Precious Metals Investors Have More Questions...
We get lots of questions from the public about precious metals.
Some people are curious about the basics. Others are skeptical about the case for owning gold and silver. Still others are longtime customers who have highly specialized inquiries.
Here we will answer a few of the most common, most broadly relevant questions we get…
QUESTION: For a big purchase, are bullion bars a better option than coins?
ANSWER: They can be if your goal is to pay the lowest overall cost per ounce. However, large bars (such as 1,000-ounce silver or 1-kilo gold) are less practical than smaller denomination gold and silver bars for the vast majority of investors.
The largest bullion bars can be cumbersome to handle, transport, sell, or use in trade. Potential buyers may insist on an assay to ensure purity. By contrast, one-ounce coins or rounds can be authenticated through a simple hand-held inspection.
The most efficient way to purchase bullion bars and be able to sell at any time with no shipping or other hassles is by holding them through our secure storage facility, Money Metals Depository.
QUESTION: Could a central bank digital currency be used to undermine cryptocurrency and precious metals markets?
ANSWER: Federal Reserve chairman Jerome Powell has acknowledged the Fed is looking into issuing a digital currency. He has been vague about how far along in development the Fedcoin project is and how exactly it would work.
But Federal Reserve Vice Chair Lael Brainard is talking up the potential benefits of a central bank digital currency. She seized on the recent carnage in cryptos to call for new regulations and tout the Fed’s ability to provide “safe central bank liability in the digital financial ecosystem.”
Fedcoin would theoretically supplant stablecoins and possibly diminish the appeal of Bitcoin as an alternative currency.
But it’s difficult to imagine how a central bank digital currency would deal any sort of blow to physical precious metals.
The only real tool central bankers have to intervene in markets and the economy is to create and new currency units and try to direct where they go. That tool could become even more prone to abuse with digital dollars that could be sent out as direct stimulus to the digital wallets of politically preferred populations and organizations.
A central bank digital currency would obliterate financial privacy and empower government authorities to control the spending behaviors of the citizenry… and even “turn off” citizens’ access to money and their ability to function in society if they run afoul.
If anything, Fedcoin would strengthen the case for owning physical precious metals. They preserve real purchasing power over time and exist outside the purview of digital financial tracking systems.
QUESTION: If inflation has peaked, will gold and silver prices head lower?
ANSWER: Some economists believe inflation pressures peaked overall this spring. Higher costs for businesses and consumers are certainly beginning to bring about some demand destruction in the economy – increasing the odds of a recession.
However, as of this writing, food and energy costs continue to surge. Those all-important markets aren’t fully reflected in the official “core” inflation rate relied on by the Federal Reserve.
Even if some inflation-sensitive parts of the economy have peaked, that does not necessarily imply that gold and silver markets will follow.
Precious metals markets don’t show a direct correlation to year-over-year inflation. Sometimes they lead general price rises, sometimes they lag. (Over longer periods of decades, of course, gold and silver do rise as the purchasing power of fiat currency falls.)
Importantly, gold, unlike industrial commodities, shows virtually no correlation to the economic cycle. So if the next recession is starting now, gold could just be getting warmed up.
QUESTION: Where is the sound money movement headed?
ANSWER: The sound money movement is building momentum at the state level. Last year, Arkansas and Ohio repealed sales taxes on gold and silver bullion. This year, Tennessee, Virginia, and Alabama passed sales tax exemptions on sound money.
According to Money Metals' public policy project known as the Sound Money Defense League, 11 states have considered bills in 2022 to remove sales and income taxation from precious metals. Some are also considering bullion depositories and allocating physical gold to state pensions and reserves.
At the national level, the current occupants of Congress and the White House are overtly hostile to most sound money issues. But there is good reason to believe the political tides may soon be shifting.
Voters are fed up with inflation. They are also growing sick and tired of the misinformation and excuses proffered by politicians and central bankers.
The Federal Reserve took another huge hit to its credibility after proclaiming last year that inflation would be “transitory.” It certainly has a lot to answer for after pumping trillions of dollars into the financial system during the COVID-19 outbreak.
At the very least, the public deserves a full audit of the Fed’s books – including an accounting of its gold holdings and its role in “managing” precious metals markets.
Sound money advocates in Congress including Rep. Alex Mooney (R-WV) are hoping to build support for auditing the Fed, auditing the Treasury’s gold, and eliminating the unfair capital gains tax treatment of precious metals.