In fact, this is not the first time that American debt has reached the ceiling. For example, the debt ceiling pushed up the gold price from August to September by 20 1 1, which was the first time to hit a record high of 1920 USD/oz. At that time, it was precisely because the United States was facing the technical default risk of sovereign debt that Standard & Poor's downgraded the US sovereign rating (from AAA to AA+), which led to a sharp rise in market risk aversion. Therefore, the US debt ceiling is a phased factor that gold investors have to pay attention to.
Before analyzing the possible impact of the US debt ceiling on the gold market, let's make a simple background introduction to what is the debt ceiling. Debt Limit, also known as debt ceiling, is the highest debt limit allowed by law stipulated by the US Treasury Department. This upper limit includes public debt and intergovernmental debt: public debt is securities issued by the federal government to the public, including individuals, companies, state or local governments, federal reserve banks and all entities except the US government; Intergovernmental debt refers to bonds held in government accounts such as government trust funds, revolving funds and special funds. These bonds are not traded in the market, but when the federal government faces the risk of debt ceiling, it can provide a certain buffer space for the daily expenses needed for the normal operation of the government through so-called "unconventional measures".
In August this year 1, the debt balance limit of the US Treasury Department was restored. Until the debt ceiling is suspended or raised again, the US Treasury cannot issue new debt, and can only rely on the deposits in the general account of the Ministry of Finance (TGA) and the above-mentioned "unconventional measures" to repay the old debts due and maintain the daily expenses of the federal government. By mid-September, the balance of TGA deposits had dropped to $250 billion, returning to the average level before the outbreak.
According to the estimation of the Congressional Budget Office, under normal circumstances, all available funds of the federal government may be completely exhausted in June 5438+10 or June 65438 +065438+10. At that time, if the debt ceiling cannot be raised through conventional legislative procedures or budget reconciliation procedures, US sovereign debt will face technical default. If we consider that the fiscal expenditure during the epidemic exceeds the normal level, the tug-of-war between the Democratic Party and the Republican Party may lead to the re-establishment of the debt ceiling (the Republican Party has made it clear that it will not support raising the debt ceiling this year), the US Treasury may run out of funds earlier than in the benchmark case.
For the gold market, if the technical default risk of US sovereign debt rises, it will bring short-term disturbance to the price, but the transmission of the factors behind it may be more complicated. On the one hand, the American debt problem has a great negative impact on economic recovery and financial stability. The warming of global risk aversion will put downward pressure on interest rates and benefit gold. On the other hand, US debt is one of the conventional safe assets, and the demand for safe-haven funds for such assets with the risk of "downgrade" will increase instead (this happens in 20 1 1), which will divert the funds in the gold market, thus partially weakening the positive effect of the debt ceiling on the gold price.