Markets Growing Unstable on Washington Chaos

Announcer:

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.

Mike Gleason:

Welcome to this week's market wrap podcast, I'm Mike Gleason.

As the partial government shutdown heads into its fourth day, the precious metals markets remain range bound. Gold and silver prices fell sharply through support levels on Tuesday, causing chart watchers to brace for more selling. But prices turned right back around on Wednesday, as gold reclaimed the $1,300 level.

As of this Friday morning recording, gold is coming in at $1,310 an ounce, down a about 2% on the week. Meanwhile, silver currently trades at $21.65 an ounce, down only about 1% for the week despite some volatile price swings mid-week.

It's still not exactly clear how the political stalemate Washington will resolve itself, or whether it will push metals prices higher or lower in the near-term. But one thing that seems abundantly clear is that Republicans won't be able to defund Obamacare. They simply don't have the votes in the Senate, and President Obama isn't going to budge on his signature legislation.

Regardless of what you think about Obamacare as public policy, it's important, as an investor, to take account of the transformative law's fiscal impact. $6.2 trillion – that's how much the Government Accountability Office says Obamacare will add to our deficit over 75 years. More immediately, the Medicaid expansion alone will cost in excess of $700 billion from 2014 to 2023. All told, the bill for Obamacare will come to $1.8 trillion over the next decade, according to the Congressional Budget Office. That's double what President Obama said his so-called Affordable Care Act would cost when he was campaigning for it. And keep in mind that government predictions on spending have often come in well under the reality of the total bill in the end.

Only in Washington can a transaction of such magnitude be labeled "Affordable"! Of course, much of the coming spending on Obamacare will be debt financed. And while some new Obamacare taxes will be imposed, they won't cover the explosive growth in Medicaid, let alone the spiraling costs of Medicare that were already baked into the cake.

Other countries that have government-controlled healthcare systems have managed to control costs. The U.S., unfortunately, hasn't. We have the most expensive and, in some ways, the least efficient healthcare system in the world. The U.S. devotes 18% of its GDP to healthcare, according to the World Health Organization – more than any other industrialized country.

The government's share of that spending is set to go up steadily. The tsunami of federal healthcare spending that's on the way promises to be negative for the value of the U.S. dollar. After all, trillions of new dollars will have to be pumped into existence just to pay for the unfunded medical entitlements, which will do nothing but grow.

This political circus is a global embarrassment for our nation. Congress and the President have even been unable to enact a federal budget for several years and federal spending has been unrestrained. There is unstoppable momentum for more deficit spending and debt monetization – with no political leadership to change course.

For the time being, investors are more focused on political wrangling, Fed tapering talk, and near-term economic data. On Tuesday, the ISM Manufacturing Index report showed strength for September. The gauge of factory output showed its best reading since April 2011. However, the positive news for manufacturing was offset by a disappointing ADP jobs report on Wednesday. Companies added fewer workers than projected last month.

That news helped lift gold and silver prices, at least for a day. No "official" jobs data today, due to the government shutdown. But since the employment situation in America stinks, perhaps it's all for the best that the data doesn't get released!

The more economically sensitive metals, platinum and palladium, fared worse than gold and silver this week. Platinum fell a little over 3% and palladium nearly 4% through Thursday's close.

Given the dearth of economic data and the political dysfunction emanating from Congress, all asset markets remain unpredictable in the near term. Volatility could pick up as we head toward a deadline for raising the debt ceiling, with the U.S. Treasury's credit rating hanging in the balance. We again urge investors to not get distracted by the headlines – and to remain focused on the long-term impact of what's going down in Washington.

And what's going down, ultimately, is the value of the currency. That's why a substantial allocation to physical precious metals may well be the right financial prescription for surviving Obamacare.

Now, here's a nice little bit of news about gold.

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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.

Announcer:

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.