December 2, 2022

Gold and Silver Reach Record Highs While Ron Paul Weighs In On Spending Fiasco

Silver was again the star performer in the precious metals group, hitting a new yearly high of $42.61.  For  the second week in a row, silver has added over $2 per ounce as measured by London PM Fix Price.  After soaring $2.59 in the previous week, silver capped another standout week with a gain of $2.39.

As a long time patient investor in silver, the moves over the past couple of years have been nothing less than amazing.  In the early 1990’s, a one ounce silver eagle  did not cost much more than $5 per coin.  In just the past two weeks we have witnessed silver increase in value by $4.98 per ounce.  Am I nervous about the rapid appreciation or worrying about a correction that the main stream press is calling for?

Not in the least – I am in silver for the long term and the policies of our government and central bank virtually guarantee much larger profits in the future (see Why Gold and Silver Have No Upside Limit, and Budget Fiasco Sends Wrong Message To Creditors and The Perfect Storm for Gold and Silver).

Any price corrections in the precious metals (and yes they will happen) should be viewed as opportunities to increase positions.

Precious Metals Prices
Fri PM Fix Since Last Recap
Gold $1,476.75 +7.25 (+0.49%)
Silver $42.61 +2.39(+5.94%)
Platinum $1,787.00 -16.00 (-0.89%)
Palladium $772.00 -26.00 (-3.26%)

Gold, as measured by the closing London PM Fix Price, hit another all time high, closing at $1,476.75, up $7.25 on the week after running up $51.50 in the previous week. After breaking out of its base in the $1,450 range, gold could be getting ready for a substantial move upwards.

Paper money is all about confidence and, to anyone paying attention, last week’s “budget compromise” proved conclusively that our government is absolutely incapable of reducing spending.  After threatening us with a government shutdown and terrifying half of the citizens of this Nation with a potential cutoff of entitlements, both political parties proclaimed victory with an inconsequential  spending reduction of $38 billion.  Keep in mind that this year’s deficit is almost 37 times the proposed spending cuts.

The problem with the “compromise cuts”  is that both political parties lied to us and they were called out by the Congressional Budget Office (CBO) which said actual spending would be reduced by only a laughable $352 million.  Futhermore, the CBO noted that when “emergency spending” and the cost of multiple wars is factored in, actual spending would actually be $3 billion higher than the 2011 budget forecast.  It is not by accident that gold and silver have been soaring.

Ron Paul, one of the very few courageous and honest politicians that this country is lucky to have, said the following in a commentary about the latest events in Washington.

Last week, Congress and the administration refused to seriously consider the problem of government spending.  Despite the fear-mongering, a government shutdown would not have been as bad as claimed.

A compromise was struck at the last minute, but until Democrats agree to rein in entitlement spending, and Republicans back off the blank checks to the military industrial complex, it all amounts to political gamesmanship.

Unfortunately, the compromises always seem to be just the opposite.  Instead of the left agreeing to cut social spending and the right agreeing to cut military spending, the right agrees to more welfare and the left agrees to more warfare.  In spite of all the rhetoric, we will go deeper in debt, the Fed will print more money, and the value of the dollar will continue to plummet.  How long will it be before foreigners stop buying our debt, and hyperinflation arrives?  Throughout history, empires have always overextended themselves through conquests and wealth transfers leading to eventual collapse, from the Roman Empire to the Soviet Union.  We are headed in the same direction and it seems only the chaos of the collapse of the dollar will stop the spending spree.  Arguing over funding for Planned Parenthood and NPR, though important, only shows that leadership in Washington either won’t face reality, or don’t understand how serious the problem is.

Of course, an actual government collapse would create serious problems for many people who have come to depend on government payments for healthcare, retirement income, their children’s education, and even food and housing.  However, these so-called entitlement programs are unconstitutional to begin with and have engendered a culture of dependence on wealth transfer payments that is out of control. It concerns me greatly that instead of dealing seriously with our situation, so many in Washington would rather allow the chaos that will ensue when all of the dependent people are suddenly cut off.  Better to look reality squarely in the face and tell people the difficult truth that government is simply not capable of managing people’s lives from cradle to grave as was foolishly promised.  We face trillions in deficits with any of the budgets under consideration.  Keeping those promises is, sadly, just not one of our options in the long run.  Better to admit the nanny state is coming to an end and we are no longer working on “compromises” but a transition – to a sustainable way of life, one that respects the constitution, the rule of law and property rights.

In a sign that perhaps the economy may not be as strong going forward as some seem to think, industrial metals platinum and palladium both sold off on the week.   Platinum ended down $16 at $1,787 while palladium lost $26 to $772.

Gold Hits All Time High and Silver Breaks $40 as Precious Metal Demand Soars

Anything but paper dollars was the theme this week as investors rushed into anything of tangible value.  Gold, silver, oil and commodities of all types have been skyrocketing since last August when the Federal Reserve announced its second round of quantitative easing.

Gold closed at an all time high of $1,469.50 as measured by the London PM Fix Price and silver hit a 31 year high closing the week at $40.22.  Some analysts cautioned that the rapid rise in gold and silver prices could lead to a pullback, but overbought markets tend to defy such logic.  Gold has decisively broken through resistance at the $1,450 level and silver looks ready to challenge the all time high of $48.70 reached in 1980.

