As Washington prepares to pump another $1.9 trillion in stimulus into the economy, asset prices are lifting. From food to housing to equities to precious metals, inflationary pressures are being felt in all markets this week.
Investors can thank politicians and their enablers at the Federal Reserve. On Thursday, President Joe Biden signed the massive $1.9 trillion coronavirus relief package into law.
Direct payments of $1,400 will soon be hitting Americans bank accounts. And hundreds of billions of dollars will be deployed to bail out state and local governments. Of course, funding for various other programs unrelated to COVID losses was inserted into the legislation as well. As well as a remarkable federal ban on states enacting net tax cuts.
The bill drew near universal opposition from Republicans, including Kentucky Senator Rand Paul. Last week Senator Paul reintroduced the Audit the Fed bill. It faces opposition from Democrats and in the past has garnered less than enthusiastic support from GOP leadership.
Nevertheless, Senator Paul believes bringing more transparency to the Federal Reserve’s operations is especially important now given its ballooning balance sheet. The Fed’s unprecedented interventions in the aftermath of the COVID lockdowns and its pivot to pursuing a higher inflation target have faced little scrutiny from Congress.
Trillions of dollars in new debt is now set to be issued by the Treasury Department and bought up by the central bank. The ultimate consequences for the value of the currency are unknown but the stakes are high for holders of U.S. dollars.
Rand Paul told One America News that this simply can’t go on forever:
One America’s News Anchor: Well, Senator Rand Paul reintroduces the Federal Reserve Transparency Act, or the Audit the Fed Bill, to prevent the Federal Reserve from concealing vital information on its operations from Congress and the American people. One America's John Hine spoke with the Kentucky lawmaker to learn more.
John Hine (News Reporter): Senator Rand Paul, I wanted to ask you about legislation basically to audit the Fed. Why is this necessary, sir?
Senator Rand Paul (KY): Well, I think there's so much that's done in secret at the Fed, and I'm not sure all of it's good for the American public or taxpayer. In many ways, our deficit, that's $27 trillion, is sort of accommodated by the Fed. The Federal Reserve buys that debt, and it seems to go on and on. So basically, they create money out of thin air, and it can work for a long time, but ultimately there is a day of reckoning, and I think that's coming.
The upshot is that policies that debase the dollar make precious metals more attractive as a sound alternative.
Last week we noted gathering strength in the mining sector as a potential precursor to a rally in gold and silver markets. This week the GDX gold miners index rallied more strongly, with precious metals spot prices participating as well.
The gold market is putting in a weekly gain of 0.9%, with prices coming in at $1,725 an ounce as of this Friday recording. Traders will be eyeing bands of resistance in the $1,750 to $1,850 area. That could make for choppy market conditions in the days ahead until the rally can gather enough momentum to fully break through.
Turning to silver, the white metal currently trades at $25.93 -- up 1.8% since last Friday’s close. Silver has shown impressive relative strength versus gold over the past year and sits on better technical footing at the moment.
Platinum prices are up 5.6% this week to come in at $1,204.
And finally, palladium is up 1.3% for the week at $2,405 per ounce.
Well, with millions of Americans eagerly awaiting stimulus checks from the IRS, millions of others are nervously dreading the upcoming tax filing deadline. The IRS has said it will not offer an extension or reprieve on paying taxes for 2020 despite the extraordinary circumstances many taxpayers face.
Some members of Congress are now pushing the IRS to delay Tax Day amid the rush of relief checks and other strains on the agency – not to mention heightened stresses on taxpayers.
Even though the 2020 tax year is over, there may still be some steps you can take to reduce your tax burden for 2020. For example, you can still make an IRA contribution for 2020 up until the filing deadline including any extensions.
If you have already maxed out your retirement account contributions for 2020, you might also want to make sure to do so for 2021 as well. The IRA contribution limit for individuals is $6,000. For those over age 50, it bumps up to $7,000.
Saving on taxes and protecting against the ravages of inflation are both key to a comfortable retirement. You can help achieve these goals by socking away wealth inside a tax-advantaged retirement account funded with physical precious metals. It’s a wealth protection double play!
Rather than holding your IRA inside the confines of a bank or brokerage firm and limit yourself to conventional financial assets, you can opt instead for a Self-Directed IRA. That frees you to own certain types of tangible assets, including physical bullion products, outside the financial system.
A conventional IRA, whether Roth or traditional, can be converted to a Self-Directed Precious Metals IRA. Switching is easy. Most providers can enroll you right online and work directly with your existing IRA custodian to transfer funds.
Not only can you purchase, hold, and sell real precious metals inside a tax-advantaged Self-Directed Precious Metals IRA, you can also withdraw your bullion and take direct physical possession of it under normal IRA distribution rules.
The IRS does impose certain restrictions on size and purity, but a wide variety of bullion coins, rounds and bars are eligible. In addition to gold and silver, you can even hold physical platinum and palladium within an IRA.
To get started in funding a Self-Directed Precious Metals IRA, choose a reputable account trustee then arrange for a bullion dealer such as Money Metals Exchange to ship your IRA-eligible bullion to your designated depository. (Money Metals Depository is approved by several IRA trustees such as New Direction and Mountain West.)
In an environment where record government deficit spending and unlimited Fed monetization are driving inflation risk, conventional paper assets could begin to underperform. In fact, we’ve seen bonds sell off massively as yields have spiked since the new administration has taken power.
Next on Joe Biden and the Democrats’ agenda may be tax hikes. Higher taxes on corporations and investors could be devastating for the stock market, which currently trades at historically lofty valuations.
Amid rising political, economic, and market risks, physical precious metals shielded from taxes could be among the top safe-haven plays going forward.
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 great weekend everybody.