Commodities Markets Register Mixed Reactions as Debt Ceiling Negotiations Continue

The past few weeks have been filled with talks about the U.S. debt ceiling and what would happen if the government defaults on its debt. The federal debt ceiling places a hard limit on the amount of money the federal government is allowed to borrow to meet obligations such as national defense, tax refunds and Social Security payments.

Every few years, lawmakers have voted to raise the U.S. debt ceiling to prevent the country from defaulting on its debt, with the Reagan administration raising the debt limit a whopping 18 times during his tenure. However, with the topic becoming quite politicized in recent years, ongoing negotiations to raise the debt ceiling have dragged on, with talks routinely stalling due to differences between Democrats and Republicans.

Although President Joe Biden and U.S. House of Representatives Speaker Kevin McCarthy previously indicated that they were close to making a deal that would raise the debt ceiling soon, it doesn’t look like talks are going anywhere. The result is increased fears of a debt default by the U.S. government, which could impact the country’s GDP, cause millions of job losses and significantly impact the lives of future generations of Americans.

This has contributed to an atmosphere of uncertainty that is causing a lot of volatility within the commodity markets, especially since the country is still dealing with high levels of inflation.

Despite this uncertainty, natural gas performed well due to its wide use as fuel for indoor cooling and heating among the American population while oil saw its first weekly improvement in a little over a month. The Energy Information Administration revealed last week that the country’s natural gas storage increased by 99 billion cubic feet (bcf), which was slightly lower than the 108–109 bcf expected, reported Texas-based energy market advisory firm Gelber & Associates. London-traded Brent oil as well as New York-traded West Texas Intermediate crude saw a $0.5 dip before surging by 2% as the debt ceiling negotiations dragged on.

A weaker greenback also made it cheaper for other currency holders to purchase dollar-backed commodities such as crude oil.

Vandana Hari, the founder of oil markets advisory firm Vanda Insights, noted that traders were hesitant to go short over the weekend because there was a chance for the government to reach an agreement and raise the debt ceiling. This observation was backed by media reports late Friday indicating that President Biden and McCarthy could meet on Sunday to continue negotiations on the debt ceiling.

Players in the mining industry such as Arizona Metals Corp. (TSX: AMC) (OTCQX: AZMCF) are likely to keep a keen eye on how the negotiations play out since the outcome could either provide stability or further destabilize commodity markets.

NOTE TO INVESTORS: The latest news and updates relating to Arizona Metals Corp. (TSX: AMC) (OTCQX: AZMCF) are available in the company’s newsroom at https://ibn.fm/AZMCF

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