Welcome to Money Metals Exchange's weekly market wrap podcast. Helping precious metals investors during these treacherous times. Now, here's this week's market wrap with commentary and analysis from the fastest growing precious metals dealer in America, Money Metals Exchange.
Welcome back everyone... I'm Mike Gleason.
Before I get into the market action in precious metals, I'd like to mention that coming up next week is the 10th annual Silver Summit. An all-star lineup of speakers and exhibitors will gather on October 25th and 26th in Spokane, Washington.
One of the keynote speakers at the Silver Summit will be silver guru David Morgan, the widely respected editor of our Money, Metals, and Mining newsletter.
Representatives from Money Metals Exchange will be covering the Silver Summit, as will members of the newsletter's editorial team.
We expect to pick up some good information from fellow silver market and mining industry insiders, and we'll be sure to share the noteworthy items in upcoming podcasts, Market Updates, and newsletter articles. Be sure to stay tuned.
Now, back to the markets. With barely two months to go, gold looks to finish 2012 with its 12th consecutive yearly advance. Year to date, the yellow metal is up 11%. It's currently trading just below $1,750.
HSBC said Wednesday it expects gold prices to hit $1,900 an ounce by the end of the year. And forecasters with that mega-bank cited the Federal Reserve's open-ended scheme of Quantitative Easing – as well as the mounting U.S. fiscal crisis – as major factors contributing to a weaker dollar.
That, in turn, should help drive gold prices to new record highs by year-end or early 2013.
In the meantime, gold and silver are experiencing a near-term correction after making some big gains in August and September.
As I noted last week, the metals could be expected to pull back and consolidate for a few more days before beginning their next upleg.
Gold currently sits just above chart support levels at around $1,735, and silver – similarly – is right on top of its key area of support, which is around $32 and a half.
However, in our view, the stage is being set for year-end rally, regardless of who wins the election. More on that in a moment.
Yes, as they say, markets hate uncertainty. And with polls whipsawing back and forth and with campaign rhetoric heating up, some now fear the outcome of a contested election will be civil unrest.
In any event, whoever ultimately takes control of Washington won't be able claim much of a governing mandate. Meaning no big or fundamental changes will be politically feasible at the end of the day.
What I can predict with a near 100% certainty is that the election outcome won't fix the nation's long-term funding crisis. Nor will it alleviate the pressure on the central bank to keep the financial system propped up with unlimited currency creation.
So investors should keep their focus on the long-term trend in the value of the dollar, which is down. And aim to protect themselves with precious metals, whose long-term trend remains up.
Let's dive deeper now into the upcoming presidential election, and to do that, I'm going to bring in Clint Siegner, Co-Director here at Money Metals Exchange. Clint, let's examine this. Currently, we have Obama with an edge in the delegate count, it appears. It looks like an Obama re-election is certainly possible, maybe likely at this point.
Obama is favorite in the majority of swing states, slight majorities and the big majority of those states. Of course, he has about 10 electoral vote lead among states where the outcome is already deemed to be certain.
He's got an advantage and had a much better performance in the debate this week. The bounce that Romney got after soundly defeating Obama in the last debate isn't likely to materialize this time around. It's a horse-race but Romney's got a lot of work to do.
He certainly does. If Obama does go on and get re-elected as many expect, no reason to think there's going to be any real change in the White House and from the policy makers in Washington if Obama does get that second term.
Nobody expects that particular zebra to change its stripes. The likelihood is we're going to get more in the way of deficits, more debt, and we're going to get more support from the President on easy-fed policy. They're going to keep the printing presses running.
Obviously, this election is not a foregone conclusion, Mitt Romney does still have a fighter's chance. He could come back in some of these swing states and close the gap where he currently trails. Talk about what could happen if Mitt Romney does get the election on November 6, and what can people expect from a Romney Administration.
Unfortunately, we don't think you should expect a whole lot of change. Money Metals isn't the only organization that questions Romney's conservative credentials, true conservatives have had their issues with Romney for some time.
This is the guy that delivered RomneyCare in Massachusetts, their state-wide health care plan on which ObamaCare was modeled. The budget proposal, which is vice-presidential candidate Paul Ryan's proposal, is being built as conservative, the media is certainly is playing it that way, but it doesn't actually reduce deficits to zero until 2040. That's 30 years from now, which might as well be never in Congress.
