Gold and silver spot prices lost ground to a strengthening U.S. dollar last week. The dollar enjoyed its best week in 5 months, as other major world currencies weakened. European central bankers are once again hinting at more stimulus, and the Chinese government cut interest rates for the 6th time in the past year.
Federal Reserve officials meet on Wednesday, and almost no one expects them to change interest rates. Because of the overwhelming build-up of government and private debt, the economy appears totally unable to withstand higher interest rates.
But expect the usual parsing of officials’ every utterance for clues. It’s already been over nine years since the Fed has raised rates even a quarter point, so don’t hold your breath.
Meanwhile, the Treasury Department declared a debt ceiling deadline of November 3rd. Outgoing House Speaker John Boehner will try to push through a debt increase before his scheduled departure on Friday (when he’ll likely hand over the gavel to Paul Ryan). If Congress can’t come to an agreement this week, markets could get rattled on the looming possibility of a U.S. default.
It’s a remote possibility, though. Insiders say the Treasury and Federal Reserve could take additional emergency actions to pay the government’s bills well past the Obama administration’s arbitrary cut-off date.
As former Federal Reserve chairman Alan Greenspan said:
“The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default. We can guarantee cash benefits as far out and whatever size you like but we cannot guarantee their purchasing power.”
In other words, the real threat to investors is inflation, not default.
Meanwhile, stock investors must think better looking economic data is coming, as they have been buying. We’ll see if the latest data matches expectations.
Silver Premiums Have Fallen, but the Short-Term Outlook Is Uncertain
