US Dollar Deflation in 2013

US Dollar Deflation 1913 to 2005

Citi currency guru Steven Englander has a new note out titled: No coin + temporary debt ceiling extension + sequester = US Dollar negative. In it he notes that the rejection of the trillion dollar coin idea to avert the debt ceiling is not alone a market moving event, but that the hard language taken by the White House that the choices boil down to clean lift or default raises the odds of a debt ceiling breach. His take:

So it is possible that we will get a technical default for a few days, but more likely that Congress will give in, vote the debt ceiling up temporarily, and let the automatic sequesters kick in. The more likely scenario of sequester plus grudging debt ceiling rise is USD negative. It will put more pressure on the Fed to keep pumping liquidity into the US economy without giving any reassurance to investors that long-term fiscal issues are close to resolution.

That seems reasonable. A debt ceiling hike + a full sequester, which would equal a weaker economy and more pumping. With Europe healing and China rebounding, USD would be the big loser. Obviously, this would lead to a stronger gold price as inflation becomes uncontrollable. Gold bulls have come out of hiding and are returning to the market, MarketWatch proclaims, and some experts predict the precious metal could surge to new highs. “Gold remains one of the best long-term safe-haven investments for the risk-averse investor despite some declines in price at the end of 2012,” David Beahm, vice president of precious metals firm Blanchard & Co., told MarketWatch.

“With as much uncertainty as there is today, and with quantitative easing and fiscal stimulus programs providing only a temporary fix, gold is poised to achieve new highs, somewhere north of $2,000 in the coming year.” “Volatility will be a major component of the markets” and that includes gold, “but counter-intuitive price swings to the downside should be viewed as buying opportunities as the market moves back upward over time,” Beahm said.

Precious metals have always been a safe haven for investing in uncertain economic times. Precious metals are assets that will never lose their value. They are not subject to systematic risks as fiat/paper money and hedge/protect your hard earned wealth against inflation and other threats of devaluation. Cornerstone Asset Metals was established to help guide investors safely in and out of the precious metals market.

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» Read our article: Why Gold is Going Up Today?

» Read our article: Why Silver is Going Up Today?

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