Gold & Silver wait their turn to ride the inflationary wave

As President Joe Biden pushed massive new spending initiatives in his address before Congress, investors shrugged off rising inflation risk. They pushed the S&P 500 up to a new record close on Thursday.

Gold, meanwhile, continues to be capped under the $1,800 level – at least for the time being.  Silver shows a slight weekly gain and trades a little over $26 per ounce. 

As trading closes out for the month of April, precious metals bulls will be hoping for a more fruitful May. Although May is typically a quiet month in markets – not known for producing major crashes or price spikes – it can represent a seasonal turning point.

The old adage, “sell in May and go away” is premised on the stock market entering a seasonally weak period that typically lasts through October.  

Last year was a very abnormal year, of course. And this one looks to be atypical as well.  With all the fiscal and monetary stimulus still making its way through the economy, seasonal trends in markets could be moot.

A major breakout in gold and silver prices could occur at any time. A short squeeze in the futures markets remains a viable scenario given the still ongoing disconnect between tremendously strong demand for physical bullion and paper selling of futures contracts. 

Some online silver investing communities are eyeing May 1st for a massive new buying campaign. 

How much buying actually materializes remains to be seen. But with mints struggling to keep up with demand and dealer inventories for popular products including Silver Eagles, silver bars, and silver rounds already stretched thin, another buying surge could have an effect on premiums and availability.

Silver and gold markets are waiting their turn to ride the inflationary wave that has hit so many other markets this year. 

Palladium and copper prices are soaring to new heights. The housing market is rising at one of its fastest clips on record as lumber prices go through the roof.  Technology companies are grappling with a computer chip shortage. Retailers are struggling with a labor shortage as millions of working-age Americans stay home and collect government benefits.

Just about everywhere you look in the economy, supply chains are strained. The precious metals bullion marketplace is a case in point.

The fact that spot prices haven’t responded in kind over the past several months is a source of frustration for many gold and silver bugs. But it’s also a value opportunity. 

Those who can see what’s coming know that the value of the Federal Reserve Note will continue to decline. They know that at some point the richly valued stock market will correct, pushing mainstream investors to seek alternatives. And they won’t be able to keep up with inflation by sitting in cash. 

The tsunami of deficit spending and currency creation coming out of Washington will only increase going forward. President Biden just proposed trillions in new spending for what he euphemistically calls jobs and infrastructure. In reality, this spending represents and entire re-making of the U.S. economy. 

Biden’s far-reaching agenda is leading some to compare him to Franklin Delano Roosevelt. FDR is commonly believed to have pulled the country out of an economic crisis through a range of government programs that fell under the banner of the New Deal.

What’s less commonly understood about FDR is that he radically expanded the power of government to control and destroy wealth. He threatened to pack the Supreme Court until it finally capitulated and stopped striking down his power grabs as unconstitutional. 

Now Joe Biden is forming a commission to look into packing the Supreme Court with additional justices that would be more favorable to his agenda.

çBack on May 1st, 1933, FDR issued Executive Order 6102 -- making it illegal for members of the general public to own more than five ounces of gold bullion. Back then, the dollar’s value was pegged to gold. The government’s way of creating inflation was to raise the price of gold in terms of dollars and make sure as few people as possible were protected from the devaluation.

Under our current fiat monetary regime, the Biden administration need not bother with gold prohibition. It can spend and borrow at the will of Congress and get the Federal Reserve to produce all the monetary stimulus it desires.

Just like during the days of the classical gold standard, a currency devaluation will ultimately be reflected in the dollar price of gold and silver as well. 

The devaluation won’t be formally announced. But when the precious metals are trading at record highs again, it will be obvious to anyone who is paying attention that sound money serves as protection against the government’s steady confiscation of purchasing power.