Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
A long-awaited dovish pivot by the Federal Reserve is helping to push precious metals markets in a bullish direction this week.
On Wednesday, Fed policymakers left their benchmark interest rate unchanged as expected. But the comments that followed from Jerome Powell and company took markets a bit by surprise. Powell struck a dovish tone as he telegraphed three rate cuts in 2024.
Traders are anticipating a strong likelihood of even more cuts. And according to trader and market commentator Gareth Soloway, the Fed may be under political pressure ahead of the 2024 election to keep the economy propped up and the government’s borrowing costs down.
Gareth Soloway: Jerome Powell was basically as dovish as he has ever been. He talked about three rate cuts next year. Now, what's amazing about this is that as soon as he said three rate cuts, the market said, no, no, no, no, no. We're going to price in six rate cuts. So, a whole basically 150 basis point in rate cuts next year, even though CPI, Consumer Price Index inflation is still between 3.0 and 3.5%. So, we're well above what the Fed has talked about at 2%. But you have to wonder, is part of this election type stuff? Are they trying to just bring it back into not crash the economy in 2024 going into the elections, or is it something to do with the U.S. debt? If the U.S. debt is at $34 trillion and interest rates were to stay where they were, this country literally would be bankrupt much, much faster. And that's arguably saying, is it even already bankrupt?
Expectations for looser monetary policy in 2024 weighed on the U.S. dollar and lifted gold and silver. As of this Friday recording, gold is gaining 1.8% for the week to bring spot prices to $2,044 per ounce – now back to within striking distance of new highs. Silver, meanwhile, shows a weekly advance of 4.2% to trade at $24.18 an ounce.
Turning to the platinum group metals, which have been hammered down in recent weeks, their fortunes turned around in a big way on Thursday. Platinum surged 5% while palladium spiked a staggering 15% on the day. For the week, platinum is up 2.6% to come in at $958. And finally, palladium is surging again here today and is posting an impressive weekly gain of 24.4%, or nearly $250 to command $1,220 per ounce.
On the sound money front, a new national scorecard exposes Vermont, New Jersey, Maine, and Minnesota as America’s absolute worst states for sound money...and Wyoming, South Dakota, Alaska, and New Hampshire as the best.
The index ranks all 50 states in this increasingly important public policy area, evaluating sales and income taxes on precious metals, whether a state affirms the role of gold and silver under the U.S. Constitution, the existence of gold or silver in state pension funds or reserves, and regulations that harm or otherwise punish precious metal dealers and investors.
Notable changes on the 2024 Sound Money Index include Arkansas’s meteoric ascent from 30th to 5th place as well as Mississippi’s leap from 43rd to 16th place.
Arkansas ended all income tax liability on the monetary metals, reaffirmed gold and silver as legal tender, and prescribed that state courts should require specific performance when enforcing contracts denominated in gold and silver.
Meanwhile, after a multi-year legislative effort, Mississippi canceled all sales taxes on precious metals. The Magnolia State became the 43rd state in the country to remove taxes on purchases of gold and silver.
Sound money victories were also seen in Florida, Tennessee, and other states.
This year’s Index includes a new criterion: gross revenue tax. It is levied against the total sales of businesses in a handful of states. It ignores whether a business category has high or low gross profit margins.
A gross revenue tax on bullion transactions is especially unfair. That’s because, except with respect to those fraudulent “rare coin” dealers you see advertising on television, most precious metals dealers like Money Metals operate on extremely small profit margins.
These margins are similar in scale to those on transactions involving real property, investments, or other goods sold by brokerages, which are usually exempt from state gross revenue tax schemes in the first place.
Oregon passed legislation in 2023 joining the vast majority of states that have exempted precious metals dealers from gross receipts tax or which don’t impose this tax at all. However, Ohio, Tennessee, Texas, and Delaware all lost points on the 2024 Sound Money Index for their controversial gross revenue tax regimes.
At the national level, sound money efforts are also ongoing despite deep-seated institutional resistance on Capitol Hill. Alex Mooney of West Virginia is leading the charge in the House of Representatives to audit the Federal Reserve. He is also pushing to recognize gold and silver as legal tender and end discriminatory capital gains taxation on bullion – which the IRS wrongly puts under the “collectibles” umbrella.
This week, Congressman Mooney wrote to Fed Chairman Powell demanding answers concerning the central bank’s recent actions in the gold market. He specifically wants to know whether the Fed has engaged in interventions to affect prices.
He also seeks to get to the bottom of whether the Federal Reserve Bank of New York has been repatriating gold to Germany’s central bank or others that are suspected of having made the request.
The Fed recently refused to respond to inquiries from the Gold Anti-Trust Action Committee about whether any foreign gold had been repatriated this year. Some doubts have been raised about the status and security of foreign gold vaulted with the New York Fed and whether it is unencumbered.
Given the recent attempts by U.S. authorities to freeze gold assets held by Russia, Venezuela, and other state-affiliated actors deemed hostile, the U.S. central bank isn’t exactly a safe haven. Nor is the U.S. currency – or any fiat currency for that matter.
Over the past couple years, central banks across the globe have scooped up gold bullion for their reserves at record rates.
Individual investors haven’t been all that enthusiastic about buying bullion for themselves. Higher interest rates on cash instruments and a rising stock market have combined to diminish some of the perceived appeal of hard assets. But that could change next year as the Fed pivots toward rate cuts and the economy potentially dips into recession.
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 wonderful 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.