May 28, 2022

Gold and Silver Soar On Fears Of Massive Central Bank Stimulus

Precious metals soared across the board this week.  The dismal jobs report released on Friday showed that the American economy has come to a standstill with zero new jobs added in August.

The specter of the US economy plunging back into recession along with imminent banking crises in Europe and the US have fueled speculation that the Federal Reserve is on the verge of conducting another massive wave of monetary stimulus which will further debase the value of the US dollar.  Apprehension is also growing that the magical Obama plan for “creating” new jobs will involve further borrowing by an already bankrupt  American empire.

Also lurking in the background is the fear of coordinated US and European central bank intervention (money printing) to contain the collapse of the European banking system.  Despite the purchase of hundreds of billions of dollars of Spanish, Greek and Italian debt by the European Central Bank, rising interest rates are forecasting default by numerous sovereign states in the European Union.   Rates are rising again on Italian debt and the rate on one year Greek paper now exceeds 70%.  The yields on Greek debt indicate that default is now a certainty and the losses by insolvent European banks holding PIGS debt will require unprecedented government bailouts to prevent complete financial chaos.

Soaring gold prices have been predicting the collapse of paper money currencies.  As measured by the closing London PM Fix Price, gold soared on Friday by $54.25 to $1,875.25.  In later New York trading, gold continued higher closing at $1,885.20.  Gold is only $2.25 below the all time London close of $1,877.50 reached on August 22nd.

Precious Metals Prices Sept 2
PM Fix Since Last Recap
Gold $1,875.25 +87.25 +4.88%
Silver $42.50 +1.44 +3.51%
Platinum $1,873.00 +61.00 +3.37%
Palladium $785.00 +38.00 +5.09%

As measured by the closing London PM Fix Price, silver gained $1.44 on the week to $42.50 and continued to rise in later New York trading to $43.35.   After consolidating in the $34 range, silver has resumed its uptrend and is likely to hit new all time highs before year end.

 

Silver - courtesy stockcharts.com

Platinum soared by $61 on the week to close at $1,873 while palladium finished up $38 to close at $785.

Precious metals may correct after strong advances, but the fundamental case for owning them is growing geometrically.  Expanding deficits and wild money printing will continue as policy makers continue their futile attempts to produce economic recovery by adding more debt to a system already collapsing from the burden of excessive debt.   Continue to increase gold and silver positions on any pullbacks.

 

Gold - courtesy stockcharts.com

Ultimate Price Of Gold Will Shock The World As Loss Of Global Confidence Leads To Economic Collapse

Gold had another stellar week while stock markets gyrated wildly.   As measured by the closing London PM Fix Price, gold gained $77.25 on the week, hitting all time highs and closing at $1,736.   After the London close, gold recovered from an earlier pullback and closed in New York trading at $1,747.30, up $11.30 from the London close.

Silver ending the week down slightly at $38.29 while platinum gained $91 to $1,800 and palladium edged up $5 to $747.

Gold has gained $253 or 17% since July 1st when it closed at $1,483.00.  The rapid price gains have pushed gold above its long term trend line.  Gold is now trading at $290 (or 20%) above its 200 day moving average.  On previous occasions in late 2009 and the fall of 2010 gold also traded more than $200 dollars above the 200 day moving average and the result was a minor pullback or sideways consolidation.

 

Gold - courtesy kitco.com

Gold may be overbought on a short term basis but the fundamental reasons for owning gold are expanding exponentially.  Public realization that dysfunctional governments are incapable of solving our economic problems is resulting in a loss of confidence.  A loss of confidence combined with a debt crisis and out of control spending can have only one result – increasingly worthless paper money and stocks as the  world central banks attempt to prevent an economic collapse with zero interest rates and printed money.

Gold Outperforms paper stocks

Government and  central bank policies have been destroying the value of the US currency for decades and have given birth to crashing housing markets, lower incomes, depression level unemployment and numerous stock market crashes.  When one  considers that the last hope of preventing an all out depression now lies in the hands of the very central banks who have already brought Hell down upon us, we should all be very, very scared.

If the last ditch efforts of the Central Banks fail to contain the financial collapse that is imminent, expect to see governments institute totalitarian measures in order to maintain a semblance of organized society.  As bankrupt empires collapse, they also attempt to expropriate every last dollar of wealth from its citizens in order to maintain their grip on power as long as possible.

