Gold at 1,641: new top

Gold has set a new record this morning. This is the day that the new debt ceiling is supposed to be voted on by the US Senate. Passage is anticipated. It is quite obvious that the new high in gold reflects the Market's vote on the raising of the Debt Ceiling. Why you might ax.

The new Ceiling authorizes the Obama regime to borrow $2.4 (or 2.5)T. Since, a lot of government programs are income transfers, I have no doubt that the regime will spend the money. Since, "baseline budgeting" involves a 5% spending increase every year, a $100B cut per year (part of the Debt Ceiling deal) does not even freeze the budget, let alone cut it.

The gold price is not reacting to the fact that the "cut" is phony. The gold price is reacting to the consideration: "where will the money come from?" Two and a half trillion bucks is serious cash. Not many countries have an economy that big, let alone being able to fork over that much into the insatiable maw of the US spending machine. China's reserves are said to be near $3T, but it is highly doubtful that even China could finance this debt, assuming they wanted to. So, where will the money come from?

It is highly likely that the FED will print the money and that is propelling gold prices at a time when gold is relatively quiet. We could also be seeing short covering; a factor predicted and aired on KWN.