The Washington standoff over raising the debt ceiling has raised economic concerns on a global basis. A nonpartisan congressional report cited a "significant risk” of a historic default within the first two weeks of June. A report by the U.S. Congressional Budget Office confirmed statements by Treasury Secretary Janet Yellen warning that a government default could come as early as June 1.
The debt limit meeting between President Joe Biden and top lawmakers which was scheduled for today has been postponed. The meeting has been rescheduled for early next week. The divide between both sides remains too large for any genuine progress to result from the meeting today. Rather staff on both sides will continue to negotiate through back channels to find common ground, as well as compromises that both the Democrats and Republicans are willing to consider.
According to Republican representative Daniel Webster, "Spending levels are the key… Spending cuts are a place where we are stuck. Not with all of them, but with a list of them.” President Biden's 2024 budget request relies on tax increases to reduce deficits while proposing to increase discretionary spending by 5% next year. That creates a $200 billion differential with House Republicans who believe an 8% budget cut is necessary while increasing the defense budget.
Concern over the potential for a U.S. default is global. At a meeting of the Group of Seven (G7) David Malpass President of the World Bank said that the "looming risk of a default, which would be the first in U.S. history, was adding to problems facing the slowing global economy”.
Although gold had fractional declines this week prices have been heavily supported by fears that no agreement will be reached by June 1 when the government will no longer be able to pay all its obligations.
As of 5:00 PM EDT Gold futures basis the most active June contract is currently fixed at $2015.60 after factoring in today's decline of $4.90 or 0.24%. Gold had a fractional decline when compared to last Friday's close as well as compared to Monday's open and current pricing. The most prominent factor taking gold lower this week was dollar strength. The U.S. dollar index opened at approximately 101 and is currently trading at its highest value this week of 102.5 a net gain of 1 ½% taking the dollar index to 102.54.
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