The most recent large scale example of the implosion of an empire was the USSR, whose sudden collapse surprised CIA analysts who had been studying the Soviet Empire in detail for decades.  Ironically, those even more surprised by the collapse of the USSR were the politicians and bureaucrats who ran the country into the ground as they remained oblivious to their economy killing policies.  Tragically, misguided and misinformed middle class citizens of the USSR saw the value of their rubles collapse along with pension plans, bank savings and other financial assets.  Those who walked away with more than they had, other than corrupt politicians, were those few citizens who converted paper money into gold or silver before the financial system imploded.

A potential short term price correction in gold is a meaningless concern.  Developed world economies are in inexorably decline from which there is no escape.  The primary concern for most US citizens should be to develop a financial strategy that does not leave them impoverished when the end game arrives.

Unfortunately, most Americans have a religious conviction that “The Government” will save and nourish them as has been promised by every politician of this century.  These promises will all be broken but Americans won’t believe it until it happens, at which point there is no financial escape.

As a worldwide systemic financial collapse grows more probable with each passing day, Americans remain in denial and place their life savings in US government debt and bank accounts, secure with the promise that they are “guaranteed by the government”.   Sorry folks, bankrupt governments don’t keep promises.  The proof of American citizens’ faith in paper assets is their very low commitment to gold and silver.  The public will belatedly turn to gold and silver en masse when the system starts crashing down around them.  This event will be the real rush to gold and at that point, prices will rise thousands of dollars per week.

When establishment journalists warn of a “bubble” or “top” in gold, don’t get annoyed – simply buy more gold, especially on pullbacks.  The ultimate price of gold will wind up shocking even the biggest gold bulls.  When gold demand is insatiable and supply very limited, attempting to figure out the ultimate high price for gold is a fruitless exercise. (see Why There Is No Upside Limit For Gold and Silver).

Precious Metals Prices 8/12/11
PM Fix Since Last Recap
Gold $1,736.00 +$77.25 +4.66%
Silver $38.29 -$0.95 -2.42%
Platinum $1,800.00 +$91.00 +5.32%
Palladium $747.00 +$5.00 +0.67%

 

Gold Rallies On Week – Is The World Economy At The Precipice?

Gold continued its winning ways this week.  As measured by the closing London PM Fix Price, gold gained $26.50 to close the week at all an time high of $1,628.50.

Gold has closed higher for the past four consecutive weeks.  The rally that began at the beginning of the month has pushed gold higher by $145.50 or 9.8% since July 1st.  Investors worried about the solvency of sovereign states in Europe have now switched their focus to the United States.

The impasse over raising the US debt limit has morphed into a crisis of confidence over the ultimate value of the US dollar.  There is no clear consensus on how the debt limit negotiations in Washington  will be resolved.  The only certainty is that, regardless of how the debt limit crisis ends, confidence in the “full faith and credit” of the United States will be greatly diminished.

China and Russia, two large holders of US debt, have watched in horror as the US deliberately debases its currency value through money printing and a parabolic increase in debt.  At a time when the US needs to borrow trillions of dollars in new debt, there is likely to be a greatly diminished appetite to purchase additional US debt.

The global debt crisis and a lack of confidence in paper money has resulted in a steady increase in the price of gold.  Will gold continue to soar if global economies start collapsing or will gold be drawn into the deflationary abyss along with all other asset values?  Opinions vary but here are some good thoughts on the matter.

-John Browne of Euro Pacific Capital warns that gold could be subject to a price pullback based on the deflationary impact of a global recession or short term optimism over the US avoiding default.

Decision Point’s Carl Swenlin wonders if gold is too much of a “sure thing” investment and ponders the fate of gold in a deflationary collapse.

-A Citigroup analyst speculates that gold could quickly reach $5,000 based on a “worst case scenario for Euro sovereign debt and USA fiscal problems”.

Confidence is vital in a fiat money based world.  The ongoing global debt crisis may be the trigger that ultimately destroys faith in paper currencies.

Precious Metals Prices 7/29/11
PM Fix Since Last Recap
Gold $1,628.50 +$26.50 +1.65%
Silver $39.63 -$0.04 -0.10%
Platinum $1,779.00 -$14.00 -0.78%
Palladium $824.00 +$17.00 +2.11%

Silver and platinum were essentially unchanged on the week after posting strong advances since the beginning of July.  Palladium advanced by $17 or over 2% on the week and is up $74 since July 1st.

As World’s Most Predicted Financial Crisis Approaches Precious Metals Move Higher

Precious metals gained across the board for the third week in a row.  Silver and palladium were the top performers this week with each advancing almost 4%.

