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Gold & Silver Prices Firm as New “Stimulus” Money Drop Looms
Money Metals ranks all 50 states on their support for sound money
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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
On this special Christmas Eve edition of the podcast, we unfortunately have to report that Washington politics and fears of a surging virus are threatening to spoil holiday cheer.
Earlier this week, Congress agreed to send millions of Americans a much-delayed stimulus check. But the gift went over like a lump of coal.
After months of partisan wrangling and posturing over COVID relief that never came to fruition, Congress finally garnered the will to pass the darn bill. On Monday night, lawmakers approved a $900 billion emergency aid package.
Highlights include $600 direct payments to most Americans and more aid for the unemployed. Lowlights include hundreds of billions of dollars in additional spending that has nothing to do with COVID relief. The legislation contains over 5,000 pages of giveaways and pet projects, including Kennedy Center grants and gender training programs in Pakistan.
Many Americans who have had their livelihoods destroyed due to economic restrictions felt insulted.
President Donald Trump panned the bill. He is now calling for it to be amended to include stimulus payments of $2,000.
As it stands, the bill’s the price tag – and its inflationary implications – came in lower than many had expected a few weeks ago, before the election.
Republicans blocked Democrat attempts to insert massive bailout funds for state and local governments. Meanwhile, GOP Senator Pat Toomey managed to get provisions inserted into the final package that will limit the Federal Reserve’s emergency lending facilities.
A significant portion of the new spending will be paid for by recycling unused funds from the Fed's lending facilities as well as previously authorized CARES Act programs.
These developments helped to dampen inflation concerns – at least momentarily – and push gold and silver prices lower on Tuesday.
As of this Thursday recording, gold comes in at $1,885 per ounce – essentially unchanged for this holiday-shortened week. And silver is down a slight 0.2% since last Friday’s close to trade at $25.87 an ounce.
Turning to platinum, bullish traders are vying for a fourth straight weekly close above the $1,000 mark. Platinum prices have been see-sawing and currently come in at $1,037.
And finally, palladium is down 1.0% this week to trade at $2,360 an ounce.
With one final week to go in the tumultuous year that has been 2020, precious metals investors will be able to count up some annual gains. Although gold and silver prices are off their highs for the year, they appear headed to record double digit returns. The metals will also have quietly outpaced the S&P 500 overall.
Looking ahead to 2021, we can expect more calls for more stimulus, rising federal budget deficits, and ongoing Federal Reserve easing. That could all add up to a more widespread public recognition of inflation risks and the need to own precious metals as a hedge.
Regardless of whether President Trump gets his wishes on stimulus, the next administration will be angling for more. President-elect Joe Biden called this week’s relief bill a mere “down payment” for a larger bailout agenda he intends to pursue.
Joe Biden: Leaders in both House and Senate, both parties, deserve credit for making the hard compromises to get this done. But like all compromises, it's far from perfect, but it does provide vital relief at a critical moment. However, as I've said all along, this bill is just the first step, a down payment.
News Reporter: Will your plan include a new round of stimulus checks to the American people? And if, so for how much?
Joe Biden: Yes. But look, that's a negotiating issue, but it will. Yes, it will. By the way, I think we owe Bernie Sanders and his Republican colleagues thanks for getting not all the stimulus we looked for, $1,200, but getting $600 done.
The “free money” handout schemes championed by socialists like Bernie Sanders and AOC have become mainstream. Now that even most Republicans are on board with the concept, it’s not going away. Every future economic crisis will probably be met with helicopter drops of cash directly into Americans’ pocketbooks.
Politicians will be vying to outdo each other -- $600, $1,200, $2,000…then maybe $2,000 a month in perpetuity as some kind of permanent “universal basic income.” It will have to be adjusted for inflation, of course.
And we’ve never seen upside pressures on the inflation front build quite like this before. We will be entering uncharted territory in 2021.
Even if there is something of a return to normal in daily life later in the year assuming an effective vaccine rollout, there will be no return to normal in fiscal or monetary policy.
We trust that listeners of this podcast aren’t banking their financial future on the U.S. dollar. If there was ever a time to own some physical precious metals, now is it.
You might consider converting your upcoming government stimulus dollars, whatever they may amount to, into some sound money.
Speaking of sound money, Money Metals Exchange released its 2020 Sound Money Index this week, and Wyoming, Texas, and Utah topped the index as the three most pro-sound money states in the United States.
The Sound Money Index evaluates each state’s sales and income tax policies involving precious metals, whether a state recognizes the monetary role of gold and silver under the U.S. Constitution, whether a state holds pension, reserves, or bonds in gold or silver, whether a state has imposed precious metal dealer/investor harassment laws, and other criteria.
Because a handful of Washington State politicians failed again this year in their attempts to impose sales taxes on purchase of the monetary metals, the Evergreen State joins South Dakota, Alaska, and New Hampshire in the fourth to seventh place range on the Sound Money Index.
Ohio fell to the bottom of the rankings last year after slapping sales taxes on gold and silver, but the Buckeye State made a minor comeback in 2020 when its government pension trustees decided to allocate five percent of retirement funds to physical gold.
Ohio joins Texas as the only two states in the U.S. known to allocate a percentage of state-held pension funds to physical gold, even though other pension trustees’ failure to own gold as financial insurance arguably violates their fiduciary duties as well as the “prudent man rule.”
According to the 2020 Sound Money Index, the very worst environments for sound money can be found in Vermont, Arkansas, New Jersey, Maine, and Tennessee.
However, Arkansas, Maine, and Tennessee are expected to consider bills that would improve their rankings in their upcoming 2021 legislative sessions.
As politicians and central bankers continue to print trillions of unbacked pieces of paper in response to COVID, sound money has never been more important. Citizens in states that foster pro-sound money environments enjoy the benefit of being able to protect their wealth without onerous taxes and regulation.
Of course, federal policies and the Federal Reserve System are the root causes of inflation, instability, and currency devaluation, but many states are thankfully taking some steps to protect their citizens from the damaging effects of America’s fiat paper money system.
Well, that's all for this week. We want to wish you a Merry Christmas and hope you and your loved ones are able to find some joy in these trying times.
Be sure to check back next week for our final Weekly Market Wrap Podcast of the year. Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and Merry Christmas everybody.