New Taxes Proposed by White House as Inflation Rages

The platinum supply crunch has arrived. Here’s how to position for it…


Mike Gleason Mike Gleason
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May 10th, 2024 Comments

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up don’t miss an exclusive interview with Ken Silva, investigative journalist with Headline USA. Ken and Money Metals’ Mike Maharrey discuss America’s gold and why our federal officials don’t seem to want to give the public a clear answer on exactly how much the Fed and U.S. Treasury have. Ken and Mike also dive into how the U.S. may be blocking certain adversaries from accessing the gold they have inside the U.S.

So be sure to check out the interview with Ken Silva of Headline USA who has been digging into this potentially explosive story, coming up after this week’s market update.

As inflation continues to put the squeeze on consumers, precious metals markets are back on the move.

Gold prices are up 2.7% this week and currently trade at $2,375 an ounce as of this Friday morning recording. A solid close above the $2,400 level should set the stage for another push to new record highs. We’ll see if that is in the cards in the days ahead as it appears the yellow metal may be on the verge of making a run back to $2,400 as we speak.

Turning to the white metals, silver is posting big gains. The poor man’s gold shows a weekly advance of 6.3% to bring spot prices to $28.40 per ounce. Silver is up more than $1.50 for the week and could break out to a fresh 11-year high with a move above the $29 level.

Platinum is up 3.8% since last Friday’s close to trade at $1,006. Although platinum hasn’t done much over the past few years, it may have quietly carved out a major bottom after becoming historically cheap versus gold.

Like silver, platinum is expected to run a large supply deficit this year. Metals firm Johnson Matthey is forecasting a physical platinum shortfall of nearly 600,000 ounces in 2024. That would be the biggest such deficit in 10 years.

Although falling automotive demand has weighed on platinum prices in recent years, supply is now shrinking faster. Other industrial sources of demand are stable or rising, and investment demand has the potential to increase markedly.

With gold commanding headlines this spring for hitting new records, more mainstream investors are waking up to the advantages of owning hard assets for wealth protection. But some are understandably wary of buying gold at a lofty price in nominal terms.

Platinum serves as a viable alternative for bargain hunters. And of course, historically, platinum has often traded at a premium to gold. So being able to obtain it today at a discount of better than $1,300 per ounce is an opportunity that may not last forever.

Although platinum bullion products are more limited in quantity and variety compared to gold, investors can obtain platinum in the form of familiar American Eagles and a few other officially minted coins as well as investment-grade bars and even wearable bullion jewelry.

In addition to protecting investors from currency depreciation, hard money in the form of bullion can also help protect investors from the corrosive effects of taxation.

Realized gains on precious metals aren’t tax exempt, of course. But unlike interest-bearing assets, bullion generates no income tax liabilities unless and until it is actually sold at a profit.

President Joe Biden is now threatening to raise tax rates and impose new taxes on investors in order to fund his massive $7.3 trillion budget wish list. Under Biden’s plan, high earners could pay an effective rate of more than 50% on their investment income.

Some members of Congress are fighting back – specifically on behalf of precious metals investors. U.S. Representative Alex Mooney of West Virginia recently re-introduced sound money legislation to remove all federal income taxation from gold and silver coins and bullion.

His Monetary Metals Tax Neutrality Act is backed by the Sound Money Defense League, Money Metals Exchange, and free-market activists. It would clarify that the sale or exchange of precious metals bullion and coins are not to be included in capital gains, losses, or any other type of federal income calculation.

Gold, silver, platinum, and palladium would be treated the same as U.S. fiat currency for tax purposes, meaning exchanging one form of money for the other would trigger no tax liabilities.

Gains on monetary metals are currently subject to a discriminatory long-term “collectibles” tax rate of 28%. Acting unilaterally, Internal Revenue Service bureaucrats have placed gold and silver in the same category as artwork, Beanie Babies, and baseball cards.

Sound money activists have long pointed out it is inappropriate to apply any federal income tax, regardless of the rate, against the only kind of money named in the U.S. Constitution. And the IRS has never defended how its position squares up with current law.

