Weekly market wrap

As the Biden administration scrambles to try to contain inflation – or at least make a public relations show of it – precious metals investors are wondering how much longer gold and silver prices will remain contained.

Metals markets got a bit of a lift this week through Thursday but have pulled back a bit here today. As of this Friday recording, gold is flat for the week now to trade at $1,860 per ounce. And silver is down 20 cents or 0.9% this week to trade at $22.12 an ounce.   

Turning to the platinum group metals, platinum is this week’s standout performer with a robust 7.7% advance to come in at $1,039. And finally, palladium prices are down 1.9% to trade at $2,039 per ounce.

While precious metals are showing some signs of emerging strength here, they remain depressed compared to other raw materials.

Gasoline prices, for example, are setting record after record across the country. On Thursday, the national average hit $4.72 a gallon. In California, it’s now over $6.00.

Consumers who are frustrated with skyrocketing costs for fuel, food, and other essentials are giving President Joe Biden poor marks for his handling of the economy.

The White House is desperately trying to revive Biden’s tanking poll numbers ahead of the mid-term elections. And to do that, the President needs to appear to be tackling the inflation problem.

On Tuesday, Biden convened a rare one-on-one meeting with the chairman of the Federal Reserve. Biden insisted he respects the Fed’s so-called independence.  But he was clearly leaning on Chairman Jerome Powell to do more to combat rising prices.

Powell is in a tough spot. He oversaw a massive central bank stimulus intervention to help accommodate the Biden administration’s spending agenda. Now he’s being asked to withdraw some of that stimulus without crashing financial markets in the process.

The administration now acts surprised that all the spending and borrowing it pushed forward helped create an inflation problem. Last year while Treasury Secretary Janet Yellen was promoting Biden’s “Build Back Better” agenda, she testified before Congress that the trillions in new spending wouldn’t contribute to inflation.

Now she is being forced by inflation realities to backtrack. Yellen went on CNN this week and admitted that she got it wrong – very wrong.

Financial Market Commentator:    (While) President Biden passes the buck on inflation, Secretary Yellen, issues a mea culpa.
Treasury Secretary Janet Yellen: I was wrong then about, umm, the path that inflation, umm, would take. As I mentioned, there have been unanticipated and large shocks to the economy that have boosted energy and food prices. And, umm, supply bottlenecks that have affected our economy badly, that I didn't, at the time, didn't fully understand.

Perhaps Yellen should have listened to former Treasury Secretary Larry Summers. A Democrat who served under Bill Clinton, Summers panned the Build Back Better agenda and warned that excessive fiscal stimulus would create the very inflation problem that we are now seeing play out.

Of course, nobody has a crystal ball when it comes to the economy and markets. While some trends are largely predictable, others aren’t.

Black swan events such as pandemics, wars, terrorist attacks, and flash crashes can devastate an investment portfolio that is highly concentrated in a particular asset class. That’s why broad diversification is key to navigating uncertain times.

If there is one investment theme that is close to 100% certain to play out, it is that the U.S. dollars in which all investments are denominated will continue to depreciate.

It is the nature of fiat currency regimes that they produce inflation. That is their very purpose. 

Politicians and central bankers don’t want to be constrained by the strict limitations imposed by a hard money system. That is why they sneer at the suggestion that gold and silver could still function as money in a modern economy.

Gold is antiquated, they say. But in reality, the fiat monetary regime is based on obsolete ideas that should have been relegated to the dustbin of history after the fall of the Soviet Union.

The central planning mindset holds that purported experts need to be put in positions of power to do things like fix interest rates and intervene whenever markets or the economy get off track. But as we’ve seen, the central planners at the Treasury Department and Federal Reserve can’t even accurately predict the outcomes of their own actions.

Public confidence in government and the Federal Reserve is plummeting when it comes to their handling of the economy. That is one reason why demand for physical precious metals is growing.

The U.S. Mint continues to struggle to keep up with buying volumes for its American Eagle gold and silver coins.  Last month, the Mint sold 147,000 ounces of gold Eagles. That was its biggest May tally since 2010.

Overall, gold bullion sales are running four times higher than recent historical averages.

Silver buying, meanwhile, is running a bit cooler. Lagging spot price performance this spring seems to have discouraged some investors from stepping into the market.

But bargain hunters are finding silver to be especially attractive at these levels.

Nobody knows how much longer the silver market will remain capped. Prices could blow through overhead resistance at any time, though. When they do, silver holders will be rewarded for their patience and perseverance.

In other news, Tennessee Governor Bill Lee just signed legislation officially making the Volunteer State the 42nd in the nation to remove sales taxes from constitutional sound money. This victory is directly attributable to efforts by Money Metals Exchange and hundreds, if not thousands, of our Tennessee customers.

The grassroots pressure made the difference in getting sales tax repeal bill passed according to house and senate members who commented repeatedly about the groundswell of support they witnessed. 

Tennessee investors, savers, and small businesses can now acquire gold, silver, platinum, and palladium bullion and coins without being slapped with taxes as high as 10%, depending on the purchaser’s specific location.

Money Metals and its Sound Money project chalked up two other wins this year – Virginia and Alabama -- building on big wins last year with the elimination of precious metals sales taxes in Ohio and Arkansas. 

Including Tennessee, 42 U.S. states now fully or partially exempt gold and silver from the sales taxes. That leaves 8 just states and the District of Columbia as the jurisdictions that still harshly penalize citizens seeking to protect their savings against the serial devaluation of the Federal Reserve Note.