Debt Debate Rages; Cause-Oriented Mint Files for Bankruptcy

The precious metals markets are in a holding pattern awaiting the outcome of the budget battle currently underway in Congress. The fight over funding for Obamacare could even result in a temporary government shutdown. And an even larger battle over increasing the debt ceiling will soon be grabbing more headlines.

If the political fighting in DC results in an actual shutdown, we expect to see safe-haven buying pick up for gold and silver. But more borrowing could cause the same thing.

Meanwhile, since the Federal Open Market Committee (FOMC) is once again unlikely to slow down its monetary stimulus measures when it meets at the end of October, the month should bring some interesting price action in the metals markets. ng $85 billion per month, is no longer providing its intended boost to the economy.

"Doing Good" With Precious Metals

All bullion investors want to "do good." Some are drawn to the profit potential. Some buy bullion to vote "NO!" on a fiat dollar system and the liberty-crushing edifices built upon it. Most of us seek to "do good" in both senses of the phrase.

And precious metals investing does offer the potential for success on both fronts – an alluring feature. However, smart investors know "doing good" all around requires putting investment merit before any ideological objectives they may have. Recent events underscore the importance of prioritizing good business judgment ahead of making political statements.

Last week, a start-up mint in Texas known as Mulligan Mint declared bankruptcy. The firm's owner, Rob Gray, cut a wide swath through the liberty movement and even testified last year against the Federal Reserve before Congressman Ron Paul's (R-TX) subcommittee.

Mulligan Mint produced a wide variety of attractive and clever silver rounds with themes promoting the ideals of limited government and honest money. And it supported efforts by tribes, local communities, and individuals to establish alternative currencies to the Federal Reserve's dollar.

Time will tell whether Mulligan Mint simply made business mistakes... we're sure it's not an easy task starting up a minting operation.

Either way, we find it pathetic that Gray stated to the Wall Street Journal last week, "We really don't know" what happened to part of a supplier's $1.4 million shipment of silver to his operation.

Some of Mulligan Mint's vendors and customers may have turned a blind eye to signs of distress – including late deliveries and broken commitments (according to Gray's detractors) – because they supported the ideology Gray espoused. Putting aside the money involved, this situation has turned into a real black eye for the cause.

[Scenarios like this are exactly why Money Metals Exchange conducts a rigorous due diligence process before making business arrangements with mints and suppliers.]

Meanwhile, dealers peddling numismatic or "rare" coins to hapless investors do a similar disservice to the cause of sound money – but on an even larger scale. Their hired celebrity spokesmen and slick salespeople routinely take advantage of hapless investors, suckering them into buying super marked-up "modern rarities" and other dubious collectibles using high-pressure techniques and outright deception.

Please be careful. Below are some important things to keep in mind when purchasing physical precious metals:

Investment Rule #1: Choose the Right Product

• The Cardinal Rule; minimize the "bid/ask spread." Identifying which items offer low buy premiums is half the battle. The other half is understanding what premium (or discount) to expect when you want to sell. Minimizing the "spread" means minimizing your transaction costs.

• Buy bullion coins, bars, and rounds, NOT collectibles. You will always know how your investment in bullion is performing because the value is tied directly to the spot market price and not the arbitrary and illiquid collectibles market.

• Stick with the most popular and widely traded bullion products. Avoid odd-ball designs on silver rounds, choose brand-name bars, and buy government-minted bullion coins produced by the major world mints. Dealers such as Money Metals will pay top dollar for this inventory because it is easy to re-sell.

Investment Rule #2: Choose the Right Dealer

• Fair prices. Honest and competitively priced dealers publish both buy and sell prices. And the "spread" between the buy price and sell price should never be more than a few percent. Pricing should be straightforward; the spot market price plus the premium. No commissions or junk fees.

• Reputation.
  • Does the firm come across as professional and well-managed?
• Take a look at articles and other content published by the dealer – for example, the News section of Money Metals's website.
• Look for accreditation by the BBB.
• An internet search can reveal whether or not the dealer has happy customers or a long wake of complaints.

• Customer Service.
  • When ordering, you should expect straightforward and thoughtful answers to your questions. Is the salesperson more interested in making a pitch or in answering your questions?
  • Once your order is placed, you should understand exactly what to expect going forward – from initial confirmation to final delivery of the product.
  • The dealer should keep you informed throughout the process – including confirmation of your order, confirmation of your payment, and shipping confirmation (including a tracking number).
  • Your shipment should be neatly, securely, and discreetly packaged to ensure safe delivery – and it should be delivered on time.

Potential Market-Moving News This Week

• Midnight Tonight – Federal Funding Deadline. Parts of the federal government will shut down if Congress and the president fail to reach an agreement on the short-term funding bill.
• Tuesday, Oct. 1st – ISM Manufacturing Index. Manufacturing activity in July and August was stronger than expected. September numbers, due out Tuesday, are expected to come in slightly lower than in recent months, but still positive.
• Wednesday, Oct. 2nd – Fed Chairman Ben Bernanke Speaks. Investors will be scrutinizing remarks from both Bernanke and Fed Governor James Bullard closely for hints about the direction of Fed policy. Another FOMC meeting is scheduled for the end of October. Bernanke is on his way out as Fed Chair, which will heighten focus on his potential successor.
• Friday, Oct. 4th – Employment Situation. The employment data for August was considerably weaker than expected. The consensus for the September report calls for a bit better growth at 188,000 jobs created.

This week's Market Update was authored by Money Metals Director Clint Siegner.