The Monetary Metals Tax Neutrality Act aligns with a broader national trend. With most states having already eliminated sales tax on the purchase of precious metals, state legislatures are increasingly introducing and approving measures to eliminate state income taxation of gold and silver.

Alabama and Nebraska each passed their version of this policy this year. Arizona, Arkansas, and Utah approved similar measures in recent years. And Iowa, Georgia, Oklahoma, Missouri, and Kansas also considered income tax exemptions in 2024, with several approving the bill across multiple committees and chambers.

In the meantime, investors who wish to legally shield bullion transactions from federal income taxes for as long as possible should consider holding eligible coins, rounds, and bars within an IRA. A Precious Metals IRA is easy to set up and can be funded with IRA-eligible physical bullion products available through Money Metals.

Well now, without further delay let’s get right to our exclusive interview with Ken Silva investigative reporter with Headline USA about the country’s gold and much more.

Mike Maharrey and Saleha Mohsin

Mike Maharrey: Greetings. I'm Mike Maharrey. I'm a reporter and analyst for Money Metals, and I'm here today with Ken Silva. Ken is an investigative reporter for Headline USA, and one of his reporting interests is clandestine government activities and corruption. So I thought it would be fun to talk to him about the Federal Reserve. How are you doing today, Ken?

Ken Silva: Very good. Thanks for having me.

Mike Maharrey: Well, I really appreciate it. You're doing some really interesting investigative work on the Fed and its gold holdings. But before we get into those details, I kind of wanted to step back and take a little bit of a big picture perspective. You hear that the Fed is independent, right? It doesn't insert itself into politics. Fed Chair Jerome Powell often touts the independence of the Fed. All of the Fed chairs have done that. Do you really think the Fed is this unbiased institution above the political fray, or is this whole independence thing a myth?

Ken Silva: Well, I don't know if I could speak to that in my capacity as a journalist, but I studied economics as a college student. I read all the Austrian economics literature. So I remember reading ... I forget what exactly it was called. The Political Theory of the Business Cycle or something. And it pretty much showed that the Fed usually lowered interest rates right before elections, and interest rates then creep back up after the elections. So the data, to me, showed pretty clearly that the Fed has never been totally independent. And I think that's just been underscored in recent years with our more boisterous President Trump openly calling for lower interest rates. I don't think he knew that that was kind of inappropriate to say for a president. And then now we have Biden doing the same. And I think his mind's gone, and he just forgot that he's not supposed to say these things out loud.

Mike Maharrey: Right. That's funny. I probably shouldn't laugh, but no doubt you're correct. And it's interesting because there's been some reporting recently about Trump and his plans if he were to be reelected, to literally put more influence over the Fed and make sure that monetary policy aligns with administration policy, which is really frightening when you think about it. But on the other hand, as you said, it seems like it's really the status quo as far as the Fed goes.

I want to talk first, again, before we get into the issue of gold, I want to talk a little bit about a report you recently did on an internal document that was produced by the Fed that was dubbed the Doomsday Book. And can you just kind of give an overview of what that is, and what did we learn from this Doomsday Book?

Ken Silva: Yeah, sure. So interesting dovetail into the transparency issue with the Fed too, is there's this finance professor in, I think, Columbia or New York State University who's been trying to get the Fed's Doomsday Book for years. I think he did a FOIA lawsuit. And he finally got it a couple months ago. And basically, what the Doomsday Book is is an internal document that describes the vast powers that the Federal Reserve thinks it has or that claims that it has. And some of the more interesting provisions in the book include ... The Fed thinks it has the power to bail out cities or even take ownership of companies. And again, I think a lot of people probably suspected that the Fed might try to do something drastic like monetize municipal debt in the case of an emergency if it really came down to it. But indeed, this Doomsday Book spells it out clearly that yes, the Fed can and would do that under certain conditions. What those conditions are, I think the politics of it all probably would define that.

Mike Maharrey: Yeah. If you study political philosophy, I think that this really shouldn't be shocking to anybody, given that any government institution tends to want to try to expand its power over time, well beyond whatever it was chartered. You just look at the federal government. You have a Constitution where James Madison claimed that the powers of the federal government were few and defined. You find that in Federalist No. 45. I don't think anybody would describe the federal government like that today. So it is just kind of a reality of politics, isn't it, to have this constant expansion and trying to push the boundaries of what these individual entities can do.

