Gold steadies as Congress nears plan to kick debt albatross down the road - Wealth Managers

Mint reports surge in gold coin sales as JPMorgan limits wire, cash transactions

Gold was holding near $1,280 on Wednesday as the U.S.Senate announced it was nearing a possible short-term resolution to the debt-ceiling standoff and government shutdown.

Gold prices saw the bulk of their gains Wednesday afternoon, buoyed by the "gold market's confidence that the global economy will not experience a negative shock from a U.S. debt default," said Jason Rotman, president of Lido Isle Advisors. "This global growth could potentially further drive demand for the precious metal, especially at these levels below $1,300."
"The dollar's weakness is helping gold"
Gold rebounded as the dollar fell, with the Standard & Poor's GSCI Index of 24 raw materials jumping as much 1.2% versus the greenback, which fell as much as 0.2% against a basket of 10 major currencies after the debt-ceiling news. "The dollar's weakness is helping gold," said Sterling Smithat Citigroup.

If the U.S. Senate extends the borrowing limit until February and funds the government through mid-January, as has been reported, "the uncertainty will thus continue for the foreseeable future," said Fawad Razaqzada at GFT Markets. A temporary fix would also imply the Federal Reserve may hold off tapering quantitative easing for another few months at the very least, Razaqzada said. 
Is it a Bear Stearns or Lehman redux?
But as at least one analyst is pointing out, this stopgap solution will only prolong the crisis. PineBridge Investmentseconomist Markus Schomer said another debt deal that kicks the can down the road, setting up yet another fiscal showdown in a few months, is potentially a worse outcome than a default. While missing payments certainly "wouldn't be good," he said it would probably spur the kind of market carnage that would force politicians to come up with a long-term deal.
According to MarketWatch: "Schomer reaches back to the darkest days of the financial crisis for some compelling corollaries. Here's one: A temporary budget deal would be much like the collapse of Bear Stearns in March 2008, he says. While many at the time mistakenly thought the investment bank's demise marked the bottom of the crisis, it was merely a way station on the path to a meltdown, which culminated in the carnage that followed the fall of Lehman Bros. in September 2008."

Also underscoring the notion that the Fed will hold off on tapering was its latest, lukewarm Beige Book, which foundabout a third of the country was experiencing slower growth in September and early October. 
Businesses "concerned" about Obamacare, Fed reports
However, trepidation among business owners over the implementation of Obamacare was a common theme in the anecdotal survey. "Many of our contacts are concerned about the implementation of the Affordable Care Act and the effect it will have on their total labor cost," said one Beige Book excerpt. Another: "Many contacts also commented on reluctance to expand due to uncertainty surrounding the Affordable Care Act; some employers cut hours or employees."

Meanwhile, on the housing front, confidence among home builders declined in October to the lowest level in four months, with mortgage-rate volatility and Washington's impasse over the debt ceiling hurting builders' views on single-family-home sales, according the National Association of Home Builders/Wells Fargo housing-market index. 
Gold coin demand surges on uncertainty
All this uncertainty has boosted demand for gold coins."Demand for U.S. gold coins has surged in October, reversing recent weak sales," Reuters reported.
"On Tuesday, the U.S. Mint sold 10,000 ounces of the most-popular 22-karat American Eagle gold coins, for total sales of 22,000 ounces so far in October, a Mint spokesman said.

"The October sales are already the highest sales in three months and are nearly double sales of 13,000 ounces in September and 11,500 ounces in August.

"Dealers also bought 4,000 ounces of 24-karat American Buffalo gold coins. ...

"The U.S. Mint also reported higher-than-usual American Eagle silver coins sales at 750,000 ounces on Tuesday, bringing the October total to 1.6 million ounces, on track to surpass sales of 3 million ounces in September."
Does chilling letter signal bank holiday?
With the U.S. running up against the Treasury's official debt-ceiling date Oct. 17, it might behoove investors to keep some physical forms of wealth -- or at least currency -- at hand. Why? Because of a disturbing letter sent to numerous business customers of JPMorgan Chase, specifically itsBusiness Banking division, that has some analysts invoking the words "capital controls" and "bank holiday."

The letter states:
Dear Business Customer,

Starting November 17, 2013:

- You will no longer be able to send international wire transfers. You will still be able to send domestic wires and receive both domestic and international wires. We'll cancel any international wire transfers, including recurring ones, you scheduled to be sent after this date.

- Your cash activity limit for these accounts(s) will be $50,000 per statement cycle, per account. Cash activity is the combined total of cash deposits made at branches, night drops and ATMs and cash withdrawals made at branches (including purchases of money orders) and ATMs.

These changes will help us more effectively manage the risks involved with these types of transactions.
Zero Hedge commented: "While we have no way of knowing just how pervasive this novel proactive at Chase bank is and what extent of customers is affected, what is also left unsaid is what the Business Customer is supposed to do with the excess cash: we assume investing it all in stocks, and JPM especially, is permitted? But more importantly, how long before the $50,000 limit becomes $20,000, then $10,000, then $5,000 and so on, until Business Customers are advised that the bank will conduct an excess cash flow sweep every month and invest the proceeds in a mutual fund of the customer's choosing?" 

Chase confirmed to one alternative news source "that all business account holders were being subjected to these new regulations. They indicated that customers would have to pay a fee on every dollar withdrawn over the limit. Given that even a relatively small grocery store or restaurant is likely to turnover more than $50k a month in cash payments, this appears to be part of a wider move to shut down businesses who mainly deal in cash. The bottom line is that banks think your money is their money and will do everything in their power to prevent you from withdrawing it."

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