Best of the Week
Most Popular
1. Five Charts That Show We Are on the Brink of an Unthinkable Financial Crisis- John_Mauldin
2.Bitcoin Parabolic Mania - Zeal_LLC
3.Bitcoin Doesn’t Exist – 2 - Raul_I_Meijer
4.Best Time / Month of Year to BUY a USED Car is DECEMBER, UK Analysis - Nadeem_Walayat
5.Labour Sheffield City Council Election Panic Could Prompt Suspension of Tree Felling's Private Security - N_Walayat
6.War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat Part2 - Stewart_Dougherty
7.How High Will Gold Go? - Harry_Dent
8.Bitcoin Doesn’t Exist – Forks and Mad Max - Raul_I_Meijer
9.UK Stagflation Risk As Inflation Hits 3.1% and House Prices Fall - GoldCore
10.New EU Rules For Cross-Border Cash, Gold Bullion Movements - GoldCore
Last 7 days
Government Shutdown Ends – Markets Ignore Looming Debt and Bond Market Threat - 23rd Jan 18
Stock Risks to Watch: Choose Your Bear Market Dashboard - 23rd Jan 18
Worse than Watergate - Release the Memo - Investigate Uranium One - 23rd Jan 18
CAT Stock Bouncing after JPM Upgrade How High and How Long Can This CAT Jump? - 23rd Jan 18
Why Banks Will Be Slammed In The Next Crisis—And That May Be Good News - 23rd Jan 18
Medicare Premiums Are A Shared Pool - Coming Changes That Will Transform Retirement - 23rd Jan 18
Charged Atmosphere of Heavy Police and Security Presence at Sheffield Street Tree Felling Protests - 23rd Jan 18
Pension Crisis And Deficit of £2.6 Billion At Carillion To Impact UK - 22nd Jan 18
Two Factors for Gold That You Don’t Want to Miss - 22nd Jan 18
Why You Must Own Silver in 2018 - 22nd Jan 18
This Could Be The Hottest Mining Stock Of 2018 - 22nd Jan 18
Stock Index Trend Trade Setups for the SP500 & NASDAQ - 22nd Jan 18
Stock Market Deceleration / Distribution - 22nd Jan 18
US Markets vs Govt Shutdown: Stock Markets at all time highs - 22nd Jan 18
Land Rover Discovery Sport - 1 Month Driving Test Review - 22nd Jan 18
Why should you use high-quality YouTube to mp3 converter? - 22nd Jan 18
Silver As Strategic Metal: Why Its Price Will Soar - 21st Jan 18
Stocks, Gold and Interest Rates Three Amigos Ride On - 21st Jan 18
Why Sometimes, "Beating the S&P 500" Isn't Good Enough - 21st Jan 18
Bunnies and Geckos of Sheffield Street Tree Fellings Protests Explained - 21st Jan 18
Jim Rickards: Next Financial Panic Will Be the Biggest of All, with Only One Place to Turn… - 20th Jan 18
Macro Trend Changes for Gold in 2018 and Beyond - Empire Club of Canada - 20th Jan 18
Top 5 Trader Information Sources for Timely, Successful Investing - 20th Jan 18
Bond Market Bear Creating Gold Bull Market - 19th Jan 18
Gold Stocks GDX $25 Breakout on Earnings - 19th Jan 18
SPX is Higher But No Breakout - 19th Jan 18
Game Changer for Bitcoin - 19th Jan 18
Upside Risk for Gold in 2018 - 19th Jan 18
Money Minute - A 60-second snapshot of the UK Economy - 19th Jan 18
Discovery Sport Real MPG Fuel Economy Vs Land Rover 53.3 MPG Sales Pitch - 19th Jan 18
For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage - 19th Jan 18
5 Maps And Charts That Predict Geopolitical Trends In 2018 - 19th Jan 18
North Korean Quagmire: Part 2. Bombing, Nuclear Threats, and Resolution - 19th Jan 18
Complete Guide On Forex Trading Market - 19th Jan 18
Bitcoin Crash Sees Flight To Physical Gold Coins and Bars - 18th Jan 18
The Interest Rates Are What Matter In This Market - 18th Jan 18
Crude Oil Sweat, Blood and Tears - 18th Jan 18
Land Rover Discovery Sport - Week 3 HSE Black Test Review - 18th Jan 18
The North Korea Quagmire: Part 1, A Contest of Colonialism and Communism - 18th Jan 18
Understand Currency Trade and Make Plenty of Money - 18th Jan 18
Bitcoin Price Crash Below $10,000. What's Next? We have answers… - 18th Jan 18
How to Trade Gold During Second Half of January, Daily Cycle Prediction - 18th Jan 18
More U.S. States Are Knocking Down Gold & Silver Barriers - 18th Jan 18
5 Economic Predictions for 2018 - 18th Jan 18
Land Rover Discovery Sport - What You Need to Know Before Buying - Owning Week 2 - 17th Jan 18
Bitcoin and Stock Prices, Both Symptoms of Speculative Extremes! - 17th Jan 18
So That’s What Stock Market Volatility Looks Like - 17th Jan 18
Tips On Choosing the Right Forex Dealer - 17th Jan 18
Crude Oil is Starting 2018 Strong but there's Undeniable Risk to the Downside - 16th Jan 18
SPX, NDX, INDU and RUT Stock Indices all at Resistance Levels - 16th Jan 18
Silver Prices To Surge – JP Morgan Has Acquired A “Massive Quantity of Physical Silver” - 16th Jan 18
Carillion Bankruptcy and the PFI Sector Spiraling Costs Crisis, Amey, G4S, Balfour Beatty, Serco.... - 16th Jan 18
Artificial Intelligence - Extermination of Humanity - 16th Jan 18
Carillion Goes Bust, as Government Refuses to Bailout PFI Contractors Debt and Pensions Liabilities - 15th Jan 18
What Really Happens in Iran?  - 15th Jan 18
Stock Market Near an Intermediate Top? - 15th Jan 18
The Key Economic Indicator You Should Watch in 2018 - 15th Jan 18
London Property Market Crash Looms As Prices Drop To 2 1/2 Year Low - 15th Jan 18
Some Fascinating Stock Market Fibonacci Relationships... - 15th Jan 18