Ken Silva: Oh, yeah. And correct me if I'm wrong, but the Constitution defines money as gold and silver, right?

Mike Maharrey: Yeah. There is that.

Ken Silva: We've come a long way off that. So yeah, your point's well taken.

Mike Maharrey: Yeah. Well, I mean, even thinking about the whole idea of a national bank, that was really the first constitutional debate. You had James Madison, Thomas Jefferson, Edmund Randolph, all saying the federal government doesn't have the power to charter a corporation, much less a bank. And then on the other hand, you've got Alexander Hamilton who, ironically, before the Constitution was ratified, he was the gung-ho ... We're going to have this limited government. And before the ink was even dry, really, he was pushing and expanding that power. So again, it goes to this whole idea of government always wants to expand its influence and whatnot.

So let's talk a little bit about this whole issue with the Federal Reserve's gold holdings. I know that you've done some FOIA work. And for folks who might not be familiar with it, FOIA is just the Freedom of Information Act. And it supposedly gives journalists and even regular people the right to get information from the government. And so I know you've done some work on this. What prompted you in the first place to start thinking about, "Well, what's going on with the gold reserves that the Fed holds?"

Ken Silva: Yeah. So the whole backstory to this ... I'm sure all of your listeners are aware about how the dollar was taken off the gold standard once and for all, I think in '71. A lot of the foreign countries kept their gold holdings with the Federal Reserve even after that though, for security reasons, just in case the Soviet Union invaded or staged a coup. At least the gold would be supposedly safe in the international rule of law or rules-based order in the West. But gradually, the Fed's foreign gold holdings dwindled from the '70s until now. At one point, it was about 13,000 tons, and now it's hovering around 6,000 tons.

So to finally answer your question, after Russia invaded Ukraine, there was a lot of buzz about ... All the foreign countries are going to take their gold from the Fed now that the West has imposed sanctions on Russia. A lot of Russians' assets in the Western financial systems were lost to the West. And so it really doesn't make sense if you're a foreign country to hold your gold here and risk losing it if you get on the wrong side of the State Department. And so we wanted to take a look at exactly what's the sum total of the foreign gold holdings? Has it actually been flowing out of the country since the Russia-Ukraine War started in early 2022?

And so Congressman Alex Mooney wrote a letter to Jerome Powell late last year asking for data on this. And Powell, as federal chairmen tend to do, responded with a jargon-filled letter that really didn't answer the questions. So we figured we'd file a Freedom of Information Act request for records that reflect the Federal Reserve's gold holdings. It seems simple enough. How much gold do you have in your vaults, and which countries own what?

A couple months later, the Fed responded and said that, "Well, we don't really have records about that. That's with the New York Fed, is the one that has the vault and holds the gold on other countries' behalf. So you'd have to ask the New York Fed that question," except there's one problem, that the Federal Reserve Board is subject to the Freedom of Information Law, but its regional branches are not.

And so that's where we hit the wall. We know the records exist, but apparently the Federal Reserve Board claims that they don't have them. It's with the New York Fed, which is preposterous because if you go on the Federal Reserve Board's website, you'll find a tab that says, "Yeah, we hold about 6,000 tons of gold right now," but when you actually ask the records that underpin that statement, they're just not forking them over, at least not yet.

Mike Maharrey: That's pretty wild. So are they basically using the argument that the New York Fed is a non-government entity? Whereas the Federal Open Market Committee or the Board of Governors is, I guess, a quasi-government? Is that kind of the argument?

Ken Silva: I believe, yeah, that's their rationale. The interesting thing about that is actually the new Federal Reserve policy went into effect this year that says the regional banks will try to comply with the spirit of FOIA. We're still not saying that they're lawfully subject to FOIA. You can't sue us, but if we feel like giving you the records, we will.

