The U.S. debt crisis is quickly proving to be a boon for Vancouver’s gold mining community.
Gold prices hit a new record high Wednesday of US$1,629 per ounce as Republican and Democratic leaders in the U.S. struggled to forge a deal less than a week before the world’s largest economy reaches its debt ceiling.
“Obviously, this debt impasse is very good for the precious metals, not good for the global economy though,” said Patricia Mohr, vice-president economics and commodity market specialist at Scotiabank.
Gold, which is often viewed as a safe haven for investors who want to avoid paper currencies, has hit several new record highs in recent weeks, lifting its less-valued cousin silver back into the US$40 per ounce range as well.
That’s good news for Vancouver’s mining community, which is home to more than 800 firms, many of them focused on gold and precious metals exploration.
Mohr believes gold and silver prices will continue to climb until U.S. lawmakers reach a debt deal.
But good news for miners has been bad news for the rest of the market.
Canada’s benchmark Toronto Stock Exchange shed 142.83 points to 13,157.73 at midday trades.
Mohr said the negative attitude in the market has more to do with a possible lowering of the U.S.’s credit rating than it does with what may or may not be happening in Congress.
“There’s some concern that the deficit reduction package, which is being cobbled together in Congress, may not actually be as high as some of the credit agencies have been arguing for,” said Mohr.
“Because of that it’s possible that the U.S.’s AAA credit rating could be downgraded … and I think that, more than anything, is what is probably bothering the financial markets today.”
Joel McKay
Twitter:jmckaybiv