Gold and Silver (1)

Whether DC Defaults or Not, Physical Gold Is Attracting Attention

Will the White House and Congress come to an agreement to raise the debt ceiling before the U.S. government defaults? It’s a question that has been driving many investors’ decision-making for a couple of weeks and it will only become more relevant with every passing day.

But many investors are turning to gold and silver now knowing that whether an agreement is reached or not, America has passed the point of financial stability from the result. A last-minute deal will still send shockwaves through most financial sectors. A default could be cataclysmic for some markets. Precious metals are seen by many economists to be the safe haven in both scenarios as gold and silver are poised to perform in the coming days and weeks.

According to Gillian Tett at Financial Times [emphasis added]:

How can an investor protect themselves against a US government default? Once, that was a crazy question to ask. But today the bizarre has become almost normal in American politics.

And while US president Joe Biden and House Speaker Kevin McCarthy have both indicated they want to cut a deal to raise America’s $31tn debt ceiling — and thus avoid a putative default — significant sticking points remain.

So Wall Street analysts are now furtively weighing the protection options as they grapple with this new tail risk. Some, like those at JPMorgan, argue that “diversification is the best defence,” and urge investors to “consider currencies and precious metals like the Japanese yen, the Swiss franc, and gold [and] high quality international equities.” That sounds sensible.

However, others are more focused: RBC Capital markets last week suggested that “gold looks like one of the few likely candidates that would bear the burden of resulting market flows” from default anxiety.

And a survey from Bloomberg this week echoes this. Gold is the top safety choice for professional and retail investors, by a long margin, with 52 and 46 per cent, respectively, citing this.

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Will there be a deal reached? In normal political times, it would seem very likely that the House GOP would fold just enough for the White House to save face, then both sides would claim victory and we would move on. But these are not normal times, so anyone’s guess is as good as anyone else’s. In both scenarios, it behooves Americans to do what they can to protect their wealth or retirement.

(Note: The information provided by The Liberty Daily or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.)