Precious Metals Prices
Fri PM Fix Since Last Recap
Gold $1,469.50 +51.50 (+3.63%)
Silver $40.22 +2.59 (+6.88%)
Platinum $1,803.00 +30.00 (+1.69%)
Palladium $798.00 +26.00 (+3.37%)

The surge in precious metals prices reflects the obvious conclusion that developed nations of the world are on a trajectory with a potentially devastating debt crisis.  The budget antics in Washington make it clear to any impartial observer that spending will not be cut and the parabolic growth of debt will continue.  No one knows how the looming debt crisis will ultimately play out for the Nation, but one certain outcome is that the dollar’s purchasing power is likely to diminish greatly (see Ron Paul Talks About Horrendous Currency Debasement).

Gold rose by $51.50 on the week and is up over $300 per ounce over the past year.

GOLD - COURTESY STOCKCHARTS.COM

Silver has been the standout performer over the past year, increasing by over 122% since last August.  This week was no exception with silver sprinting past the $40 mark and gaining 6.9% on the week. Despite the large increase in the price of one ounce of silver, the Silver Institute reports that both investment and fabrication demand soared last year.  During 2010, world investment demand for silver increased by 40% and fabrication demand (which accounts for 83% of total silver demand) rose by 13%.

Platinum and palladium also rose on the week, recouping the price correction experienced after the Japanese earthquake.  Platinum rose by $30 on the week to $1,803 while palladium rose by $26 to $798.

Gold and Silver Prices Soar As Budget Fiasco Sends Wrong Message To U.S. Creditors

Gold and silver prices rose to new highs today on continuing concerns over a weak U.S. dollar, the European debt crisis, growing conflicts in the MidEast and escalating doubts over the ability of the United States to avoid a debt crisis.  The ongoing budget charade in Washington makes it perfectly clear that neither political party has the desire or ability to seriously address the exploding level of U.S. debt.

Gold hit a new all time high of $1463.70 and silver reached a 31 year high at $39.79.  Prices of both metals eased in early afternoon trading with the New York Spot Price for gold at $1456.70 and silver down fractionally at $39.33.  The limit on future increases in precious metals prices has effectively been removed due to the absolute inability of Congress to address the looming debt crisis.

GOLD - COURTESY STOCKCHARTS.COM

With the United States facing a $1.5 trillion dollar deficit on a projected budget of $3.6 trillion, politicians are threatening to shut down the Government over their inability to agree on whether spending should be cut by $40 or $60 billion.  Does anyone really believe that Congress is capable of coming to terms with the reality of an exploding deficit and spiraling national debt when agreement cannot be reached on $20 billion – a mere one half of one percent of total government spending?

The surge in gold prices reflects the realization that the nation is on the fast track to higher interest rates, a spiraling increase in the cost of living and a continued debasement of the U.S. dollar (see Why There Is No Upside Limit To Gold and Silver Prices).

Meanwhile, as the threat of a Government shutdown looms, Treasury Secretary Geithner warned of dire consequences if the U.S. is not allowed to borrow more money by raising the debt ceiling above its current limit of $14.3 trillion.  At a meeting with a Senate Appropriations subcommittee Secretary Geithner forecast that a U.S. default would lead to much higher interest rates, the failure of hundreds of thousands of businesses, payment cuts to senior citizens and a financial crisis worse than that of 2008 – 2009.

Geithner’s prediction of Armageddon, unfortunately, comes with no prescription on how to reign in out of control Government financial policies which are the fundamental threat to the country’s economic future.  It’s not just this year’s or last year’s multi trillion dollar deficits that are the root of concern, but rather the massive long term structural deficits that are now built into Government spending budgets.

The debt limit will eventually be raised and both political parties will claim victory.  America’s creditors will ponder the increasing risk of U.S. Treasury debt and ultimately conclude that the U.S. has no will to fix a financial system on the brink of insolvency.  The ultimate day of financial Armageddon, alluded to by Secretary Geithner, will not be forestalled by our unworkable political process.  The final reckoning and hard choices will be made only when forced upon us by markets that refuse to finance additional U.S. borrowing.

Gold Price Hits All Time High, Silver At 31 Year High

The price of gold hit an all time highs for the second day in a row, while silver prices moved up to a new 31 year high.

As measured by the closing London P.M. Fix Price, gold reached an all time high of  $1,447.00 up from yesterday’s all time high of $1,439.50.  The previous record London Fix Price was $1,437.50 on March 7th.   The all time record high intraday price of gold was also reached on March 7th at $1,444.95.  Earlier in the day, Comex gold futures had hit an all time high of $1,448.60 before a pull back erased the day’s gains.  In late afternoon trading the bid on New York spot gold was $1,431.30.

Silver futures scored another new 31 year high at $38.18 before sliding to $37.45 in New York spot trading.   The closing London P.M. Fix Price for silver was $37.78.

GOLD - COURTESY STOCKCHARTS.COM

In 2010, the price of gold advanced by 30% as investors grew increasing nervous about the value of paper currencies and the increasing threat of inflation.  The U.S. Federal Reserve policy of printing money to fund government deficits sets a horrendous precedence and it appears that other central banks will soon be conducting their own versions of quantitative easing.

The European Central Bank is struggling to prevent numerous sovereign defaults in an effort to preserve the European Union and monetization of the debt seems to be the only feasible “solution”.   Japan, the most heavily indebted developed nation in the world, needs hundreds of billions of dollars for reconstruction after a devastating earthquake and the printing press seems to be their only option.

Reflecting on the fiscal and monetary policies being conducted by the U.S. Government, Warren Buffet stated that “We’re following policies that will lead to a lot of inflation down the road unless changes are made.  The U.S. can’t run the kind of deficits we’re running and other policies without it being enormously inflationary”.

Unfortunately, intelligent changes are not being made and the ruinous policies of central banks seems likely to continue at an accelerated rate.  Gold has broken out to new highs and should see significant price gains in 2011.