COMMODITIES

Just like the pot of riches on the other side of the rainbow, the handwringing over the fiscal cliff spells opportunity for investors with cooler heads, notes Peter Schiff of Euro Pacific Precious Metals.

Turn on the TV and this is what you'll hear: The US budget is heading for a fiscal cliff. If a deal isn't reaching Congress by the end of this year, a combination of automatic tax hikes and budget cuts will sink America into economic depression. There is no escape.

Of course, my readers know that the fiscal cliff is merely an example of the piper having to be paid. The problem isn't the bill, but that we ran it up so high in the first place. Any deal to avoid the cliff by borrowing even more money may allow the piper to keep playing a while longer, but when the music finally stops, the next fiscal cliff will be that much larger.

My readers also know that there are several ways for investors to avoid the cliff altogether. Perhaps the most secure is buying precious metals. However, given what we know, it may seem confusing that the spot prices of gold and silver have been moving sideways.

However, these headline prices have largely concealed a more important indicator: physical bullion sales are booming.

An Under-the-Radar Rally
The figures are astounding. For US Gold Eagle coins, mint sales are up some 150% from the QE3 announcement on September 13. Despite what the spot prices show, there has been a tremendous surge in people buying physical gold.

But why hasn't this translated into higher spot prices? It seems clear that the spot prices of both gold and silver are being driven right now by a large pool of institutional capital moving into and out of instruments like commodity ETFs.

The movements have been predictable: When there is a sign of a deal coming out of Washington, the spot prices move up. If negotiations are faltering, there is instead a major sell-off.

Physical bullion investors are a different breed. We are in this market for the long haul. When I increase my physical gold and silver holdings, I do it because I see the long-term fundamental picture for the US getting worse.