by Mike Gleason, Money Metals:

Coming up we’ll hear from the one and only Marc Faber of The Gloom, Boom and Doom Report. Dr Faber has some alarming things to say about how America’s foreign policies may have disastrous implications for the U.S. and global economies, and for the dollar. He also weighs in on which asset class, crypto-currencies or precious metals, will ultimately will be the major benefactor of all of the pending geopolitical unrest. Don’t miss a tremendous interview with Dr Doom, Marc Faber, coming up after this week’s market update.

Precious metals markets suffered a big setback this week as the U.S. dollar gained strength. The dollar rose to a three-month high on interest rates and upbeat economic data, including strong durable goods numbers. The dollar’s rise against the euro was also boosted by the European Central Bank’s decision Thursday to maintain its ultra-loose monetary policy.

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Precious metals traders responded by hitting the sell button. Gold prices are down 1.0% on the week to bring spot prices to $1,323 an ounce as of this Friday recording. Silver currently checks in at $16.52 after falling 3.6%. Platinum is down 1.5% this week to $917, and palladium is off 4.2% to come in at $988 per ounce.

Metals markets could continue to face selling pressure if the U.S. dollar continues to rally. Dollar bulls note interest rates continue to look relatively attractive in the United States, with the European Central Bank showing no signs of trying to catch up with the Fed in raising its benchmark rate. Some currency analysts describe the dollar as the best looking house in a bad neighborhood.

Dollar bears counter that the Federal Reserve’s nominal interest rate hikes are lagging behind rising inflationary pressures. Moreover, rising deficit spending makes the U.S. fiscal house one of the worst looking in any neighborhood. The current debt to GDP ratio of close to 100% puts the United States in a danger zone.

Other countries that have seen their government’s debt balance exceed the output of their economy went on to experience political upheavals, defaults, and hyperinflations. The most notable example currently playing out is Venezuela.

The bolivar has lost more than 99% of its value since the socialist economy collapsed, sending prices up thousands of percent. The Venezuelan stock market is up some 1,600% so far this year alone. Of course, that doesn’t mean you can expect to get rich quick buying Venezuelan stocks. They are moving largely just as a side effect of inflation.

That’s easy to see in an extreme case like Venezuela. It’s less obvious when inflation is rising at a relatively low annual rate, as it has been in the United States in recent years. But over time the stock market has gotten and continues to get artificially inflated while politicians and mainstream media outlets cheer on what they want us all to believe is a true bull market.

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