DMR–Gold support levels collapse sending it down $21 in early trading

Gold support levels collapsed in early trading taking the metal below the $1300 mark at $1293 and down $21 on the day. Silver is also off sharply – down 32¢ at $16.24. The metals have been under constant pressure the past few weeks as dollar support strengthened the result of continued monetary easing by the Bank of Japan and the European Central Bank and tightening in the United States. The 10-year Treasury note pushed over the psychologically important 3% mark yesterday adding to gold’s discomfort. The Dow Jones Industrial Average is also taking a hit this morning – down 181 as this posted, also responding to rising yields on Treasury paper. Today’s gold chart is showing the kind of waterfall drop usually associated with momentum driven technical selling in the futures’ markets, though the volume thus far today has been surprisingly middle range.

Quote of the Day
“A few years ago, the government paid less than 1.5% on its 10-year Treasury note. Today the rate has doubled. This has a profound impact on Uncle Sam’s cash flow: they have to borrow MORE money just to pay interest on the money they’ve already borrowed… and spend a larger and larger share of the budget on debt service. It’s a financial death spiral. Think about it: if the government is having this much trouble making ends meet when they’re paying 2% interest on $21 trillion in debt, what’s going to happen when they’re paying 5% on $30 trillion? It’s foolish to think that this trend has a consequence-free outcome. No nation in history has ever become prosperous by borrowing record amounts of debt to finance reckless spending.” – Simon Black, SovereignMan.com

Chart of the Day

Chart note: This chart zeroes-in on why the national debt matters to ordinary Americans and does not require a lot of embellishment. Please note, though, the strong growth in interest payments from 2008 forward at a time when rates were abnormally low. Rising interest rates and massive growth in the federal debt will push these numbers much higher – so much so that the expenditure to service the debt will soon exceed what the nation spends on national defense.

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