{"id":80123,"date":"2015-10-26T14:54:58","date_gmt":"2015-10-26T18:54:58","guid":{"rendered":"http:\/\/countingpips.com\/?p=80123"},"modified":"2015-10-26T19:39:18","modified_gmt":"2015-10-26T23:39:18","slug":"this-week-the-fed-debt-ceiling-and-physical-premiums","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/10\/this-week-the-fed-debt-ceiling-and-physical-premiums\/","title":{"rendered":"This Week: The Fed, Debt Ceiling, and Physical Premiums"},"content":{"rendered":"
October 26, 2015<\/div>
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By Money Metals Exchange<\/em><\/p>\n

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.
\n\"dollar-fed\"<\/p>\n

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.<\/p>\n

But expect the usual parsing of officials\u2019 every utterance for clues. It\u2019s already been over nine years since the Fed has raised rates even a quarter point, so don\u2019t hold your breath.<\/p>\n

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\u2019ll likely hand over the gavel to Paul Ryan). If Congress can\u2019t come to an agreement this week, markets could get rattled on the looming possibility of a U.S. default.
\n\"debt\"<\/p>\n

It\u2019s a remote possibility, though. Insiders say the Treasury and Federal Reserve could take additional emergency actions to pay the government\u2019s bills well past the Obama administration\u2019s arbitrary cut-off date.<\/p>

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As former Federal Reserve chairman Alan Greenspan said<\/a>:<\/p>\n

\u201cThe 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.\u201d<\/p>\n

In other words, the real threat to investors is inflation, not default.<\/p>\n

Meanwhile, stock investors must think better looking economic data is coming, as they have been buying. We\u2019ll see if the latest data matches expectations.<\/p>\n

Silver Premiums Have Fallen, but the Short-Term Outlook Is Uncertain<\/strong><\/p>\n

With silver prices rising almost 10%, retail buying of physical silver has lessened over the past three weeks \u2013 down from the frenetic pace over the past 4 months. That\u2019s allowed premiums on many products to fall toward normal levels. Production backlogs and delivery delays have also been dissipating.<\/p>\n

Ask premiums for the Maple Leaf, American Eagle, and Pre-1965 90% silver U.S. coins \u2013 the products that saw the sharpest hikes through the summer \u2013 are now leading the way down. The respite will help mints and refiners catch up. Dealers are taking the opportunity to replenish inventories.<\/p>\n

One fly in the ointment is the upcoming annual halt in deliveries of silver American Eagles. The U.S. Mint is expected to stop production of 2015 dated coins sometime between early and mid-December and change out the dies for the 2016 date. (While private mints only require a few hours to make a switch, the U.S. government requires a few weeks.) So the market can expect a month of no deliveries until a resumption in mid January.
\n\"supply-demand\"<\/p>\n

If dealers cannot build adequate inventory to supply the market during the Mint\u2019s hiatus, we will see upward pressure on premiums once again. January demand for the new year\u2019s coin is also traditionally among the strongest months of the year. That may also push premiums higher.<\/p>\n

This adds up to an uncertain outlook for premiums in the short term. Much will depend on what happens to retail demand in the coming months. The extraordinary demand from June through September was based largely on safe-haven buying.<\/p>\n

The crisis in Greece has shuffled out of the headlines. Meanwhile, the combination of additional stimulus and the threat of draconian punishment for anyone selling Chinese stocks seems to have stayed the collapse of share prices there.<\/p>\n

U.S. stock markets are also recovering from their late September lows. These signals indicate that complacency and the narrative of economic recovery is creeping back into markets. There is no one better at pushing a narrative than officials in Washington, unless it is Wall Street. Their problem, as always, is supporting it with actual facts.<\/p>\n

Spot prices<\/a> will also be a significant factor in bullion demand, of course. Prices have risen well above the recent lows, tempering some interest among bargain hunters. The markets also have some convincing to do before investors trust that the recent recovery actually represents a reversal and the start of a new uptrend.<\/p>\n

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\"clint-s\"Clint Siegner is a Director at <\/em>Money Metals Exchange<\/em><\/a>, the national precious metals company named 2015 \u201cDealer of the Year\u201d in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals\u2019 brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.<\/em><\/p>\n

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By Money Metals Exchange 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 […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-80123","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/80123","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=80123"}],"version-history":[{"count":3,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/80123\/revisions"}],"predecessor-version":[{"id":80128,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/80123\/revisions\/80128"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=80123"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=80123"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=80123"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}