The Daily Market Report: Gold Consolidates as Jackson Hole Speeches Awaited

USAGOLD/Peter Grant/08-24-17

Gold is maintaining a consolidative tone ahead of tomorrow’s all-important speeches at the Jackson Hole symposium. The underlying bias remains to the upside amid heightened political and geopolitical risks.

Senate majority leader Mitch McConnell tried to assuage concerns about the impending debt ceiling fight, claiming earlier in the week that there was “zero chance” Congress won’t raise the debt ceiling. It’s hard to refute that assessment because the debt ceiling has always been raised in the past, regardless of how contentious the preceding fight had been.

Failure to raise the debt ceiling would lead to a default, and arguably market chaos. President Trump acknowledged that the debt ceiling situation is “now a mess” and laid the blame at the feet of Senator McConnell and Speaker of the House Paul Ryan.

Treasury has said the extraordinary measures they’ve been employing to maintain the solvency of the U.S. will run out at the end of September. October 1 marks the beginning of the new fiscal year and passing an appropriations bill without first addressing the debt ceiling seems pointless.

“If we have to close down our government, we’re building that wall,” said the President on Tuesday evening in Phoenix. Today, an administration official told NBC news, it was no idle threat.

The resolve of both sides is going to be tested in the weeks ahead. The window to reach some consensus and avert a shutdown is a small one.

As the Fed ponders future policy moves, they have to be looking at the current political situation with a fair amount of concern. Whether it warrants a mention in Janet Yellen speech tomorrow on ‘financial stabilty’ remains to be seen, but financial and political stability go hand-in-hand. It will take great effort to avoid such and ‘elephant in the room.’

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