As most of the economies in the world are linked towards the US Dollar and the US economy, any of the steps taken by the US Federal Reserve will have ripple effect on the world. The trickledown effect is likely to be shown by the US economy. The US fiscal year 2013 is on an end date i.e. on September 30th and the federal agency is on a way ahead of shut down.

The US debt ceiling is rising year after year and currently it has about US $16.7 trillion. At the end of FY 2013, the total government debt in the United States, including federal, state, and local, is expected to be 20.541 trillion dollars which is beyond the limit of $16.4 trillion set on 2011. President Obama advocated Congress to raise the debt ceiling without conditions to avoid a default by the US on government debt in a press conference held on January 14, 2013 which was supported by Ben Bernanke, chairman of the Fed. Congress has raised the debt ceiling 14 times from 2001-2013. The government to default on its legal obligations which includes paying Social Security and Medicare benefits, military salaries, interest on the debt, and many other items would potentially cause appalling economic consequences for the US and rest of the world.

The Congressional Budget Office (CBO) projection shows that the Treasury is likely to exhaust all of the borrowing authority as well as its cash balance between 22-31October. The Treasury Department has set the date no later than 17th October with a cash balance of approximately US $ 30 billion. Lawmakers at Congress are on a clash on the continuation of the 2010 Affordable Care Act also known as Obama care. If the agreement does not make up to an end then it would reach to the government shutdown before October 1. President Obama is not on a move to negotiate over the debt ceiling but has forwarded open talks on broad fiscal policy. So, what is the effect of debt on the precious metal- gold considered as the safe haven and a store of value?

The potential fiscal crisis in the US economy is shoring up the gold prices in the midst of the mixed US economic data. The GDP in the previous quarter was 2.5% and unemployment claims was 309000 in the previous week. The durable goods orders rose 0.1% during the month with core durable goods rising by 1.5% in August. The GDP and unemployment claims are expected to rise. Gold futures for delivery in December rose by 1.5% in COMEX and bullion for immediate delivery rose by 0.8%. Seeing the historical 2011 debt crisis and its reaction on gold prices where it reached a record of US $ 1923.70 on September 6, 2011; the current situation is hovering the gold prices.