Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Well, we’re seeing another big move in the gold market. The monetary metal reached a new record high on Thursday to close out this holiday-shortened trading week. Gold finished the week, the month, and the quarter on a high note at $2,243 an ounce, gaining 3.1% since last Friday’s close.
Silver, however, isn’t quite matching gold’s strength. The white metal showed a gain of just 1.1% for the week to bring spot prices to $25.15 per ounce.
Platinum rose 1.7% this week to close at $923 an ounce on Thursday. And its sister metal palladium registered a weekly gain of 2.8% to finish at $1,051 per ounce.
Gold may be making headlines, but precious metals remain under-owned by individual investors, pension funds, and governments. As fiat currency proliferates and pushes up the nominal value of financial assets, gold and silver as a percentage of total liquid assets remains near historic lows.
And silver, of course, remains historically cheap – still about 50% below its old nominal high. Given gold’s advance to new highs in terms of U.S. dollar fiat currency, silver has a lot of catching up to do. And when it does finally garner some serious buying momentum, it can catch up quickly.
Precious metals are positioned to gain ground as portfolio diversifiers for individuals and as reserve assets -- not just for foreign central banks but for U.S. state and local governments as well.
Last Thursday, Utah Governor Spencer Cox signed legislation empowering the state Treasurer to secure state funds with a significant allocation to physical gold and silver. The Treasurer may hold up to 10% of certain state reserve accounts in precious metals to help secure state assets against the risks of inflation and financial turmoil.
Up to now, Utah’s reserves have been invested almost exclusively in Treasuries, municipal bonds, corporate bonds, and agency debt. These debt instruments carry credit risk and inflation risk. Even under modestly elevated inflation rates, bonds can deliver negative real returns that compound into enormous losses over time.
And now just yesterday, our own state of Idaho passed a similar bill out of the house in a narrow vote. The bill would allow Idaho’s treasurer to invest up to 7.5% of the state idle funds – which is nearly $10 billion in total – into gold and silver. The bill will now be sent to the governor’s desk and would become law if he decides to sign it.
Here are some excellent comments by Reps. Vito Barbieri and Heather Scott, made during the floor debate in the Idaho House on Thursday.
(Idaho, District 3, Representative) Vito Barbieri: Thank you, Mr. Speaker. I'm astounded at some of the some of the debate here. Investments are not hedges against inflation. They're a store of value. We are printing a trillion dollars of fiat currency every hundred days. Now the fluctuation that the gentleman from [District] 25 is talking about was not when we were printing a trillion dollars, three and a half trillion dollars a year of paper fiat backed by nothing.
There was a time when the petrodollar was backed by oil because we controlled the oil fields, even though they weren't in the nation. Money as a store of value must remain constant. But if you're going to go into debt and print money, it cannot stay constant. It simply cannot do that. I used this example last time we talked about this.
A suit of clothes a hundred years ago would cost you the same in gold than it would today, converted into dollars. But that suit is, what? 15x more expensive now.
We've got to recognize that we're not talking about mandating this for the treasure but giving the treasure the option to store value. We are in unprecedented times. Do you want to pretend like we're not? I'm fine with that. I would prefer that you were right. But you cannot debase a currency without it reflecting in some commodity.
Why are nations purchasing tons of gold? Because they think it can be manufactured at some other point? That we can alchemize the lead into gold? I don't think so. All we're talking about is giving the treasurer an option with the appropriate advice to store in value. We, this money, what do we call them? Cash equivalents, they’re bonds. They are still bonds and bills that are paying interest. And that interest that they are paying is less than the inflation. It is less than the inflation. We are losing money on those cash equivalents. The fundamentals are different now than they may have been at any time before, specifically because of what I'm saying with respect to the printing of a fiat currency.
The present dollar is a Federal Reserve Note, a promise to pay in the future, with future Federal Reserve notes. Future promises. Fascinating way to build an economy. But they're doing it, and they're doing it successfully, at three and a half trillion dollars a year.
Don't forget, that we all believe in the United States Constitution.
It specifically states gold and silver is to be used as legal tender. Article 1, Section [10].
