Gold trading sideways awaiting Fed; Bloomberg says U.S. debt outlook “bleaker than even Italy”


Note: Today we return to our regular format of a single Daily Market Report, instead of the two we have been posting over the past few months. Both the Chart of the Day and Quote of the Day will be included in the morning report. We will post LATE DAY UPDATES when warranted, so check back late afternoon, early evening.

Gold is trading sideways this morning at $1305.50 waiting, like the rest of the financial markets, to see if the Fed will spring any surprises in its announcement this afternoon. Silver, though, has sprung a bit of a surprise of its own, up 24¢ at $16.42 this morning. Silver is vastly under-priced against gold at yesterday’s ratio of 80.5 to one and technical traders might be finally latching on to that opportunity at current lows.

Though the markets seem to have fully priced-in the Fed interest rate policy – at least for now – it has not even begun to take into account the immense problems associated with the rapidly growing national debt. In an article meant to alert readers that the Treasury Department intended to raise the quarterly long-term debt schedule from $39 billion to $73 billion – a small number in the scheme of things – it also slips in a somewhat scathing observation:

“The country’s debt load is seen spiraling compared with the rest of the world, with forecasts showing that in five years it will have a bleaker outlook than even Italy, the perennial poor man of the Group of Seven industrial nations.”

Over the past 12 months, the federal government has added $1.225 trillion to the national debt. Over the last 90 days, it has added an astonishing $574 billion to the national debt pile. On a number of occasions, we have posted charts on the direct connection between the national debt and gold since 1971. That correlation looks poised to enter a new realm, but few are paying attention to it. . .once again, at least for now.

Chart of the Day

Chart note: This chart zeroes-in on why the national debt matters to ordinary Americans. Rising interest rates and massive growth in the gross debt will push these number much higher – so much so that it will exceed in the near future what the nation spends on national defense. . . .and the higher interest rates grow the greater the problem will become. At some point one would think that like Italy or Greence, at some point, the level of debt and interest payments will affect the national credit rating.

Quote of the Day
“Investors who owned Russian stocks in 1917 or Chinese stocks in 1949 lost everything. London Business School market historians Elroy Dimson, Paul Marsh and Mike Staunton calculate that shares in Austria—which lost two wars and an empire—lost money after inflation over 97 years, even when counting dividends. Shareholders in Belgium, Germany, Italy, France and Japan were down in real terms for more than half a century, as were Spanish investors, who endured a destructive civil war and dictatorship.” – James Mackintosh, Wall Street Journal


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