The Fiscal Cliff
In less than a month (January 2013), the so-called ‘fiscal cliff’ is expected to emerge from the largely unwanted but seemingly unstoppable junction of governmental spending and taxation policies. Several tax issues, including
elimination of Bush tax cuts for the wealthy,
potential additional 3.8% taxes on incomes in excess of $200,000.00,
a 5% tax increase on capital gains, and
additional 2% social security taxes on worker salaries should take effect. These will combine with the new ‘sequestration’ of government spending (Budget Control Act), designed to generate cuts of about 10% in the majority of federal discretionary programs, causing:
cessation or diminution of multiple federal contracts, likely including
slowdowns in manufacturing output and business investment,
extensive layoffs or unpaid leaves, potentially adding to unemployment totals.
Although one cannot say for certain to what extent the fiscal cliff will develop or its overall impact on economic performance, asset protection strategies seem advisable for investors. Owning precious metals is a good way to protect you from the fiscal cliff.
Growing Wealth Despite the Fiscal Cliff
If the economy falls off the fiscal cliff and record debt is created, a proactive approach to protecting your assets from inflation and taxation is essential. Asset protection strategies are devised to ensure stabilization or growth of wealth even if the worst projections of the fiscal cliff prevail. Although one can expect prices of commodities like gold, silver and other precious metals to decline in the first months of next year, if fiscal cliff projections hold true, their diminished value is not forecast to be of longer-term.
Gold, currently over $1,700.00/ounce may decline to around $1,500.00 in the very short-term (45 days), and silver from $33.00/ounce to around $30.00. Rather than signaling bad news for investors, they can actually come out well ahead by purchasing these metals at their lower prices and waiting for the increases certain to follow. Although some projections, with gold rising to $5000.00/ounce, and silver to $500.00, are no doubt rather excessive, the opportunity for sizable gains is present.
In this environment, precious metals represent bargain assets offering higher returns for lower investment costs, particularly in relation to stocks and bonds, suspected to be hardest hit by fiscal cliff problems. If these problems don’t emerge, and the economy remains relatively stable, precious metals retain their value. The recent record has not shown either wages or most other forms of personal income growing at a similar pace with inflation or consumer debt. This is precisely the kind of fiscal environment that demands appropriately proactive asset management strategies, regardless of the existence of a fiscal cliff. Projected gains in the price of precious metals, following a swift decline in prices, could lead to substantial returns.
Asset Protection Strategies in 2013
Of course, whatever Washington can do to avert next month’s looming financial crisis may render fiscal cliff worries superfluous. Gold’s price is expected to gain – to a level between $1,800.00 - $1,900.00/ ounce – through the end of the year.
While following this logic, appropriate asset protection strategies suggest it may be better to wait until after January to buy some precious metals, rare metals from Swiss Metal Assets offer an exceptional opportunity right now. We are offering a special designed to protect to against the fiscal cliff while giving incentives that should help offset any projected decline if the cliff does loom (and give you the advantage of subsequent price gains following in mid-February).
Besides, there has been some suggestion that precious metals’ prices will grow regardless of economic performance in the new year. Even if the fiscal cliff does generate an economic plunge, rare and precious metals have traditionally provided investors a reliable haven for risk, and should continue to do so in the long-term.