Daily Market Update 7/29/11

GOLD

On the last trading day of July, Gold owners should be very happy. Gold is trading at $1,626.40 at 11am PDT, up $10.50 per ounce for the day and up $138.70 for the month of July. A physical gold investment has shown a return of 9.32% in just one month. Compare this increase to many Gold Mining Stocks and Funds that are unchanged to lower for the same period. I will provide more comparison information in my Weekly Market Report that will be emailed out on Monday Aug. 1st. The crisis over lifting the debt ceiling continues in Congress, providing higher volatility in the precious metal and currency markets. See additional information below in the 3rd update on the debt ceiling crisis.

SILVER

The debt ceiling crisis in Washington is taking its toll on Silver traders with higher volatility. In Asian overnight trading, Silver traded down to $39.27 before we saw significant buying. Right now, at 11am PDT silver is trading at $39.94, up 2 cents an ounce for the day. If we look at the month of July, Silver has increased $6.23 per ounce or 18.48%. With gold trading at All-Time highs, I really would like to see Silver trading over $40 per ounce to stay bullish on a short term basis.

3^rd  Update on Debt Ceiling Crisis, How is it unfolding..

$307B question for Treasury: Who gets paid first?

With revenues of $172 Billon and expenses of $307 Billion, who does the Treasury pay?

The following is a breakdown of the authorized Federal Expenditures from the Bipartisan Policy Center (BPC):

$29B    Interest on Federal Debt

$49.2B Social Security

$50B    Medicare & Medicaid

$12.8B Unemployment Insurance Benefits

$2.9B   Active Duty Troop pay

The BPC believes that the above has the highest priority, leaving $28.8 Billion to pay $169.8 Billion Federal Expenses. I believe the Treasury needs to use the remaining money to prioritize the essential and vital position at these agencies.

$93.8B Government Agencies (Department of Justice, Labor, Education, Commerce, EPA, HHS, etc)

$31.7B Defense Vendors

$14.2B Federal Salaries + Benefits

$  9.3B Food Stamps and Welfare

$  6.7B Housing and Urban Development

$  3.9B IRS Refunds

$  2.9B Veterans affairs programs

$   0.3B Small Business Administration

Why is House Leader John Boehner catering to the Tea Party Republicans?

There are 240 Republicans in the House of Representatives. To pass legislation, Boehner needs 217 votes so if he can’t persuade 23 Republicans to vote for his legislation, it’s OK.  However, there are 60 Congressman who are members of the Tea Party Caucus, and they normally vote as a block.  Unless Boehner caters to the Tea Party freshman Republicans, or can persuade 37 Democrats, it would be impossible to pass any bills in the House.  Additionally, it’s important that the Republican Party keep those 60 Congressmen happy, because if the Tea Party decides to split off and start a third political party, the Republicans would have a very difficult time winning a Congressional election in 2012. Many of the Tea Party Republicans oppose any raising of the debt ceiling, want larger cuts in federal spending, and a requirement to balance the federal budget.

Today’s other Important news that affects precious metal prices:

• Gross domestic product expanded at a 1.3% annual rate in the second quarter, the Commerce Department said, after a downwardly revised 0.4% gain in the January-March quarter. Economists had forecast GDP growing at a 1.6% rate in the second quarter from a previously estimated 1.9% rate in the first quarter. This was the weakest six-month period since the recovery began in the second quarter of 2009. 
• The Chicago PMI slowed to a reading of 58.8 in July from 61.1 in June. This marks the 22nd month that the indicator was above the 50 line, indicating expansion. Economists polled by Market Watch had expected a 61.9% reading. 
• Consumer sentiment fell to 63.7 in July -- the lowest level since March 2009 -- from 71.5 in June, according to media reports of the gauge from Thomson Reuters/University of Michigan released Friday.

My 24 page research study on Hyperinflation is still available for a limited time. After three months of research I am proud to share the information with clients and friends.  The title of the booklet is “U.S. Hyperinflation is Coming Soon, will Gold Confiscation or a Gold Standard be Far Behind?”

For a free copy of the booklet for yourself or a friend, just email  [email protected]