Market Oracle FREE Newsletter

6 Critical Money Making Rules

Investors Ditching Before the Fiscal Cliff

Commodities / Gold and Silver 2012 Dec 06, 2012 - 01:18 PM GMT

By: Peter_Schiff

Commodities

Turn on the TV and this is what you'll hear: The US budget is heading for a fiscal cliff. If a deal isn't reaching in Congress by the end of this year, a combination of automatic tax hikes and budget cuts will sink America into economic depression. There is no escape.


Of course, my readers know that the fiscal cliff is merely an example of the piper having to be paid. The problem isn't the bill, but that we ran it up so high in the first place. Any deal to avoid the cliff by borrowing even more money may allow the piper to keep playing a while longer, but when the music finally stops, the next fiscal cliff will be that much larger.

My readers also know that there are several ways for investors to avoid the cliff altogether. Perhaps the most secure is buying precious metals. However, given what we know, it may seem confusing that the spot prices of gold and silver have been moving sideways.

However, these headline prices have largely concealed a more important indicator: physical bullion sales are booming.

Gold Bullion Sales Chart

An Under-the-Radar Rally

The figures are astounding. For US Gold Eagle coins, mint sales are up some 150% from the QE3 announcement on September 13th. Despite what the spot prices show, there has been a tremendous surge in people buying physical gold.

But why hasn't this translated into higher spot prices?

It seems clear that the spot prices of both gold and silver are being driven right now by a large pool of institutional capital moving into and out of instruments like commodity ETFs. The movements have been predictable: When there is a sign of a deal coming out of Washington, the spot prices move up. If negotiations are faltering, there is instead a major selloff.