Now, what spurred this change in policy is Elizabeth Warren and one of the Republican senators on the Finance Committee in late 2022 and early 2023, they tried to pass legislation that would've subjected all the Fed's regional branches to FOIA. And the reason Elizabeth Warren did this is because she was upset that the Fed had stonewalled her investigation into Federal Reserve officials doing inside trading during the COVID Pandemic. So Warren, to her credit on this issue, she was actually pushing for transparency. Her bill was defeated in the Senate, but I think the Federal Reserve said, "Hey, we'll change our policy and say that we'll try to comply with the spirit of FOIA," as a way to head off future attempts by Warren and other legislators to codify that in law.

So that's a long-winded way to say that I think if I refiled the request for records of foreign gold holdings, I could probably argue that, "Well, hey, you said you'd comply with the spirit of FOIA, so you should give the records now." So we might try to pursue that angle. But that's, I guess, where we're standing right now, is no records.

Mike Maharrey: So if you were to refile and use the spirit of FOIA argument, perhaps if nothing else, you could at least get some type of reason why they wouldn't release those documents, because I'm not really familiar with the federal FOIA laws, but I know several state FOIA laws, that they have to give you a reason. They can't just say, "No, you can't have this." Is that true at the federal level as well?

Ken Silva: I don't think they'd have to do anything but if they want to follow their policy, then yeah, they should, I would think. And I guess I would be a little hopeful because I was actually rereading my coverage this morning in the Doomsday Book that we were talking about. The New York Fed is actually the one that eventually forked it over to the professor that had been suing for it. The professor lost his lawsuit against the Federal Reserve, but then he tried to get it from the New York Fed, and he actually was successful. So sometimes these things come down to the whims of whatever bureaucrat is considering your request, but I would say it's certainly worth the effort or worth the shot.

Mike Maharrey: Well, I really appreciate your tenacity on the part of the average person out here that would kind of like to know what's going on with this. The whole gold repatriation thing ... I mean, we know that a number of countries over the last 10 years or so have repatriated at least some of their gold. Off the top of my head, I know Germany did, Hungary, I believe Poland repatriated some of their gold. So this isn't something that's a mystery. We know it's happening, but it is interesting to kind of speculate about how much of that movement has been happening since the Russian invasion of Ukraine. Do you have any sense of it, or is this just a speculation that you're trying to confirm?

Ken Silva: Yeah. So we don't know what's going on, but the interesting thing is that the website ... It says that there's about 6,000 tons of gold in the Fed's vault right now. And I searched the website on Archive.org, so you could see the old versions of the Fed's website. And that number's been pretty consistent for the last five or six years. So nothing looks to have changed since the invasion. And one possible reason for that could be is that Ukraine actually sent its gold to the New York Fed to offset the outflows of the other countries that you had mentioned were repatriating their gold. Well, in 2014, there was a coup. I think a lot of allegations that the CIA supported the coup to overthrow Ukraine's pro-Russian government. Excuse me.

And after that, there were a lot of reports about gold being sent back to America. And there was actually ... The FBI opened an investigation because the Ukraine Central Bank was missing a lot of its gold. It looks like it kind of got looted amidst the chaos. And I also have an outstanding FOIA with the FBI for records about its investigation because it's almost a ten-year-old case now. They could easily stonewall me by saying, "Well, we're still investigating it and we can't give records while our investigation's ongoing," but I'll be interested to see what, if any, records they provide me about that investigation. Yeah. It looks like the US might've practically stole Ukraine's gold. It's pretty [inaudible 00:15:30]

Mike Maharrey: Well, I mean, from what Janet Yellen has said, they want to steal Russia's assets. No, I know some people will say, "Well, it's justified because of the invasion," and that's a whole different debate, but it's I think the kind of thing people need to wrap their head around. And to me, it seems like ... If I was a betting man, I would guess that some countries have moved their gold, because as you said, if you're looking at the actions the US has taken, you hear Janet Yellen saying, "Hey, we're going to take Russia's assets and we're going to give them to Ukraine," and you have assets that are in control of the US. What do you want to do? I mean, obviously you're going to want to try to minimize that control. But I think it's probably happening, but as you say, it would be interesting to know and I think important to know whether or not it's happening in real life. So good on you, trying to get the information out there. I know it can be frustrating at times.

