THE BLOG
13/10/2013 15:47 BST | Updated 11/12/2013 05:12 GMT

This Isn't the Debt Default Gold Is Looking For

No denying it - the threat of US debt default has been a non-event for gold and silver so far. For long-time investors, the irony looks so thick you could butter your toast with it.

The US Dollar is still the world's No.1 currency. The United States is also the world's largest debtor. So-called gold "bugs" who began buying in the early 2000s thought they saw what was coming. Then from 2007, Washington only added to its historic debt pile, backing the nation's entire finance sector with yet more taxpayer promises.

The endgame looked clear. And here it is, with one week to go. We now have the very real risk of an outright default, a failure by the United States government to pay its debts or bills as they come due.

US Treasury bonds underpin the world's financial system, setting interest rates and acting as collateral for pretty much the entire planet. The panic about to take hold should mean silver and gold prices are soaring. Yet here we sit, back below $1300 and $22 per ounce.

Why? Because this "default" is a sham, a fraud and scamola. Political posturing is all that is happening, and the markets know it. America faces default on a technicality, not on a refusal by creditors to finance any more of its spending. Even if no deal is done by Oct. 17th, equity and bond investors know the US remains the world's biggest economy, and the source of its hottest must-have investments.

Take communications, for instance. The UK has Royal Mail, floating this week for $5.25 billion. The US has Twitter, priced at twice as much by its IPO.

So no, there's little surprise that gold and silver aren't jumping. Because the sense of crisis peaking in 2011 continues to ebb. The real panic, the financial "end times" which Tea Party Republicans are winking at, is still pending. And precious metals, most especially gold, remain the antidote.

Physically rare and indestructible, gold is the very opposite of debt investments. Owning it puts you a million miles from being a creditor. If this US default were for real, gold would say so. For now, this is not the debt default gold owners were looking for.