Tentative U.S. Debt Ceiling Agreement Bullish for Precious Metals

It was announced late Sunday, May 28th, 2023 that President Biden and Republican Speaker of the House, Kevin McCarthy had reached a tentative debt ceiling agreement.  That said, nothing will become official until it can be sold to congress and voted into law.  This is adding to the U.S. Treasury Secretary, Janet Yellen’s anxiety because if the deal is not solidified, the United States Treasury will fully run out of money by June 5th, 2023, causing a historic default on United States debt.  With only 5 days until that time passes, it would be a monumentally swift sign-off as congress is known to drag these votes out due to the right-wing congress members and left-wing congress members rarely seeing eye-to-eye.  However, with government spending cuts built in to help reduce future government deficits, the left sitting congress members have been vocal about voting against this agreement.  While the suspension of the debt ceiling being built into the deal, meaning NO CAP would be placed on government spending until January 2025, right leaning congress members have voiced their disapproval saying they would also oppose this deal being passed.

It is worth reminding our readers that no matter what happens with this deal, silver and gold, along with other precious metals are poised to take the spotlight.  The reason being that if this agreement is accepted by a majority of congress, the United States is set to sell another $1 trillion in debt within the next couple months (known as monetizing their debt), causing the money printers to be turned back on as new currency floods the system.  Alternatively, if the deal is not accepted, U.S. debt, which was previously known as a safe haven in today’s economy due to the United States having never previously defaulted, and therefore always paying back their debt holders, would quickly plummet in value and skyrocket in risk.  This being highlighted by how quickly countries have been dumping their current holdings of United States Treasuries to ensure they are not crippled by a potential default.

On either side of the coin, silver and gold are set to stand high above other assets as a true safe haven storage of value.  If currency floods the system, inflation will continue to rage, setting silver and gold up to continue to absorb the losses in USD purchasing power, whereas a default would leave silver and gold as the only true safe haven asset left on the market.

Knowing this, we feel this is a perfect time to remind our readers of the importance of holding assets that do not carry counter party risk.  Assets with high counter party risk being assets that heavily rely on good financial health in the overall financial markets, where those assets (such as silver and gold) with low counter party risk, can continue to hold or rise in value as turbulence hits global markets.  A good example being those who held stock in the banks that collapsed earlier this year.  Without the bank showing good health, the value of those stocks plummets, while at the same time silver and gold rise to protect their holders from the chaos.  In good times, assets such as stocks or U.S. Treasuries return nice gains, while silver and gold hold steady, whereas in bad times, these assets struggle due to them requiring more and more currency entering the system to keep them propped up.  Silver and gold do not require such floods of currency, as they move inversely to risk assets, protecting their holders when other monetary assets struggle.

Another great example of counter party risk is what we are currently seeing in the U.S. stock market, namely the S&P 500, which is made up of the 500 companies with the highest market valuation at the time.  At face value, the S&P 500 seems to be performing well since the start of 2023, up 7.1%, however, when you pull open the hood of the car, you can see signs of massive weakness within the engine and its other critical components that allow the car to run.  The gains we have seen in the S&P 500 is being driven by what is known as the Trillion Dollar Club, companies with over a $1 trillion dollar market cap, these companies being Apple, Microsoft, Google, Amazon and Nvidia.  Since the start of 2023, these companies have added a whopping $2.87 trillion to their combined market cap, the rub being, the total market cap increase of the overall S&P 500 including the other 495 companies is only a touch higher at $2.98 trillion.  This meaning that out of the 500 companies that make up the index, the five companies in the Trillion Dollar Club have contributed 96% of the gains seen to date, while the other 495 have only contributed 4%, showing MASSIVE weakness in the index as a whole.  Taking this one step further, the Trillion Dollar Club companies has increased in valuation by 46.2%, while the other 495 companies are up a measly 0.3% since the start of 2023.  Massively highlighting the negatives in holding assets with counter party risk.  If the Trillion Dollar Club were to falter, those holding stock in the S&P 500 would see their modest gains turn to immense losses.

One development that has continued to highlight the importance of holding precious metals is the rapid pace countries continue to accumulate these metals.  It was reported yesterday (May 30th, 2023), that Iraq purchased 2.5 tonnes of gold, raising their overall reserves by 2% in a single day, this being another country feverishly looking to join BRICS to help gain financial independence from the West.  This coming on the tails of Saudi Arabia announcing that they were looking to join New Development Bank, a Shanghai based lender that is backed by BRICS nations.  If Saudi Arabia were to join BRICS and begin facilitating oil sales in currencies other than the USD, what is known as the Petrodollar would lose the significant power it currently holds over other countries that need to first buy dollars before buying Saudi oil, who stands as the world’s largest exporter of what is known as liquid gold.

If you too want to continue to protect yourself from counter party risk, securing value you wish to hold long into the future, silver and gold are primed to do so with ease.  As these metals continue to show strength and gain value, through financial turbulence, fractional metals will become far more important as moving bricks of these metals will be useful for larger transfers of wealth, whereas fractional metals will be perfect for smaller purchases if needed.  Today, we point your attention to our 1g, 2.5g, 5g, and 10g pieces of gold out of Credit Suisse, Valcambi Suisse, and the Royal Mint of UK – pieces perfect for storing value, but also giving you flexibility if you choose to use these metals in the future at higher valuations per ounce.

1g Gold Valcambi Suisse Bar


2.5g Gold Valcambi Suisse Bar


5g Gold Credit Suisse Liberty Bar


10g Gold Royal Mint Britannia Bar