FX.co ★ What will happen to gold once the debate on debt ceiling is over?

The final decision on the debt ceiling could mark the peak of the rise in gold prices as the precious metal could break through $1,900, the highest record since July 2020.

Undoubtedly, investors will look at gold should the economy come close to default or something so extreme. However, once an agreement occurs, a bigger sell-off in the metal will occur. This means that resolving the debt ceiling could actually be a short-term high that could hold the price for a while.

Back in 2011, gold rose in price, reaching an all-time high of $1,910 per ounce. Lower rates and the falling US dollar accompanied this rally, thus, in the short term, the metal is likely to experience a large consolidation before moving upwards.

Indeed, gold is an asset that many are turning to in these volatile times because it is out of the system. However, in the end, given that the debt ceiling issue is mostly theatrical and ostentatious, the impact on gold will be temporary.

The situation back in 2011 is an interesting parallel because when there is concern that the financial system is in a precarious position, the debt ceiling can turn from a non-issue into something that makes people more fearful of government instability and an unstable financial system.

And gold has always been a safe way to store wealth.