Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Overbought as New U.S. Debt Issuance Hitting Congress Limits

Commodities / Gold & Silver 2009 Sep 15, 2009 - 12:38 AM GMT

By: Ned_W_Schmidt


Best Financial Markets Analysis ArticleWell, the U.S. has another debt problem in the making. This one has been visited before on a regular basis. The U.S. is running out of the ability to issue new debt. So much debt has been issued that the U.S. is bumping up against the statutory debt limit, which is set by Congress. That limit, now don't laugh, was intended to keep the U.S. government from being a runaway debt machine.

In the table above is listed the current statutory debt ceiling of the U.S. Second line is the currently outstanding public debt of the U.S. government. At $11.8 trillion, it is just slightly below the statutory limit. Admittedly, having Congress set the debt limit is the equivalent of the patients being in charge of the asylum keys. The Obama Regime has already requested that Congress raise the statutory limit. As the U.S. Congress votes like lemmings, we expect it to be raised. So presumably we should not fear running out of U.S. debt. We are, however, more optimistic as at least one member of Congress has been willing to speak up. Now, if we could only get the other 534 to do so.

More shocking are the last two lines in that table. The real deficit of the U.S. government over the past twelve months has been $2.1 trillion. Forget the silly number released by the U.S. Treasury, as that is the unified budget deficit. That concept was invented to hide the real deficit from the public. The unified budget deficit includes the current surplus of funds going into the Social Security System. Those funds, rather than remaining available to pay future benefits, are then invested in U.S. government debt. A true daisy chain of government finance if ever there was one.

That $2 trillion dollars must be financed in one of three ways. The debt can be bought by either U.S. savers, foreign central banks, or monetized by the Federal Reserve. With the failing and fading Obama Regime now starting a trade war with China, monetization looks increasingly necessary. With a trade war likely to reduce Chinese purchases of U.S. debt, monetization may be the only choice. That means longer term the dollar falls in value, and $Gold rises to more than $1,700.

But, Gold Bugs also have to live in the short-term. After the excitement in the Gold and Silver markets of the past two weeks, we may feel a let down if Gold does not keep steaming upward. Gold Bugs have been waiting, craving, and calling for $1,000+ Gold for a long time. Do they know what to do now that it has arrived? Remember, we only have three choices, buy, sell or hold.

An analyst has a two fold assignment. One is to determine what should happen in the markets. Second task to acknowledge and interpret that which has happened in the markets. The latter is perhaps the easiest, as it simply is the regurgitation of history.

Should the month of September continue in a positive fashion we would have a serious indication, perhaps confirmation, of the beginning of Wave V. However, that does not mean the move will be straight up as every major wave has subwaves. Further, quite simply too much optimism has been generated in too short of time. The emails and web sites are full of the kind of talk that exudes emotion rather than analysis. Wild rumors have been rapidly disseminated. A favorite is the secret plan by the G-20 to eliminate the dollar as a reserve currency by the end of the year. Hello, the G-20 could not agree on a pizza order by the end of the year.

While a raging long-term Gold bug, a question arises. Why is Gold going up? None of the traditional reasons seem to exist. No financial crisis exists. The terrorists seem quiet. AfPak is a problem, but the insurgents probably will not get control of the nuclear weapons there till next year. Inflation seems non existent.

We do, however, have the Obama Regime continuing on a determined path to destroy as much U.S. wealth as possible. A growing lack of confidence in U.S. leadership could indeed be a factor in the fall of the dollar, and the consequent rise of Gold. As an indication of the falling popularity of the Obama Regime, a non rigorous review of the 180 magazines on display at the public library was made. Of those 180 magazines, only one was observed with Obama on the cover.

$Gold should be rising if, one, lots of U.S. dollars were being printed, or, two, if the investing public was making a major asset shift to Gold from other investments. As we will again explain in the coming issue of The Value View Gold Report, quantity of U.S. dollars is not expanding. If quantity of U.S. dollars is not expanding, U.S. inflation should not rise and the value of the dollar should not fall.

As $Gold is rising without readily apparent fundamental support, we must assume that technical and momentum driven buying are at the heart of this move. As that is the case and $Gold is extremely over bought, as shown in the above chart, investors should step aside till calm returns to the market. In the case of Gold stocks, many have been driven to over valued levels. That condition is especially true among the smaller Gold companies. Investors may want to consider reducing these holding, and buying the stocks back perhaps 25% lower in price.

While highly excited about the recent move to more than US$1,000, we would await the next period of price weakness before adding to holdings of Gold. When emotions are running rampant best to take the hand off the mouse, and relax. A better buying opportunity in the long march to $1,700 will arrive. Your Gold has already allowed your wealth to compound at a far greater rate than the returns produced by almost all Street investment managers. That was accomplished by careful analysis and patience, rather than emotional buying. Remember, the secret is to buy low, and never sell in a bull market.

By Ned W Schmidt CFA, CEBS

Copyright © 2009 Ned W. Schmidt - All Rights Reserved

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report , monthly, and Trading Thoughts , weekly. To receive copies of recent reports, go to

Ned W Schmidt Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in