The United States federal deficit for October ballooned up to more than $100 billion, which is almost 58 percent more than the figures we had for last year. In October of 2017, the United States saw a monthly deficit of $63 billion, but the figures have gone even higher this year.
The net spending by consumers in October rose by some 18 percent, whereas the receipts collected showed a meager increase of 7 percent. The Congressional Budget Office (CBO) has said that due to current ongoing projects, the federal deficit in the United States is expected to go up over the $1 trillion mark.
Last time we saw the United States federal deficit cross the $1 trillion mark, gold prices made a massive jump to end at over $1,800 per ounce.
Gold has not yet participated in this deficit, because of a strengthening dollar. As the dollar comes down, we might see some participation by gold in this economic crunch. However, the turmoil in Euro zone and the conflicts in UK have made their respective currencies weaker, leading to a cumulative increase in the prices of the dollar.
Generally, it has been seen that gold shines under circumstances where the United States federal reserves are under massive debt. You can see the correlation between the two, by clicking on the chart found on https://goldrate.com/gold-rate-today/.
The deficit seen in the reserves currently is further expected to increase because of the tax cut proposed by Trump’s administration and the expected increase in defense spending. The expected annual deficit for the year 2018 is expected to reach the $981 billion mark. This is just shy of the $1 trillion milestone that was reached during 2011 and 2012. We saw during the years 2011 and 2012 that gold prices shot up to $1,800. This is because the US federal deficit was around $1 trillion.
At that time, the United States was rallying from a recent recession and the higher deficit was justified. Investors had deployed their sums in precious metals for a safe haven investment. Similarly, with the US federal deficit almost close to the 2011 highs, gold is currently nowhere near the highs it achieved back in that period. So, there are plenty of chances that gold will see a serious hike in the years to come.
Even if we make conservative estimates, gold prices will rise above $1,400 per ounce during the coming 12 months, or by the end of 2019. This presents a lucrative investment opportunity for Indian and global investors.
Indian Government Sets up Domestic Gold Council in India
The government of India has set up a domestic gold council on the 23rd of November to boost exports of jewelry and foresee the growth within this sector. This council will have representation from a wide variety of stakeholders, including traders, purifiers, miners and artisans. Suresh Prabhu, the Minister for Commerce and Industry in India, believed that this council will help improve standards within the industry.