Physical bullion investors are a different breed. We are in this market for the long haul. When I increase my physical gold and silver holdings, I do it because I see the long-term fundamental picture for the US getting worse.

Getting a Read on the Bullion Bull

While the ETF speculators are trying to anticipate the market's - and each other's - immediate reaction to whatever 11th hour deal is struck, I believe physical bullion investors are sending a clear signal: this whole debate is out of order.

A J.P. Morgan study concluded that 82% of the hit to GDP if we go over the fiscal cliff would be related to tax increases, not spending cuts. And if the legislators reach a deal? It will only result in more tax increases and much fewer spending cuts. These guys just don't get it.

Looking back to the debt ceiling debate of August 2011, we saw big movements into physical gold there as well. What investors are concluding as they hear these grand debates is that whatever the result, the budget, the dollar, and the taxpayer will lose.

They are deciding to get off this runaway train. Because the real fiscal cliff isn't coming on December 31st - it is coming when there is a global flight from the US dollar.

The Real Fiscal Cliff

The Democrats are complaining that the fiscal cliff imposes too steep demands on those who receive entitlements. Republicans are trying to protect the military budget. What no one seems to want to address is what happens as foreign creditors increasingly decide to stop financing this bonanza.

To a large extent, this is already happening. China has already become a net-seller of Treasuries and is diverting more of its reserves into gold. The Chinese government recently approved banks holding gold as a reserve asset and made it easier for banks to trade gold amongst themselves.

While Japan and other Keynes-drunk governments have filled some of the gap with increased purchases, a supermajority of new issues are being bought directly by the Fed. That was the idea behind QE3 Plus, as described in last month's commentary.

Because of the acute trauma in Europe and certain institutional mandates to hold Treasuries, much of this new inflation is being absorbed. This has caused what may be the most dangerous of situations. It has allowed the inflationists to paint people like me as the boy who cried wolf. It seems to them that no matter how irresponsible Congress and the Fed are, we are immune from economic consequences.

In reality, all this money printing is like pulling back a spring. Pent up inflationary forces are building, and when they are unleashed, the debate will be over faster than they can say "oops."

The Only Way to Win Is Not to Play

Those buying into physical gold and silver see this inevitability and are getting prepared. We believe there is no sense playing Russian roulette with our savings. Every time Washington raises that debt ceiling or announces another stimulus, it's like one more click of the trigger.

When the global markets finally wrap their heads around the scale of US insolvency, the response will be as fierce as it is rapid. In such a once-in-a-century scenario, physical gold and silver are among the few assets without counterparty risk. From the looks of the physical bullion sales charts, I'm not the only investor who has figured this out.

Peter Schiffis CEO ofEuro Pacific Precious Metals, a gold and silver dealer selling reputable, well-known bullion coins and bars at competitive prices.

For the latest gold market news and analysis, sign up for Peter Schiff's Gold Letter, a monthly newsletter featuring contributions from Peter Schiff, Casey Research, and other leading experts. Click here for your free subscription.

Peter Schiff is CEO of Euro Pacific Precious Metals. Having spent years encouraging his brokerage clients to buy physical gold, he grew concerned about the growing number of unscrupulous dealers that tried to "up-sell" customers to rare or collectible coins with high markups. Peter Schiff's gold coin buying philosophy is to buy for the coin's metal value, not its claimed "numismatic" value. He decided to open his own firm to sell investment-grade bullion products at competitive prices. Euro Pacific only sells reputable, well-known coins that trade on the open market, such as American Gold Eagles, Canadian Maple Leafs, and Australian Kangaroos. To find out more, please visit www.europacmetals.com or call us at (888) GOLD-160

Peter Schiff Archive

© 2005-2018 http://www.MarketOracle.co.uk - 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

6 Critical Money Making Rules