What Would another Debt Ceiling Crisis Have to Do With Gold Prices? Precious Metals Brokerage Group, International (PMBG) Presents Potential Effects on Gold Prices

The United States has never defaulted on its debt. If that were to change, so would the rates the market charges to loan the government money. Market performance statistics indicate that irrespective of whatever happens regarding the debt ceiling, gold will be an asset that performs well. However, financial experts believe that if the debt ceiling is not raised, investors will be looking for safe haven assets as their paper assets would be expected to plummet in value, and if the debt ceiling is raised then investors will likely be drawn to gold for reasons of expected additional US dollar devaluation.

Los Angeles, CA (PRWEB) November 17, 2012

Market performance statistics indicate that irrespective of what happens regarding the debt ceiling, gold will be an asset that is slated to perform well, with enough of a time horizon to ride out any potential short-term pull backs. Financial experts believe that if the debt ceiling is not raised, investors will be looking for safe haven assets. If the debt ceiling is raised then the money supply will be increased even more, with eventual likely inflation the likes of which current pre-Baby Boomer generations have never seen.

The United States has never defaulted on its debt. If this were to change, so would the prices the market charges to loan the government money as was already experienced in 2011 just from the “…threat that the country might not pay all its bills…” which “…caused a slump in financial markets and led in August 2011 to the first downgrade of the nation’s credit rating,” according to a New York Times’ recent article. It continued on to say “It left broader economic scars, too. Many economists contend it hurt economic growth and jobs, and a July 2012 report by the Government Accountability Office found that it increased the country’s borrowing costs by about $1.3 billion in the 2011 fiscal year. See: http://topics.nytimes.com/topics/reference/timestopics/subjects/n/national_debt_us/index.html

PMBG sees two key scenarios to be considered in order to understand the potential ramifications of a next debt ceiling crisis on gold prices:

1) If the debt ceiling is not raised, which would mean in principle that total cumulative US debt was being kept from increasing; it would be somewhat bearish for gold short term due to the likely initial belief that the risk of both a US currency crises and sovereign debt crises would be lowered. However, gold has traditionally been used as a safe haven in times of uncertainty. It has been pointed out with the upcoming fiscal cliff that if the debt ceiling is not raised and if the economy were not to improve significantly and in a timely fashion to offer the additional strong arms needed to make actual progress in sustainable debt reduction, the current fragile underlying economic conditions would not offer such support and the mid-range and long-term prospects for gold would still be elevated.

2) If the debt ceiling is raised (as expected) in order to avert actual default then the market conditions would favor gold prices in the near term, especially if Bernanke announces that he will additionally need to monetize some or all of this incremental debt amount. This potential additional round of accelerated dollar debasement, which also means that real gains in US stocks will be negated due to the devaluation of the currency in which they are priced, would not apply to gold however. Therefore raising the debt ceiling would likely lead to near-term gains and long-term valuation would once again depend upon whether the economy is able to repair enough to both remove the need to run increasing deficits as well as sustain such repairs for long enough to actually pay down current accumulated debt.

Either scenario lends to gold (and silver) being in a position to either sustain or grow in valuation as we draw closer to and coming out of what is likely to be a strong battle on the hill with regards to the next wave of partisan pre-fiscal cliff maneuvers from both sides.

About Precious Metals Brokerage Groups International, LLC ("PMBG"):

PMBG is a leading, U.S. based precious metals trading firm and a proud member of the Better Business Bureau with an ‘A’ Rating. The company offers a full range of internationally recognized precious metals investment products including bars and coins of gold, silver, palladium and platinum and semi-numismatic and certified numismatic coins. The precious metals are delivered via free and direct, insured shipment to your home or to a secure depository storage for 401k, 403b, Traditional and Roth IRA rollovers into a Self-Directed IRA account. Interested investors can call PMBG directly at 1-800-516-PMBG (1-800-516-7624) or visit http://www.pmbg.net for a FREE Gold Investment Kit or to learn more details on setting up Gold and/or Silver IRAs and other precious metals investment and retirement accounts.


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