If inflation is going to continue to exceed the amount that we're going to get on interest, that is the way it's going to work. We're going to continue to lose while we continue this cash flow, take, collect taxes, and pay the taxes out.
The only last thing I can say is, with respect to these Federal Reserve notes, is they do have a counterparty risk. At some point, if you can't print the dollar, oh, we're going to start putting them into electronic digits. And what are those worth? There's counterparty risk in any loan, whether it's a cash equivalent or not, that's got to be paid back.
And if it can't be, then the value of that note goes down. All we're talking about, again, is a store of value while the federal government prints trillions. Thank you.
(House Speaker of Debate): For the debate on the motion, good lady from [District] 2. Thank you, Mr. Speaker, debate. Good lady has the floor. Thank you Mr. Speaker I just want to add some, some ideas to this debate.(Idaho, District 2, Representative) Heather Scott: I guess just touch on the Constitution, no state shall make anything but gold or silver coin as tender in payment of debts. One of the, one of the people, or one of the good gentlemen brought up the idea that well, could we make gold in the future? And I want to take you back to science class, maybe fifth grade.
Gold is a chemical element, it's an element. Gold and silver are elements, not compounds. And so that's why our Constitution, that's why we say nothing but gold and silver. They are pure substance made with the same atoms. And that's why we stick to gold and silver. This bill, what I like about it, it's not mandatory.
It's another option. But what I don't think that we've put into this whole mix is we do live in the gem state. Many of the founders of this state came here for gold and silver. The reliance on precious metals has been part of our culture since statehood. And that rings true to my district, District 2, where at its prime, it had more silver taken out of the ground than any other place in the world.
Now that's something amazing about Idaho. It's embarrassing that all these other states are investing in gold and silver, and we are saying it's too risky. It's, it's just, I can't, I can hardly understand that, that argument. Because, you don't think cash is risky? You don't think the dollar is risky?
The other thing, I think that wasn't mentioned is the Idaho Mining Association does support this bill. They believe that the passage of it will send a signal that Idaho is favorable to precious metals and favorable in mining. And they believe it will help junior mining companies in this state.
And I just encourage you to maybe think outside the box a little bit. I know we've been living in a society that's just cash, cash, cash, Federal Notes. But, look at during our lifetime how it's gone from. From an actual note to now a promise of a note. It used to be payable. All our dollars used to be payable in gold or silver.
If you took them into the bank, you could get gold or silver. There has to be some value in gold and silver. And this bill just asks for an opportunity to invest in that. To hedge our investments. And so that, I ask for your green light.
That last speaker was Representative Heather Scott from Northern Idaho.
As state legislators are increasingly recognizing, the monetary metals provide an important hedge against inflation, debt default risks, and stock market declines. An allocation to hard money has historically boosted risk-adjusted investment returns while insuring against risks inherent in financial assets.
The Sound Money Defense League and Money Metals Exchange have been actively encouraging states to hedge reserve and pension funds using gold and silver. Texas and Ohio have previously acquired gold. Meanwhile, legislation like Utah and Idaho’s recently passed in Tennessee and is also under consideration right now in Oklahoma, North Carolina, Kansas, West Virginia, Iowa, Indiana, and Missouri.
Meanwhile, when it comes to states repealing sales taxes on purchases of precious metals, Kentucky is now on the cusp of joining Wisconsin, whose governor just signed a sales tax exemption bill into law in the Badger State last week.
The Kentucky house and senate passed a similar bill yesterday, which is now on the desk of the Commonwealth’s governor awaiting his signature. Assuming the bill signed, Kentucky would join 44 other states with a sales tax exemption on gold and silver.
So, it has been a very active week for sound money at the state level indeed.
And with federal deficits spiraling out of control, states and individuals alike need not sit around and wait for a solution out of Washington, D.C. that will likely never come. They can take matters into their own hands by trading out Federal Reserve notes and other paper promises for uncorruptible currency in the form of precious metals.
Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast.
And don’t forget to tune in every Wednesday as well for the Money Metals Midweek Memo podcast. Join Mike Maharrey each week for some additional commentary and analysis on the markets and the economy. Just go to MoneyMetals.com/podcasts or find that on whatever podcast platform you prefer.
Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a wonderful Easter 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.