Democrats are howling and there's a lot of theater, but at the end of the day, this "Conservative Budget Proposal" doesn't amount to a whole lot of cuts that are going to be representing any kind of fundamental change in government policy.
Both of these guys were for the big bailouts of the banks a few years ago, if I'm not mistaken.
Yes, they both supported Tarp and we just don't think that there's a whole lot that would indicate they're going to do anything radically different.
Right. Neither candidate is really looking like they're going to pose any sort of a challenge to the existing Fed Policy that we have, which is highly inflationary and dollar-destroying, and at the end of the day, it's all about the Fed. When you really get down to it, it doesn't so much matter who's in the White House. If they're not going to be challenged by that person anyway, then we're just going to continue to see more of the same.
Let's talk a little bit now about some of these Senate elections, this is an overlooked topic here. This is going to have a very far-reaching effect on the type of policy that we get from the next administration. Talk a little bit about these Senate races.
Certainly the Senate race, as you'd expect during a Presidential election year, it doesn't get much focus, but it may be the more important election of the two, at least in terms of spending policy, the policy that drives debt, deficits and creates the inflation that has made metals such a good investment.
The Republicans, have a tall order trying to get control in the Senate. They have to win in seven of the 11 states where races are close. In those toss-up states, they have to win a big majority. If they manage to pull that off, they will only have a simple majority in the Senate, which is not enough for them to do anything dramatic in terms of reducing debt.
Repealing ObamaCare for instance, or extending the Bush tax cuts, things that certainly have been hot topics.
Yes, they've been dead-locked in Congress generally for years now, teeter-tottering back and forth on this 50-50 number. Small majorities don't seem to be enough to get anything done, that's assuming, of course, that the Republicans really wanted to do anything dramatic and personally, I don't think that's all that likely.
At the end of the day, we're obviously a precious metals company, this is a precious metal market update. What's the bottom line here for people that are following this, because they are interested in precious metals and protecting themselves against the devaluing dollar? Why does this matter, why should they care and why should they really be examining the two possible outcomes here?
Presidential elections are big news and are certainly going to impact markets in one direction or another. The problem is trying to guess what direction and how much the odds of making a short-term prediction like that successfully are not particularly good, it's just gambling and that really isn't the business we're in. We try and stay away from the short-term stuff, we acknowledge we're not good at it and we know, statistically, that it's just unlikely you're going to be able to do that reliably.
Longer term, we don't expect all that much change. We've gone by the point of no return. We've got so much debt already on the books, in excess of 16 trillion dollars. We've got entitlement liabilities, the whole package, now estimated maybe north of 100 trillion dollars.
There's only three options for these guys, as has been discussed elsewhere. They can grow their way out, we don't think that's likely. They can default outright, in other words, call Granny and let her know that her "Social Security check just isn't coming anymore," or, what we consider the most likely option, which is to inflate their way out. That would allow them not to have to call Granny, they'll just send her a check that doesn't buy much.
If you look at the situation back in the late '70s when we were in a very similar situation from an inflationary standpoint, our dollar is very weak, it's not buying as much as it used to, which really started after they de-linked the dollar from gold during the Nixon administration.
We are not in a position of strength like we were back then. A guy like Paul Volcker coming in and raising interest rates to double digits is not even a possibility for a guy like Ben Bernanke.
No. Even if Bernanke was inclined to raise interest rates, or his predecessor, were inclined that way. Just a modest increase in interest rates would actually crash the federal budget. The exceptionally low rates, we've seen as a part of policy for a reason, they just wouldn't be able to afford interest payments at much higher levels.
Good stuff as always, Clint. Thanks for your insights and we'll do it again soon, I'm sure.
And thanks for listening, everybody. This has been Mike Gleason with Money Metals Exchange, reminding you that we are fully committed to getting you the most metal for your depreciating dollar... with speed, with privacy and with top-notch service. Have a great weekend, everybody.
Thank you for joining us for this edition of the Money Metals Exchange Weekly Market Wrap. Be sure to come back next week, and don't forget to subscribe to our weekly podcast through iTunes. For answers to all of your questions, or to discretely and securely buy or sell gold or silver coins, bars, and rounds, call 1-800-800-1865. Our knowledgeable and no-pressure specialists are standing by between 7:00 a.m. and 5:30 p.m. mountain time, Monday through Friday. Visit us at www.MoneyMetals.com or call 1-800-800-1865.
About the Author:
Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.