July has seen an explosive move in the precious metals group as worries intensify about the twin debt crises in Europe and the U.S.  In both cases, governments and central banks are avoiding the tough choices that must be made when debt levels reach unsustainable amounts.  Common sense dictates that over leveraged borrowers with insufficient income to service debt must eventually default, or gradually reduce the debt through a combination of austerity measures and income growth.

Common sense, however, is a trait sorely lacking in politicians.  Nor does preaching austerity to your constituents enhance the odds of being re-elected.  The preferred solution, which has been employed since the 1980’s, is to add more debt and let the future take care of itself.  What’s different this time is the growing realization that at some point the compounding of debt becomes unsustainable, enslaving future generations and inhibiting economic growth.

The widely discussed study by Rogoff and Reinhart definitively documents that when public sector debt to GDP approaches the 90% level, economic growth slows dramatically – (see This Time Is Different: Eight Centuries of Financial Folly).  Since most of the developed world economies are already at or above the 90% debt to GDP ratio, the prognosis for future economic growth to gradually reduce debt levels becomes a tenuous prospect.

Despite the obvious risks of a growing debt burden, a significant number of the Washington elite insist that the debt limit be raised by another $2.5 trillion which would represent a doubling of the national debt in a little over five years.

Raising the debt limit, which became a routine ritual in past years, has suddenly morphed into a potential default situation as a growing number of responsible political leaders refuse to rubber stamp another massive increase in public borrowing.  As debt limit negotiations broke down today, the odds of a potential default by the United States became a distinct possibility.

Will a temporary default become a seismic event?  Who knows, but if gold had advanced by one dollar per ounce for each time I’ve seen an article predicting financial Armageddon, if the debt limit was not raised, gold would be well over $4,000 per ounce.   If the U.S. does “default”, it will not be the end of the world.  In the best case scenario, a brush with default may convince more members of our EZ spending Congress to come around to the financial common sense of men such as Ron Paul.

Summary of Ron Paul’s comments to Congress:

  • Countries that are as indebted as the U.S. always default.
  • The real increase in the debt this year, counting entitlements, is $5 trillion.
  • In the past 3 years, the dollar has been devalued by 50% against gold.
  • Default will be through inflation.

Gold advanced by $15 on the week and is up $119 since July 1st.  Silver advanced by $1.50 on the week and has gained $5.82 since July 1st.

Platinum and palladium both advanced on the week by $33 and $30 respectively.  Platinum has gained $85 and palladium $57 since the first of the month.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,602.00 +$15.00 +0.95%
Silver $39.67 +$1.50 +3.93%
Platinum $1,793.00 +$33.00 +1.88%
Palladium $807.00 +$30.00 +3.86%

Gold and Silver Rocket Higher As Bernanke Oils Up The Printing Presses

The precious metals group continued higher this week, with standout performances by gold and silver.

As politicians continue to engage in reprehensible scare tactics in order to increase the debt limit by another $2.5 trillion, it has become increasing clear that the policies of more debt and dollar debasement will continue.  In an interview today, Ron Paul said that he expects “nothing will change” and that the U.S. is already defaulting on the debt via the devaluation of the dollar.

Gold and silver, which had already been strongly advancing in the prior week, soared after Fed Chairman Bernanke spoke before Congress on Wednesday.   Mere days after the end of QE2, Bernanke said that he stands ready to rescue the American economy with more accommodative monetary measures.   Although the exact mechanism by which future monetary easing  will be deployed remains to be seen, the end result will be the further debasement of the U.S. dollar.

As measured by the London PM Fix Price, gold hit new highs, soaring by $45.50 on the week, putting its two week gain at $104.00 per ounce.  Gold prices continued higher in New York trading with gold closing at $1,594.30, up another $7.30.

Gold has become the currency of last resort as it becomes clear that money printing is the only option left to prevent massive sovereign debt defaults by world governments.   Accordingly, there is really no upside limit for gold and silver prices.   Legendary trader Jim Sinclair told King World News that the stage has been set for gold to move up to $12,000 per ounce.

Silver has been the standout performer in the precious metals group.  After basing in the mid 30’s range after the May correction, silver has exploded upwards.

 

Silver - courtesy kitco.com

After rallying by over 7% last week, silver tacked on another 5% this week.  As measured by the closing London PM Fix Price of $38.17, silver has advanced by $4.32 or 12.8% over the past two weeks.   After the close in London, silver continued to gain in New York trading, closing at $39.37.

