Today’s AM fix was USD 1,321.75, EUR 978.71 and GBP 824.34 per ounce.
Friday’s AM fix was USD 1,355.25, EUR 1,002.18 and GBP 845.39 per ounce
Friday’s AM fix was USD 1,355.25, EUR 1,002.18 and GBP 845.39 per ounce
Gold dropped $39.30 or 2.92% Friday, closing at
$1,325.30/oz. Silver slid $1.27 or 5.84%, closing at $21.74. At 3:32 EDT
Friday, Platinum fell $31.30 or 2.1% to $1,427.50/oz, while palladium
slipped $18.53 or 2.5% to $713.97 /oz. Gold was up 0.16% and silver was
down 2.03% on the week.
Gold has been up and down in choppy trading in London today
as investors digest the U.S. Fed’s decision to wait on tapering until
perhaps next month. Comments on Friday from James Bullard, the St. Louis
Federal Reserve Bank President affected the markets. He said, “a
reduction of the Fed’s $85 billion monthly bond purchase program
beginning in October was possible and that the Fed can be patient in
deciding when to scale back its pace of asset purchases”.
In Germany’s elections, Chancellor Angela Merkel is on her
way for a third term as German leader after her party, the Christian
Democratic Union (CDU) scored its best federal election result since
1990. However, it appears likely she has lost her coalition partner, the
Free Democratic Party (FDP) as they failed to secure the required 5%
threshold necessary and will be without Bundestag representation for the
first time in its 65-year history.
Gold is finding support by the increasing consensus that
the current Federal Reserve Vice Chair, Janet Yellen, will take over
from Bernanke. Gold got a boost Thursday after a senior White House
official’s remarked that Yellen is a leading candidate to replace
Bernanke when he steps down.
Yellen, a strong supporter of Bernanke’s policies, should
keep U.S. interest rates low for an extended period of time and she is
very dovish, contrary to recent revisionism.
The U.S. national debt continues to surge higher every day
and is now at $16.95 trillion and will soon surpass the $17 trillion
mark.
When Standard & Poor’s reduced the U.S.’s credit rating
from AAA to AA-plus, it was the first time the U.S. ever suffered a
downgrade to its credit rating. The S&P took this action despite the
plan Congress passed last week to raise the debt limit.
The downgrade, S&P said, “reflects our opinion that the
fiscal consolidation plan that Congress and the administration recently
agreed to falls short of what, in our view, would be necessary to
stabilize the government’s medium-term debt dynamics.”
It’s those medium- and long-term debt problems that also
worry economics professor Laurence J. Kotlikoff, who served as a senior
economist on President Reagan’s Council of Economic Advisers. He says
the national debt, which the U.S. Treasury has accounted at about $14
trillion, is just the tip of the iceberg.
“We have all these unofficial debts that are massive
compared to the official debt,” Kotlikoff tells David Greene, guest host
of weekends on All Things Considered. “We’re focused just on the
official debt, so we’re trying to balance the wrong books.”
Kotlikoff explains that America’s “unofficial” payment
obligations — like Social Security, Medicare and Medicaid benefits —
jack up the debt figure substantially.
Laurence J. Kotlikoff served as a senior
economist on President Ronald Reagan’s Council of Economic Advisers and
is a professor of economics at Boston University
“If you add up all the promises that have been made for
spending obligations, including defense expenditures, and you subtract
all the taxes that we expect to collect, the difference is $211
trillion. That’s the fiscal gap,” he says. “That’s our true
indebtedness.”
We don’t hear more about this enormous number, Kotlikoff
says, because politicians have chosen their language carefully to keep
most of the problem off the books.
“Why are these guys thinking about balancing the budget?”
he says. “They should try and think about our long-term fiscal
problems.”
According to Kotlikoff, one of the biggest fiscal problems
Congress should focus on is America’s obligation to make Social Security
payments to future generations of the elderly.
“We’ve got 78 million baby boomers who are poised to
collect, in about 15 to 20 years, about $40,000 per person. Multiply 78
million by $40,000 — you’re talking about more than $3 trillion a year
just to give to a portion of the population,” he says. “That’s an
enormous bill that’s overhanging our heads, and Congress isn’t focused
on it.”
“We’ve consistently done too little too late, looked too
short-term, said the future would take care of itself, we’ll deal with
that tomorrow,” he says. “Well, guess what? You can’t keep putting off
these problems.”
To eliminate the fiscal gap, Kotlikoff says, the U.S. would
have to have tax increases and spending reductions far beyond what’s
being negotiated right now in Washington.
“What you have to do is either immediately and permanently
raise taxes by about two-thirds, or immediately and permanently cut
every dollar of spending by 40 percent forever. The [Congressional
Budget Office's] numbers say we have an absolutely enormous problem
facing us.”
UBS has updated their short-term gold targets today,
increasing their one-month forecast to $1,450/oz from $1,250/oz and
three-month to $1,375/oz from $1,350/oz citing the U.S. Fed’s decision
not to reduce its QE program as positive for gold. Additionally the U.S.
fiscal and debt ceiling debates are imminent. Oct. 1st is the U.S.
government shutdown date to be avoided and the market rhetoric will
increase gold’s safe haven status. Finally, UBS analyst Edel Tully noted
the upcoming wedding and festival season in India followed by the
Chinese Lunar New Year will all increase physical demand for the yellow
metal.
NEWS
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