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Metals Inching Higher As Congress Faces New Debt Deadline
A repeat of 2011's debt ceiling debacle and precious metals rally?
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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 to this week's market wrap podcast, I'm Mike Gleason.
Stay tuned at the end of today's podcast to hear about one of the best product specials we've had in months, and for perhaps one of the most popular silver products out there. But first, let's take a look at the weekly market news.
Well, as political theater over the federal budget takes center stage in Washington, the precious metals markets seem to be taking a wait-and-see approach. Gold and silver entered Friday morning trading little changed on the week.
Prices had rallied immediately after Fed Chairman Ben Bernanke's no-taper announcement last Wednesday. But the rally fizzled that Friday when Fed governors dropped hints that Quantitative Easing could be scaled back later this year.
Until the precious metals markets can find a new catalyst to get moving, they remain at the mercy of the Fed and media-driven expectations of what it will do next.
For now, investors are nervously eyeing the government-funding showdown in Congress. Next Monday is the deadline to pass a stopgap funding bill.
Obama Administration cheerleaders are issuing melodramatic warnings that if Congress doesn't raise the debt limit to avert a government shutdown, the nation's credit rating will be jeopardized. The reality is that it's the debt itself that's rendering the United States uncreditworthy. The official national debt is now approaching $17 trillion – with more than $6 trillion of it piled on since President Obama took office. Our debt now exceeds our total GDP.
Taking on more debt to stave off a political crisis only worsens the actual long-term debt crisis. You can't solve the problems caused by too much debt with more debt!
More debt puts more pressure on the Federal Reserve to keep buying up government bonds. Why? Simple – the Chinese and the rest of the world no longer have a big enough appetite for burgeoning U.S. debt.
The Fed now holds an astonishing $2.1 trillion worth of U.S. Treasury securities and another $1.3 trillion in mortgage-backed securities, for a grand total of a $3.4 trillion chunk of the bond market. The Fed has no way to extricate itself from this $3.4 trillion wager. For the time being, it can't even refrain from placing $85 billion in new bets every month.
It's difficult to imagine how this won't end in a massive inflation, as all smaller-scale debt monetizations in history have. The consequence will be a flight to gold and silver. For more on why, here's hedge fund manager Bill Fleckenstein, from a CNBC interview this week.
I just wonder where the new gold demand will come from.
The new gold demand, Bryan, is going to come from you and other people in America when they realized that the Fed is going to, over time, wipe out your purchasing power. That has been the history of the Fed since it was founded in 1913. The dollars lost 90% of its value.
Now, if that happened slowly enough, no one cares. When it accelerates, people do care. Your point is well taken about these countries slowing down, but inflation is rampant in India so people tend to take a certain amount of their money and buy metals to protect themselves. They've been right to do so. In local currency terms, gold is basically hitting a new high or was a week ago.
In the meantime, precious metals investors will have to exercise patience while confusion and false hope still reigns in the markets. Gold has been consolidating just above the $1,300 level over the past three weeks. It is up about 1% so far today and currently trades at $1,338 per ounce as of this Friday morning recording.
It's a similar story for silver. The white metal currently comes in at $21.90 an ounce. Over the past three weeks now, it's been testing and holding above support near $21.50. If these support levels break, a re-test of key levels going back to July could be in our future. If they hold, then we'll look for a rally to take prices back toward the August highs of $24.50 for silver and $1,420 for gold.
Turning to the platinum group metals, there's more of a mixed picture. While platinum heads for its fifth straight weekly loss, palladium looks to record its third straight weekly gain – albeit just barely. Platinum comes in at $1,420 an ounce as of this recording, down a little over 1% for the week, while palladium is up close to 1% and sits at $728 per ounce.
An unexpected product special opportunity came up this week and since we announced it yesterday morning Money Metals Exchange customers have responded in a MAJOR way.
We snatched up a big lot of the popular Pre-1965 90% junk silver. And in less than 36 hours, we sold out of the 40 bags our wholesaler asked us to dump, and we're scrambling now to get more inventory.
The premium will rise slightly to $1.99 over spot as of this afternoon, but it's still a fantastic deal which has our competitors wondering how we're doing it. We haven't been able to offer this form of silver at premiums this low since the beginning of the year – when silver was almost $7 per ounce higher.
And our offer on free shipping still stands. Anyone who orders at least $100 face value of these 90% dimes or quarters – containing 71.5 ounces of silver and valued at close to $1,700 – will get free shipping on their entire order.
Supplies are going fast and this special may end without notice – so give us a call at 1-800-800-1865 to place an order by phone, or visit www.MoneyMetals.com to place an order 24 hours a day, 7 days a week through our secure shopping cart.
Well that will do it for this week's market wrap podcast, thanks for listening. This has been Mike Gleason with Money Metals Exchange reminding you that remain fully committed to getting you the most value for your depreciating dollar... with speed, with accuracy, 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.