It's hard to believe, but just last July 1, (33 days ago) gold traded at $1490 an ounce. As the debt deadline approached, both gold and silver prices rose along with tensions surrounding debt ceiling negotiations. As D-Day approached, and it became apparent some deal would be hammered out, metals prices dipped.
Frankly, it should have come as no surprise that metals prices would slip upon settling the dispute. What I am surprised at is this. It only took the markets about 8 minutes to figure out the deal to raise the debt ceiling and cut spending was really a guarantee to increase the national debt.
Senator Rand Paul tried to warn us that the bill passed will not cut spending. It will cut increases to spending and effectively guarantee a $7 trillion increase to the national debt over the next decade. That's what the markets are seeing today. That's the catalyst driving the gold price to new highs.
My question is this. If the agreed upon $200 billion or so in annual spending cuts really represents a guarantee of $700 billion each year in deficits, when was it that the budget deficit was fixed at $900 billion per year over the next 10 years? And who's to say the deficit won't be set at $1.5 trillion then cut by $200 billion?
Nothing has changed. In Rand Paul's Open Letter , he cites comments by Senator Jim DeMint wherein DeMint explains, "the deal to raise the debt ceiling doesn't stop us from going over the fiscal cliff. At best it slows us down from going over it at 80 mph to going over it at 60 mph."
So if you want to see the future of gold, as it unfolds along with the details of this current debt deal, just look back at the last 3 years and see that gold prices have doubled during that time. Then ask yourself, what's going to stop gold from doubling again?
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