U.S. to Lose Its AAA Credit Rating

Standard & Poor’s sovereign rating of the U.S. will most probably go down a notch in the coming months. The U.K.’s outlook has already been downgraded because it has borrowed against 100% of its GDP. The U.S. borrowing is currently at about 70% of GDP, and increasing.

The market has already figured this out. U.S. equities have started to come down, and both the 10-year and 30-year treasury bonds have gone down in price (which means that interest rates for government borrowing have gone up). Geithner has commented on the issue and Bill Gross, manager of the world’s biggest bond fund, has said it is now a certainty.

Standard & Poor’s also reports that China is continuing to look for ways to park their large surpluses other than funding U.S. debt. This has in fact strained the U.S. – China relationship.

What this all means for gold is that it has already gone up in value, and the market has started to move in this direction in a big way. This past week, gold has broken through an important resistance at $945-950 and is now at $956. If this continues next week, it should break through the $1000 barrier by June. I expect gold to shoot up shortly thereafter.

It’s not too late to buy gold now, but by June there will be a stampede and it will be difficult to get hold of it without getting crushed.

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About ctapang

I am a Software Design Engineer. I have just abandoned the huge army organized to make .Net programming the one dominant programming system. I now program in Typescript which (surprise) is also from Microsoft. Aside from my day job as a programmer, I am also involved in a movement (http://correctphilippines.org) to correct the Philippine constitution. It's an ambitious undertaking in itself, and there's no guarantee that improving our constitution will improve things. However, one thing is certain: if we don't establish a rational constitution, we will continue on our path of self-destruction. What kind of government is best? For me the best government is that which governs the least. We need the government not because it can provide for us but because it keeps us from running into each other. The proper function of government is that of a traffic light: it prevents us from bumping each other, but it does not tell us where to go.
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