Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
This week is shaping up to be a pivotal one for precious metals markets with some breakout price action on the board. As the U.S. stock market got pounded, hard assets perked up on safe haven buying.
Gold prices rallied to a two-month high on Wednesday. As of this Friday recording, the monetary metal checks in at $1,840 an ounce after gaining 0.8% on the week.
The silver market saw an even bigger jump, surging close to a buck and a half or 6.2% this week to bring spot prices to $24.47 per ounce.
The platinum group metals got in the action as well. Platinum shows a weekly gain of 6.8% to trade at $1,050. And finally, palladium is pushing higher by whopping 12.9% or nearly $250 this week to command $2,156 per ounce.
These are the times that prove the indispensable role precious metals play in a balanced investment portfolio. Year to date, the S&P 500 is down 6%. The bond market is also down. And Bitcoin is suffering a double-digit drop so far in 2022.
There has been nowhere for investors to hide except in hard assets.
Bitcoin is touted by promoters as “digital gold.” Yet cryptocurrencies have been trading more like tech stocks than sound money.
The Bitcoin versus gold debate won’t be settled anytime soon. Crypto enthusiasts still anticipate a massive price run-up ahead, while skeptics warn the bubble may have burst.
Regardless of where crypto markets head from here, the claim that digital tokens are somehow a substitute for physical precious metals is absolutely, positively, 100% wrong. Anyone venturing into crypto markets thinking they can obtain the digital equivalent of gold or silver is making a huge mistake.
Precious metals and cryptocurrencies are entirely separate asset classes. While they both serve as alternatives to fiat currencies and conventional investments, speculative digital assets ultimately can’t stack up to physical bullion when it comes to long-term wealth protection.
Blockchain-based cryptocurrencies, like all technologies, can eventually become obsolete. Gold and silver are basic elements that can never be replaced. They will always be valued for their aesthetic properties and industrial utility even if their historic role in the monetary system diminishes to nothing.
Of course, that’s not likely to be the case. Central banks around the world continue to accumulate gold in their reserves. Meanwhile, individual investors have been accumulating their own gold and silver reserves at a robust pace over the past couple years – clearing out U.S. Mint coin inventories in the process.
In other news, the Federal Reserve on Thursday released a paper on the prospects of issuing a central bank digital currency.
Steve Leisman (CNBC): The long awaited paper on the central bank digital currency being issued at this time by the Federal Reserve, in which they say that a CBDC could offer a range of benefits and risk, don't come to any particular conclusion about it, but they say could offer the, the general public, a risk free digital money that is free from credit risk, free from liquidity risk, would not place existing digital money, but would be an addition to it. The Fed will not proceed as Chair Powell has said with the CBDC without support of Congress and the executive branch, but it is potentially the biggest change to money since, I don't know, currency consolidation after the Civil War. So, we're watching it very carefully.
CNBC Anchor: Yeah. A huge step for mankind.
Critics warn that a central bank digital currency would be a huge step toward a Chinese-style social credit and financial surveillance system.
Under a CBDC, the Fed could control access to digital wallets and, together with federal agencies, monitor how digital dollars are used and by whom. Perhaps people who are behind on child support or tax bills would be denied the ability to transact in “Fedcoin.” Fed-issued digital wallets could also carry data on personal vaccine status or a host of other things governments and businesses may be interested in knowing.
Although officially the Fed hasn’t yet announced that it will move to implement a CBDC, the concept is backed by Fed Governor Lael Brainard. Brainard has been nominated by President Joe Biden to serve as Vice Chair of the Federal Open Market Committee.
Some members of Congress are trying to prevent the Fed from issuing a central bank digital currency before it gets the chance. Representative Tom Emmer of Minnesota introduced a bill that amends the Federal Reserve Act to prevent the central bank from assigning digital accounts or issuing digital currencies to the public.
But there is zero chance that Congress will take away the Federal Reserve’s digital printing press. The vast majority of the money supply pumped into the economy by the Fed is in electronic form rather than in coins and paper bills.
The power to inflate by means of computer entries entails the power to destroy purchasing power at the push of a button.
Inflation is now running at a 40-year high. It threatens to wipe out holders of bonds and cash instruments that sport deeply negative real yields.
While there are many alternatives available in financial and crypto markets, the ultimate alternative to the risks inherent in paper and digital profusions is to seek out hard assets instead.
In other news, we’re pleased to report Money Metals’ nationwide sound money project is off to strong start here in 2022, with our allies in state legislatures having already introduced more than one dozen bills to repeal sales taxes on gold and silver, repeal income taxes, and even push state treasurers to hold the monetary metals as reserve assets.
You may recall that last year, Money Metals help secure passage of sales tax exemptions in Arkansas and Ohio, leaving only 8 states that still fully tax the purchase of gold and silver. We now have bills pending in Tennessee, Mississippi, Hawaii, Kentucky, and New Jersey to do the same thing.
Meanwhile, Oklahoma, Iowa, and South Carolina will be considering bills that eliminate all state income taxes on the sale of precious metals. In years past, states like Arizona have enacted such exemptions on constitutional money.
The importance of these sound money efforts should not be underestimated. After all, taxes on the purchase and/or sale of the monetary metals are real disincentives against their ownership and use.
Of course, individual states cannot bring soundness to America’s monetary system on their own.... The root of the problem is the Federal Reserve, U.S. Treasury, and Congress who have fully embraced fiat money and abandoned monetary restraint.
The consequences of this are becoming more obvious by the day. With the Consumer Price Index now rising at its highest rate in 40 years, inflation is becoming the most pressing economic issue of our time.
But – even as federal policymakers seem only to be exacerbating the problem – a handful of states are trying to step up and give their citizens some tools to protect themselves.
Keep your eyes on news and announcements about Money Metals’ sound money projects by visiting MoneyMetals.com -- and by keeping an eye out for our emails.
Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend 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.