Ken Silva: Yeah. Well, thank you. And I know Donald Trump recently threatened ... He said, "Well, when I'm president, we're going to impose penalties on countries who try to get off the dollar." And I got to imagine that only accelerated the outflows. Any country on the fence right now, unless you're Israel or Great Britain or one of our close allies, if you're a country like Brazil where it's hot and cold with the US, there is no point of risking it. I'm going to take all my gold back before Trump gets into power and implements his plan. I got to imagine the outflows have accelerated.

Mike Maharrey: Yeah. It's interesting. You can go back to, I guess, three or four years ago, after the US backed out of the nuclear deal with Iran, and they were talking about sanctions on Iran and stuff. And I know the EU is actually working on developing a payment system outside of Swiss so they could continue doing business with Iran. So even our allies have to get edgy sometimes. You can only wield the stick for so long before people start trying to figure out a way to avoid the swing.

Let me play devil's advocate with you here. And this is a kind of more broader journalist question, but you talk about getting this information, and a lot of times it's difficult and the government makes it as difficult as possible. How would you respond to somebody who says, "Well, Ken, the government needs to keep some secrets. It's national security. It's for your own good not to know." How would you respond to folks that take that viewpoint?

Ken Silva: Well, I mean, there's obviously the point ... We're supposed to be living in a democracy where this is a government of, by, and for the people. That's my tax dollars. Why can't I see what you're doing with money you forcibly extract from me? I guess that could be a little tenuous if you raise specific issues of national security, but I think there ought to be a law that says after a certain amount of time, all records become totally declassified and public, that way ... If it's a national security issue now, what about 10 years from now when none of these players are even in power? Then everything should eventually become public. I haven't really thought about what would I do as a public policy expert? How would I write FOIA or anything like that to account for these kind of trade-offs and balancing exercises? But that's, I guess, my short answer.

Mike Maharrey: Yeah. I mean there's always going to be that tension, right?

Ken Silva: Yeah. Yeah, absolutely. And I've seen so many cases where ... The lion's share of my work is on the FBI. And they abuse these national security laws flagrantly. So the scale is totally tipped on one side. I even covered a case where the FBI argued to a judge that, "We have the power to lie to you, judge, for national security." The judge actually rejected that, as he should, thankfully. But that's just to give you an idea of how tipped the scales are to the side of secrecy, and it needs to change.

Mike Maharrey: Yeah, I agree. I've not dealt with the FBI or any of the national ... Although I did do a TSA open records request one time. But I do have some experience in trying to get information from local law enforcement, and it's the same thing. Some of the rationale that were used to justify the secrecy were just ... Any normal person's going to look at it and say this is absurd. And yet you get in court and judges are ... Yeah. It's really frustrating. But then if you think about it, you kind of have the government determining the extent of the powers of the government.

Well, good on you, again, for doing this work, because it is tedious if people ... People have no idea how difficult it is to gather information. And then once you get it, you have to comb through it and try to make sense out of it. And oftentimes you're reading through redacted blocks of text as well. So appreciate the work that you're doing. Where can folks go to find your work? We've been publishing some of your gold and Fed-related stuff at moneymetals.com/news. But where is the lion's share of your work for folks who might want to check out some of the stuff you're doing on the FBI and other topics?

Ken Silva: Most of my work is at headlineusa.com. That's where you can find me every day. Occasionally, I contribute to the Libertarian Institute. I actually see you have some books by Scott Horton behind you, so that's awesome. Scott Horton's a good friend of mine. And on Twitter, @JD_Cashless is my Twitter handle.

(Mike Maharrey's Twitter)

Mike Maharrey: Awesome. Well, folks should follow you and follow your work. And again, we appreciate it. We'll be looking forward to seeing what happens, and if you can get your hands on some of this information, or at least finding out what kind of excuse they use that they can't give it to you. So appreciate your hard work again, and thanks for taking a little bit of time to come on the show.

Ken Silva: Yeah, thanks again for having me.

Another great interview there from Mike Maharrey and we certainly appreciate Ken Silva’s time.

Well, that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. And of course, you’ll want to check in to the Money Metals Midweek Memo each Wednesday, hosted by Mike Maharrey. To listen to any of our audio programs just go to MoneyMetals.com/podcasts or find them on whatever podcast platform you prefer.

Until next time, this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a wonderful weekend everybody.

Mike Gleason

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.