Welcome to this week's market wrap podcast, I'm Mike Gleason.
On this special pre-Independence Day release of our weekly podcast, it's a good time to reflect on some of the wisdom of our Founding Fathers – wisdom that sorely needs to be re-learned by today's leaders.
The author of the Declaration of Independence, Thomas Jefferson, warned against the very sort of fiat debt-based monetary system that is currently in place. Jefferson wrote that "The trifling economy of paper, as a cheaper medium, or its convenience for transmission, weighs nothing in opposition to the advantages of the precious metals.” He said of fiat money that it “is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted."
How prophetic Jefferson's warnings turned out to be.
Today, we have a national debt of $17.6 trillion, with total unfunded liabilities of more than $100 trillion by some estimates. This fiscal recklessness is made possible by the Federal Reserve, which now holds more than $4.3 trillion worth of bonds and serves as the engine of asset inflation.
The government, the banks, even the stock market have all become dependent on the central bank to help them grow artificially large. The government, banking, and stock market sectors are comprising greater and greater proportions of GDP -- even as most folks in the real economy struggle to make ends meet.
All of this is building toward a crisis of confidence in the dollar that could eventually send its value plunging much more rapidly than the Fed wants or anticipates. For now, though, there's not much action of note in the U.S. Dollar Index. It's down slightly for the week and now comes in at 80 on the nose – a level it has been oscillating around for the past several months.
Meanwhile, real money – gold and silver – have been showing strength since last month. Three of the four metals and are in positive territory again this week. Gold spot prices are essentially flat since last Friday's close and currently come in at $1,318 an ounce as of this Thursday morning recording. Silver shows a weekly gain of a little less than 1%, with prices coming in at $21.10 an ounce.
Turning to the platinum group metals, this week's market action produced some fresh breakouts. Platinum broke above the $1,500 level to notch new highs for the year. Platinum currently trades at $1,506, good for a 1.5% weekly gain.
As for palladium, prices got hit in early June after striking South African miners finally agreed to return to work. You may recall in my interview with David Smith a couple weeks ago that David told us to expect palladium to resume its uptrend. And that's exactly what it's done. With a 2.5% gain this week, palladium prices are on track to settle at new multi-year highs on a weekly closing basis. Currently the white metal trades at $864.
We aren't seeing new highs for gold or silver – at least not yet. But if platinum and palladium are leading, then gold and silver can be expected to follow. One indication that silver is in the process of making a major move higher is that it's on track to close above its 50-week moving average for the second consecutive week. This is something that silver was unable to do on all previous rally attempts off last year's lows.
Now that the precious metals complex appears to be on its way back up, it's a good time to favor silver over gold. During bull markets in the precious metals, silver outperforms the yellow metal.
It currently takes just less than 63 ounces of silver to buy one ounce of gold. Yes, this number could go higher, but we wouldn't bet on it. Spikes higher tend to happen during unusual and unpredictable events – such as the financial crisis of 2008, when the ratio surged briefly above 80 and spent a few months above 70.
On a historical basis, the gold:silver ratio is near an extreme. Except for the decade between 1987 and 1997, the current level is much higher than average. The good news is that a top in the gold:silver ratio is also likely to signal a bottom in gold and silver prices.
The reason is that silver usually underperforms when the precious metals markets are in a bear cycle, as we have seen over the past 3 years. The ratio bottomed at 33 in 2011 when silver reached $49/oz, and it has been rising as silver prices have fallen under $20/oz, while gold's decline has been far less dramatic.
So where is the ratio likely to go from here?
Well, we expect the gold:silver ratio to fall to 16 or less, meaning silver could outperform gold by 300%. That's why our Specialists urge investors to favor silver at these levels when making new purchases. And for anyone whose holdings consist primarily of gold, it may make sense to swap some of that gold for silver at this time – perhaps most of it later on if we see a sudden spike higher in the ratio.
Those who want to make the swap can count onMoney Metalsto make it easy. We'll lock prices on the gold you wish to sell and the silver you wish to buy simultaneously. We'll even pay the cost to ship and insure your silver as soon as we receive your gold.
That's right, you get FREE SHIPPING from Money Metals if you swap gold for silver!
If you're looking to buy some silver on this early show of strength, we have plenty of great options to fit your budget and objectives. In the spirit of Independence Day, we invite you to consider Money Metals' “Don't Tread on Me” silver rounds, especially if you don't already have some. They feature the iconic coiled rattlesnake used by Paul Revere to rally colonial resistance to tyranny from the British crown. The reverse side of the “Don't Tread on Me” rounds commemorate the Boston Tea Party – a symbolic protest of distant, corrupt, and non-responsive government. That message resonates strongly with American patriots today who believe their government has overstepped its bounds.
And don't forget about Money Metals' half ounce rounds commemorating Paul Revere's midnight ride which, like all other fractional gold and silver products, are part of a special offer this month. Buy $1,000 or more of any gold or silver product which is less than one ounce in size, and we'll throw in a free roll of 20 pure copper rounds. Order $5,000 or more, and your order also ships for free!
What better way to communicate a message of real liberty than with real money? As Thomas Jefferson noted, paper scrip “is only the ghost of money, and not money itself.”
Well that will do it for this week's Market Wrap Podcast, thanks for listening. This has been Mike Gleason with Money Metals Exchange asking that if find yourself with a beverage in your hand at some point during this holiday weekend, be sure to raise a glass to Liberty! Have a great 4th of July everybody.
About the Author:
Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.