Kitco News: “FOCUS – Gold Could Rally If U.S. Debt Ceiling Talks Falter”

The stalemate between Democrats and Republicans regarding a vote to lift the U.S. debt ceiling is giving gold a boost, and if an agreement is not reached before the August 2 deadline, many market watchers believe there would be a rush to buy gold and other hard assets. Economist Michael Szenberg discusses the potential impact on financial and commodity markets if the U.S. cannot raise its debt ceiling.

The bickering between the Democrats and Republicans over raising the debt ceiling has been bullish for gold.

Even if the debt ceiling is not raised, the U.S. would have money coming in to pay some obligations, but it would have to make choices on who gets paid and who doesn’t. That’s why it is considered a technical default.

Michael Szenberg, chair and distinguished professor of finance/economics at Pace University’s Lubin School of Business, said he believes that yields would likely spike under a default situation, but points out the rise is relative, noting that in the 1970s and early 1980s, bond yields were hovering around 20%. “The American economy is dealing with tremendous fragility, but this (debate) might take us in the direction we need to go,” Szenberg told Kitco News, a precious metals website which gets ONE MILLION hits a day.