Silver is in a long term super cycle advance backed by fundamentals that guarantee higher prices. The accelerating exodus from paper money will quickly push silver prices to new highs – see For Silver , This Time Is Different.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,587.00 +$45.50 +2.95%
Silver $38.17 +$1.89 +5.21%
Platinum $1,760.00 +$20.00 +1.15%
Palladium $777.00 +$1.00 +0.13%

Platinum advanced by $20 on the week after a $32 dollar advance in the previous week.  Palladium ended essentially unchanged on the week after an advance of $26 last week.

Precious Metals Advance Strongly On Week

Precious metals roared back this week after consolidating in the previous week.

Gold gained $58.50 on the week closing at $1,541.50.  As measured by the London PM Fix Price, gold reached a closing high this year of $1,552.50 on June 22nd and has stubbornly refused to decline.  Gold’s technical position looks excellent and a breakout above June’s high should set the stage for the next major advance.

Meanwhile, depending on how you look at it, the comedy or tragedy unfolding in Europe continues as insolvent nations line up for handouts.  The credit rating agencies are falling over each other in a race to downgrade the debt of country after country, adding Portugal’s debt this week to the status of junk paper.  Quite a difference from how they bestowed  A+ credit ratings on every piece of toxic mortgage paper produced by the banks prior to the financial crisis.

As Europe keeps center stage on the debt crisis, attention has been diverted from some other looming train wrecks, including Japan, the world’s third largest economy.   From a debt standpoint, Japan is in solid first place for the highest ratio of debt to GDP of almost 250%.  Can Europe forestall a debt crisis by piling up even more debt like the Japanese?  Who knows, the story is still unfolding, but the one certainty is that not only Europe, but the entire world is moving inexorably to a major financial crisis as debt burdens reach the level where massive defaults become the only option.

Investors in gold, meanwhile, can take comfort in the fact that gold has no credit risk.

Silver rebounded strongly this week, closing at $36.28, up over 7% on the week.  Prior to this week’s rally, silver had declined for three consecutive weeks, dropping by $4.10 per ounce.

Platinum rally strongly, climbing $32 to $1,740, after a $12 advance in the previous week.

Palladium jumped $26 or 3.5% on the week to $776, continuing last week’s rally of $11.

 

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,541.50 +58.50 +3.94%
Silver $36.28 +2.43 +7.18%
Platinum $1,740.00 +32.00 +1.87%
Palladium $776.00 +26.00 +3.47%

 

 

 

 

Gold and Silver Decline As World Turns Upside Down After Resolution of Debt Crisis

It wasn’t supposed to be like this.

A default on Greek debt was supposed to have set off a chain reaction collapse of other weak sovereign debtors including Ireland, Spain, Portugal and Italy.   European banks holding huge amounts of Greek debt would be rendered insolvent pushing Europe into a banking crisis.  U.S. banks, holding large positions in credit default swaps and derivatives would follow the European banks into a downward spiral as both confidence and liquidity evaporated.

Money market funds, piled high with toxic debt securities issued by insolvent European banks would be facing a massive run by nervous shareholders.  Central banks, the last great hope of insolvent nations, would be forced to come to the rescue with oceans of printed money.  Nervous holders of paper currencies would rush into gold driving prices sharply higher.

The plausible scenario of default by insolvent members of the European Union suddenly got turned upside with stocks exploding higher and gold prices hitting a six week low.

BloombergGold Falls to Six-Week Low Amid Reduced Concern Greece May Default On Debt

Gold futures tumbled to a six-week low as Greece progressed in staving off a default, curbing demand for the metal as an investment haven.

Greece may get as much as 85 billion euros ($124 billion) in new financing, including a contribution from private investors, in a second bailout aimed at preventing default and ending the euro region’s debt crisis, according to an Austrian Finance Ministry official. Gold dropped 2.2 percent last month.

“Gold’s inability to extend further gains in recent sessions, despite a weaker dollar, could be a warning sign heading into the third quarter,” Australia & New Zealand Banking Group Ltd. (ANZ) said in a report.

The Austrian finance official effectively said that the euro region’s debt crisis was solved by extending further credit to a blatantly insolvent Greece – too much debt was cured with more debt.

The extend and pretend policies, used extensively by policy makers in every past crisis would be employed again, this time to a nation with the lowest rated sovereign debt in the world.

The success of extending further loans to Greece would be guaranteed by the sale of Greek national assets and forcing every citizen of Greece to endure a depressionary lifestyle.  Other members of the EU facing a debt crisis could be handled in the same manner.  The European Central Bank and Wall Street popped the champagne corks and celebrated the end of the debt crisis.

