‘Fiscal Cliff’ Distracts As ‘Fiscal Abyss’ In Japan, UK and U.S. Cometh

Gold has lately been behaving like any risk asset. However, buyers should continues to focus on the long term as gold ownership.

Today’s AM fix was USD 1,658.75, EUR 1,259.68 and GBP 1,031.37 per ounce.
Yesterday’s AM fix was USD 1,655.25, EUR 1,247.65 and GBP 1,022.96 per ounce.

Silver is trading at $30.16/oz, €22.97/oz and £18.79/oz. Platinum is trading at $1,533.70/oz, palladium at $701.00/oz and rhodium at $1,040/oz.

Gold climbed $4.10 or 0.25% in New York yesterday and closed at $1,664.20/oz. Silver slipped to $29.685 in London, but it rose to a high of $30.466 in New York and finished with a gain of 0.8%.

Currency Ranked Returns in US Dollars – (Bloomberg)

Gold pared back early gains and edged down on Friday and tick tock goes the US “fiscal cliff” clock as time is running out for the somewhat irrelevant New Year’s deadline.

Gold bullion prices are on target for their first weekly gain in a month after the sharp fall in December (-3%)  led to bargain hunters buying the dip. Gold bottomed on December 29th last year prior to very strong gains in January 2012 and we believe a similar pattern may be seen again this year.

The yellow metal looks set to rack up its 12th straight year of gains on low to zero interest rates, concerns of the eurozone debt crisis and diversification into bullion by central banks.

2013 should see global gold demand grow on further strength from China and a recovery in India, helping the precious metal continue its bull run into its 13th year, according to the World Gold Council.

U.S. CFTC commitment of traders’ data is at 1930 GMT today.

President Obama meets congressional leaders from both parties regarding the fiscal cliff and if a deal isn’t struck it will likely fuel safe haven buying of gold.

Negotiations to avert the ‘fiscal cliff’ offer great political drama, but they won’t solve America’s looming budget and debt crisis and may cast the nation into another recession or worse.

A deal is likely to be done but any deal will be another cynical exercise of kicking the can down the road while failing again to address the root causes of the debt crisis which is too much debt at all levels of American society.


Gold Spot $/oz, 1 Year – (Bloomberg)

The political and media side show that is the so-called “fiscal cliff” will soon be overshadowed by the appalling and rapidly deteriorating situation regarding the U.S. national debt.

Treasury Secretary Timothy Geithner has alerted Congress that the nation will once again hit the debt ceiling on Monday, but that his department can take “extraordinary measures” to keep paying the bills for another few months.

Incredibly, the debt ceiling was raised from $14.294 trillion in August 2011, to its current level of $16.394 trillion. Thus in the span of only sixteen months, the Obama administration has added a whopping $2.1 trillion to the national debt.


Silver Spot $/oz, from Oct. 2011 – (Bloomberg)

The U.S. federal deficit is now exceeding $1 trillion dollars every year —up from $161 billion in 2007, the last year before the financial crisis. Spending is up some $1 trillion, as outlays for Social Security, Medicare, Medicaid and other entitlements have increased by an amount equal to the entire 2013 military budget – a budget which may again surpass the combined military expenditure of every other nation in the world.

U.S. unfunded liabilities are now estimated at between $50 trillion and $100 trillion and by the end of the decade (in less than just 7 years), runaway entitlement spending will require shutting down the military or crippling many other vital domestic spending programs to head off massive deficits that will likely lead to a dollar crisis and significant inflation.

No matter what deal is eventually agreed, whether before or after the new year, it will at best nibble at the edges of the trillion dollar annual deficits that are being piled up.

While all the focus has been on the so called U.S. ‘fiscal cliff’, amnesia has taken hold and many market participants have forgotten about the far from resolved Eurozone debt crisis – not to mention looming debt crisis in the UK and Japan.


Cross Currency Table – (Bloomberg)

In Japan, the national debt is seen topping ¥1 quadrillion by the end of March 2013. A policy of money printing pursued for a decade has failed abysmally and now politicians look set to pursue currency debasement in an even more aggressive manner – with attendant consequences.

The UK is one of the most indebted countries in the industrialised world – the national debt now stands at more than 1 trillion pounds ($1.6 trillion) and total debt to GDP in the UK remains over 500%.

Gold is traditionally sought out as a safe-haven and inflation hedge that investors diversify into in times of trouble. This is because throughout history, those who own physical gold have been protected from financial, economic and monetary crisis.

Also, much recent academic research has shown gold is a proven safe haven asset.

Gold has lately been behaving like any risk asset. However, buyers should continues to focus on the long term as gold ownership will protect people from the fiscal abyss facing major economies and currencies internationally in the coming years.

7 comments on “‘Fiscal Cliff’ Distracts As ‘Fiscal Abyss’ In Japan, UK and U.S. Cometh
  1. wahrheit says:

    OBITUARY
    America, R.I.P.
    Killed by bankers and energy companies, adored by the world for its music and cola products, founded on principles of free speech and gun-toting, this short-lived democracy was festive and happy like a retarded puppy, even while it incarcerated vast numbers of people for dubious reasons, backed cruel despots around the world, drone-struck Reuters reporters and blew them to bits, and turned millions of its own people into huge fat storage vessels. It will be missed, but not mourned.

