The U.S. Debt Ceiling Impact on Gold and Silver Prices

As the debt ceiling deadline of August 2nd rapidly approaches with no clear agreement in place between the House and the Senate, we’ve seen a spike in the prices of gold and silver.  How exactly are the prices of gold and silver affected by the U.S. debt ceiling issue, and what are the long term ramifications on the precious metals market if an agreement isn’t in place by Tuesday of next week?

It’s clear that concern over an impasse on the budget in Congress has had a substantial affect on gold and silver prices, but why is that the case?  For one, the big three credit rating agencies (S&P, Moody’s, and Fitch) have all threatened to downgrade the United States’ credit rating if the debt ceiling isn’t raised by Tuesday’s  deadline.  This will likely result in a weakening of the dollar versus other currencies and higher interest rates, as U.S. debt won’t be perceived as the flight to quality that it has in the past.  That means that the U.S. government may need to pay higher interest rates for the debt that it issues.

Even if the debt ceiling is raised, the credit of the U.S. may still be downgraded if a long term plan for the reduction of our debt and deficits isn’t included in the agreement.  Considering that all three major credit rating companies are on the same page with respect to budget cuts, and interest rates are determined by the perceived safety, or lack thereof of a country’s debt, the downgrade of the country’s credit by a level or two will likely resolve in higher borrowing costs for the U.S.

If you remove from the equation one of the traditional flights to quality and safety, that being U.S. treasury bills and bonds, you create an opportunity for other perceived safe assets, such as gold, silver, and platinum to be the recipients of the funds that were historically invested elsewhere.  Higher demand for gold, silver, and platinum, and more specifically as it respects our industry, gold, silver, and platinum coins, bars, rounds, ingots, and other bullion, will result in an increase in prices.

While it’s anyone’s guess as to if an agreement will be reached by August 2nd, and if that bill will include with it substantial cuts in the budget, one thing is certain – we’re likely to see a good bit of movement in the price of gold, silver, and platinum until some type of resolution has been reached.

If you’ve been waiting for an ideal time to sell your gold coins, silver bars, or platinum bullion, now may be the time to cash in with the recent surge in prices.  Assuming that you bought your gold, silver, or platinum more than six months ago, you’re likely looking at a substantial increase in the value of your valuables.  Alternatively, if you’re concerned about the ongoing concerns with the substantial debt and deficits that the U.S. is facing, and would like to buy gold, silver, or platinum as a hedge against continued economic problems, this may also be a good time to buy gold coins, silver coins, or platinum bullion.

Atlanta Gold and Coin Buyers, metro Atlanta’s leading coin buyer and dealer, is able to assist you with all of your buying and selling needs.  We offer extremely competitive prices, whether you’re buying or selling coins, offer no-obligation free coin appraisals, and never pressure customers into making a decision that they’re not completely comfortable with.  Give us a call today at 404-236-9744 and let us earn your business!

Tony Davis
Tony Davis