Political Threats to Paper Wealth on the Rise Globally
Uncertainty reigns in the bullion markets for now. The conflict in Syria and next week's Federal Open Market Committee meeting (and any announcement regarding plans to "taper") both have potential to drive markets, but there is very little certainty about outcomes. Investors appear content to wait.
Many expected the FOMC to announce a schedule for withdrawal of stimulus this month, but last week's poor jobs report dealt a blow to that consensus. Metal prices responded by trading higher on Friday.
But demand for metals as a safe haven may be diminished slightly as President Obama turns to Congress for support on military action in Syria and finds a decided lack of enthusiasm.
Silver Eagle Sales Surpass Full Year 2012 Total – On Pace for Record
The U.S. Mint reported sales of more than 33 million ounces of the silver American Eagle coins through August – more than what was sold during all of 2012. And, with four months remaining in the year, sales surpassing the 2011 all-time record of 39 million ounces appear almost certain.
The demand is even more remarkable when considering these coins have commanded abnormally high premiums for most of the year, with delivery delays sometimes stretched more than three weeks. Bumbling federal bureaucrats even halted production for more than a week in January.
Gold American Eagles are also pacing well ahead of last year. Through August, sales reached 691,000 ounces, compared to 413,000 ounces through the same period last year.
The Reasons to Own Bullion Multiply Worldwide
The crisis precipitated by decades of over-borrowing and over-spending is ongoing and continues to have profound implications for the bullion markets over the longer term. Vigilant metals investors saw more interesting developments last week.
First off, the Pakistani government reported a more than 1,500% increase in gold imports. The increase can be attributed to efforts by the Indian government to curb direct imports.
The high-handed attempt by the Indian government to limit the ability of citizens to defend themselves from the devaluation of the Rupee isn't succeeding as planned. Gold-loving Indians are smuggling it in by the ton, and because of gold's privacy and portability, officials are nearly powerless to stop it.
Next, bureaucrats in Poland took steps that are, so far at least, only talked about here in the U.S. They seized half of all private-sector pension assets! The Polish government had run up against a hard limit on additional borrowing and needed to lower its debt to GDP ratio.
No surprise, when forced to act, officials prefer any alternative to imposing spending discipline and shrinking government. Confiscation of privately held bonds from retirement accounts proved far too simple and expedient. The government, now able to resume borrowing, solved its problem for the short term. On the other hand, pension holders who just woke up and found themselves trapped in the state-run retirement system of an increasingly bankrupt nation, are finding their problems are just beginning.
Potential Market-Moving News This Week
This week will be quiet in terms of scheduled releases of economic data. All eyes will be looking forward to next week's FOMC meeting.
- Thursday, Sept. 12th – Jobless Claims. Thursday's upcoming report on new claims for jobless benefits comes on the heels of last week's lousy employment data and will be the last such report before Fed officials meet. A poor report increases the odds tapering will be delayed.
- Friday, Sept. 13th – Retail Sales. Sales were up modestly in July and consensus is for even stronger sales in August.
- Friday, Sept. 13th – Producer Price Index. Lower fuel prices muted price inflation at the Producer level in July. Expect a slight increase in the PPI to be reported this week.