  2. daddy warbucks says:

    The latest from “DHS Insider” (Part I)
    24 December 2012:
    By Douglas J. Hagmann

    Excerpt:

    “It’s Jarrett and Napolitano, with Jarrett organizing all of the plans and approaches. She’s the one in charge, at least from my point of view, from what I am seeing. Obama knows that’s going on and has say, but it seems that Jarrett has the final say, not the other way around. It’s [screwed] up. This really went into high gear since the election.
    But it’s a train wreck at mid management, but is more effective at the lower levels. A lot of police departments are being gifted with federal funds with strings attached. That money is flowing out to municipal police departments faster than it can be counted. They are using this money to buy tanks, well, not real tanks, but you know what I mean. DHS is turning the police into soldiers.

    By the way, there has been a lot of communication recently between Napolitano and Pistole [TSA head]. They are planning to use TSA agents in tandem with local police for certain operations that are being planned right now. This is so [deleted] important that you cannot even begin to imagine. If you get nothing else out of this, please, please make sure you tell people to watch the TSA and their increasing involvement against the American public. They are the stooges who will be the ones to carry out certain plans when the dollar collapses and the gun confiscation begins.

    DH: Whoa, wait a minute. You just said a mouthful. What’s the agenda here?

    RB: Your intelligence insider – he knows that we are facing a planned economic collapse. You wrote about this in your articles about Benghazi, or at least that’s what I got out of the later articles. So why the surprise?

    DH: There’s a lot here. Let’s take it step by step if you don’t mind.

    RB: Okay, but I’m not going to give it to you in baby steps. Big boy steps. This is what I am hearing. Life for the average American is going to change significantly, and not the change people expect. First, DHS is preparing to work with police departments and the TSA to respond to civil uprisings that will happen when there is a financial panic. And there will be one, maybe as early as this spring, when the dollar won’t get you a gumball. I’m not sure what the catalyst will be, but I’ve heard rumblings about a derivatives crisis as well as an oil embargo. I don’t know, that’s not my department. But something is going to happen to collapse the dollar, which has been in the works since the 1990′s.”

  3. Bruce says:

    Treasury Secretary Timothy Geithner has alerted Congress that the nation will once again hit the debt ceiling on Monday, but that his department can take “extraordinary measures” to keep paying the bills for another few months.
    ~~~~~~~~~~~~
    It’s so laughable, it’s so uncontrollable, it’s so unbelievable…it must be from theonion.com. If someone wanted it fixed, it would be. But it’s not.

    Pay up taxpayers. Enjoy the Big Purge. Enjoy being controlled. Enjoy debt slavery. Enjoy every last freedom you have GONE. Enjoy the real enemy: your own out-of-control govermnent.

    That goes double for the rest of the world.

  4. Alden says:

    A deal is likely to be done but any deal will be another cynical exercise of kicking the can down the road while failing again to address the root causes of the debt crisis which is too much debt at all levels of American society.”"”"”"”"
    DEBT … not the biggest problem or the ROOT of the US demise ..the reasons for that debt include financialization of the entire Anglo American ‘system’ … .. I am with Catherine Ann Fitts on this .. transfer of trillions abroad along with jobs and gutting of US productive capacity play as big or bigger role in our falling off any kind of cliff. American workers have been in a race to the bottom since the late 70s when Paul Volcker informed us that American living standards would have to decrease so the rest of the world could rise…. I used to think capitalism made a pie BIGGER not forced everyone to share one piece..silly me. BUT then what we have had the last 30 years is not capitalism but corporatism .. as the rise of the financials and transnationals pretty much wiped out the American or Brits productive capacity .. and I do not count creating derivatives or algorithms to manipulate markets as free market capitalism. Piling on DEBT with the help of the banksters allowed AMERICANS and most of the West to FEEL richer and better off but the real story and reality was the exact opposite. It amounts to piracy —. Our system reminds me of Norman Bates dead mother who has been sitting in her chair dead as a door nail for several decades and Norman still acts like she is alive and murdering nubile young women .. and the whole thing is in his delusional psychotic BRAIN …. as is our economic system … as 90 percent of the people in the US and West … plus the pathetic talking heads and info babes who act like everything is just fine until they are bleeding out in a shower provided by the banksters and their government stooges.

  5. lupe says:

    won’t be long now………

  6. Jason King says:

    You say that if/when we go over the cliff, it should be good for gold – but if we go over the cliff, everyone agrees it will hurt the economy. And gold and silver seem to be tied to the economy lately. So do you see this trend somehow reversing? Why?

  7. chiller says:

    TSA cowards don’t sign up for military duty, not paid enough to die rounding up US citizens, and die they shall should the chickens in DC turn their empty heads the other way. This is the guberment’s way of throwing the gauntlet down in the face of the American people. It will boil down to who backs the tyrannical forces in DC and who does not. Either way there’s going to be a lot of violence whether we like it or not and the blame can be squarely placed on the first US guberment to ever go to war against it’s people since 1861. Only this time it’s not north vs. south, it’s all law bidding citizens against social anarchist attempting to take over the country and eliminate the constitution, laws and spirit that made this country great. Worth fighting for?? Oohhh yeaaaah!

Access The Max Keiser Podcast
Weekly Downloads, live Q & A Session and exclusive video posts from Max and Stacy

Subscribe Learn More
Buy Gold Online
Watch the latest Keiser Reports:

Watch our Google Hangouts: