Gold testing key resistance at $1,920 as Yellen warns Congress that U.S. could hit debt limit Jan. 19
(Kitco News) - The gold market has pushed to new session highs Friday afternoon after U.S. Treasury Secretary Janet Yellen said the United States would likely hit its statutory debt limit on Jan. 19.
The warning has created some renewed safe-haven demand for the precious metal. February gold futures last traded at $1,919.90 an ounce, up more than 1% on the day.
At the same time, analysts have said that the $1,920 level represents a significant resistance point.
In a letter to Congress, Yellen said that as early as next week, the Treasury would be forced to take "extraordinary measures" to prevent a default.
"Once the limit is reached, Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations," Yellen said in the letter.
She urged lawmakers to act quickly to raise the debt ceiling, but said Congress should have a few months to resolve the issue.
"While Treasury is not currently able to provide an estimate of how long extraordinary measures will enable us to continue to pay the government's obligations, it is unlikely that cash and extraordinary measures will be exhausted before early June," Yellen said in the letter.
The issue of the U.S. debt limit garnered new attention at the start of the year as it became sticking point during the House of Representatives' speakership vote.
Some members of the Republican Party conditioned their vote for House Speaker Kevin McCarthy on deep spending cuts accompanying any rise in the debt limit.
Economists and political analysts have said that the Republicans' small majority in the House could complicate negotiations on the debt ceiling, raising the risk that the nation defaults on its obligations.
In an interview with Bloomberg, Thomas Simons, an economist at Jefferies, said the near-deadlock in the House "almost completely eliminates any chance of it being handled smoothly, which was already pretty low."