The surreal events of the past two weeks only reinforce the certainty of a greater debt unwind at a fast approaching future date. Expecting Greece to repay its obligations is simply not economically feasible.  Greek citizens, rioting against austerity measures, have made it clear that default is the best option.  Political leaders of Greece, the birthplace of democracy, must eventually accept the public will.

The debt crisis has not been resolved, it has been expanded.  Investors foolish enough to convert precious metal holdings back into paper currency are giving serious long term gold and silver investors a gift opportunity to accumulate at bargain prices.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,483.00 -31.75 (-2.10%)
Silver $33.85 -0.88(-2.53%)
Platinum $1,708.00 +12.00 (+0.71%)
Palladium $750.00 +11.00 (+1.49%)

Gold  and silver both declined on the week by over 2%, while platinum and palladium saw modest gains.

As measured by the closing London PM Fix Price, gold has declined by $69.50 since June 22.

Silver has now declined three weeks in a row.  Since June 1st, as measured by the London PM Fix Price, silver has declined by $4.10 per ounce or 10.8%.

Silver ETF Holdings Gain As Gold ETF Holdings Decline Slightly

Silver holdings of the iShares Silver Trust (SLV) gained by 21.23 tonnes on the week.  In the previous three weeks,  SLV silver holdings had declined by a total of 381.95 tons, bringing the net outflow for the year to 1,340.96 tonnes.

The all time high holdings of the SLV was 11,390.06 tonnes on April 25, 2011.   The decline in SLV holdings from the all time high totals 1,809.45 tonnes, a decline of 15.9%.  The yearly high for the price of silver of $48.70 on April 28th correlates closely to the date of record holdings of the SLV.

The iShares Silver Trust currently holds 308.0 million ounces of silver valued at $10.6 billion.  The total net assets of the SLV have plunged by $6.7 billion since reaching an all time high of $17.3 billion on April 28th.  The dramatic 39% decline in the total net asset value of the SLV reflects the combination of much lower silver prices and reduced silver holdings.   Silver, at today’s close, has declined by $14.31 per ounce (29.4%) from the high of $48.70 on April 28th.

 

SILVER - COURTESY STOCKCHARTS.COM

Silver, as measured by the closing London PM Fix Price, closed today at $34.39, up $0.43 per ounce.  In later hour New York trading, silver continued to move up and closed at $34.98.  Silver has been in a narrow trading range in the mid 30’s since its decline in early May.

GLD and SLV Holdings (metric tonnes)

June 29-2011 Weekly Change YTD Change
GLD 1,208.23 -0.91 -72.49
SLV 9,580.61 +21.23 -1,340.96

The holdings of the SPDR Gold Shares Trust (GLD) declined slightly on the week by 0.91 tonnes, bringing the decline for the year to 72.49 tonnes.  The GLD currently holds 38.85 million ounces of gold valued at $58.4 billion.

Gold closed in London at $1504.25 and continued to move up in late New York trading, closing at $1512.80, up $9.70.  Gold has remained in the $1,500 range even as oil, stocks, silver and a large number of other commodities have declined in price since early May.

Gold, Silver, Platinum and Palladium All Decline On Week

It was a dismal week for precious metals as prices declined across the board.  Platinum declined by over 3%, palladium and silver by 2% and gold by 1.5%.

As measured by the London PM Fix Price, gold declined on the week by $22.75 after a gain of $8.25 last week.  After closing Wednesday at $1,552.50 gold was hit by selling that drove the price down by $37.75 at Friday’s close.  Gold has now dipped below its 50 day moving average as it has done on numerous occasions since early 2009 but remains solidly above the 200 day moving average.  Since early 2009 the price trend of gold has remained in a solid uptrend and every sell off to the 200 day moving average was followed by significant upward price moves.  The 200 day moving average for gold is currently at $1,410.

 

Gold - Courtesy Stockcharts.com

Silver declined modestly on the week, losing $0.66 and has remained in a tight trading range over the past two weeks between $36.22 and $34.68.

Platinum was down $55 on the week, closing at $1,751, after losing $78 in the previous week.  Palladium was also weak, falling $15 to $739 after retreating $61 in the previous week.  Both metals have large industrial uses and sold off as numerous economic indicators suggest a slowing world economy.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,514.75 -22.75 (-1.48%)
Silver $34.73 -0.66(-1.86%)
Platinum $1696.00 -55.00 (-3.14%)
Palladium $739.00 -15.00 (-1.99%)

Markets had been positioned for an improving economy, higher interest rates, higher inflation and additional monetary stimulus by the world’s central banks.  Since early May, the consensus has reversed considerably.  Commodity prices have declined substantially and U.S. interest rates, contrary to the expectations of many, have declined sharply.  Contributing to the sell offs in equity and precious metal markets were midweek comments by Fed Chairman Bernanke that, despite lower expectations for economic growth, the central bank had no plans for QE3.  Markets, confronting the loss of both fiscal and monetary stimulus along with slower economic growth, sold off sharply.

The Dow Jones has plunged over 900 points since early May.

 

DOW JONE - COURTESY YAHOO.COM

Commodities have tanked by 16%.

 

COMMODITIES - COURTESY YAHOO.COM

Oil, after peaking in early May at over $112 per barrel, has declined to the low $90’s.

 

OIL - COURTESY STOCKCHARTS.COM

Interest rates, expected to soar after QE2 ended, have declined substantially with the 10 year Treasury note dropping from 3.6% to 2.9%.

10 year treasury - Courtesy yahoo finance

 

The massive amounts of debt in the system can no longer be supported by economic growth.  Bernanke knows this which is why he is terrified of deflation.  The collapse of asset bubbles have resulted in debt that is now unsupported by collateral value, threatening the solvency of banks and countries.

As the current market sell offs turn into a rout, the Fed will again turn to the only option left – money printing on a scale that will dwarf QE2.  As reported by Bloomberg, former Fed Governor Lyle Gramley said,  “The hurdle for QE3 is obviously high. But if large downside risks materialize and the economy slows enough so that the unemployment rate starts to increase again, QE3 would have to be considered.”

The Federal Reserve can’t create jobs, increase incomes, reduce unemployment or maintain the integrity of the dollar.  The one thing the Fed can and will do is produce dollars in infinite quantities to prevent a 1930’s type debt induced deflationary depression.

Precious Metals Little Changed On Week While Investors Ponder Government Defaults

Precious metal prices traded in a narrow range this week.  As measured by the closing London Fix Price, gold, platinum and silver declined slightly while palladium gained $16 per ounce.

After the London close, prices of precious metals rose across the board in New York afternoon trading.  Gold closed at $1,514.50 up $19.70, silver at $35.26 up $.12, platinum at $1,775 up $8 and palladium at $739 up $8.   Buying in the precious metals may have been prompted by late day worries over the downgrade of Greek debt by Fitch Ratings as well as concerns over the worsening state of public finances in Spain, Portugal and Italy.

Yields of 25% on short term debt Greek debt imply that the markets are are pricing in a very high probability of default by Greece.  What markets do not seem to have priced in is the contagion risk of Greek default and what impact that would have on investor confidence, world financial markets and the global banking system.

Meanwhile the U.S. debt crisis continues to brew as the debt ceiling limit was reached with no indication of a resolution by Congress.  If the past is any guide, Congress will let the debt bomb/deficit crisis simmer until the last minute when the debt ceiling will be raised yet again under the guise of “future fiscal restraint” and the deficit spending and borrowing will continue as usual.

Ignoring the eroding financial condition of the U.S. today only ensures that the inevitable financial crisis will be more devastating than one might chose to contemplate.  The timing may be uncertain but the outcome is not.

The American Precious Metals Exchange (APMEX) included a chart in one of its latest email newsletters that depicts the gap between the growth of  U.S. GDP and debt.  The chart graphically illustrates the extent to which the U.S. has been living beyond its means and using trillions in deficit financing to do so.

DEBT VS GDP - COURTESY APMEX

APMEX also notes that  “If there is no resolution (of the budget ceiling) by August 2nd, there could be disastrous ramifications for the U.S. and the global economy. The U.S. will be in default on its promises to pay. The value of the dollar could drop dramatically.”

 

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,490.75 -15.00 (-1.00%)
Silver $34.80 -1.40(-3.87%)
Platinum $1,767.00 -7.00 (-0.39%)
Palladium $734.00 +16.00 (+2.23%)

Precious metals, silver in particular, have been undergoing corrective price action during May, but the fundamental reasons for owning precious metals grows stronger by the day.   Demand for precious metals remains strong.  The World Gold Council’s latest report shows that global demand for gold increased by 11% in the first quarter, while buying by Chinese investors reached all time highs.  The trend is still your friend in the precious metals markets and price weakness should be viewed as an opportunity to increase long term positions.