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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Precious metals investors faced choppy market seas this week. Gold bobbed to a slight decline while silver essentially treaded water through Thursday’s close. Both are advancing here today.
As of this Friday recording, gold comes in at $1,934 an ounce and now registers a weekly gain of 1.4%. Spot silver shows a price increase of nearly a dollar or 4.1% this week to trade at $24.83. Platinum is up by 0.9% to trade at $898. And finally, palladium is putting in a robust weekly advance of 6.5% to command $2,480 per ounce price.
Metals markets are being overshadowed by equities markets. The S&P 500 broke out to a 5-week high yesterday. The rally comes on a rising tide of Federal Reserve liquidity coupled with on again, off again hopes for a stimulus deal in Washington.
More stimulus is definitely coming. The only question is how many trillions and whether they get dished out before or after the election.
At some point investors might begin to rethink whether trillions in additional deficit spending plus unlimited Quantitative Easing is as bullish for stocks as it ultimately will be for hard assets. A rising tide may lift all boats, but an undercurrent of inflation could send some investment vessels off course while giving others a big boost.
Investors must navigate through an unprecedented monetary environment. Never before has the nation’s central bank become so openly committed to depreciating the currency in coordination with politicians on Capitol Hill.
Past Federal Reserve chairmen at least publicly tried to urge members of Congress to be fiscally responsible. They warned of the dangers of running up excessive amounts of debt, even if they lacked the will to stop accommodating it with low interest rates.
But current Fed chair Jerome Powell is taking a categorically different approach – one that in just about any other time history would have been widely dismissed as bizarre or possibly even insane.
This week Powell lobbied politicians to spend more on fiscal stimulus. Despite already being on course to run up a record high budget deficit of over $3 trillion, Powell thinks it’s not big enough. He told lawmakers that there is now virtually no risk of spending too much, but that there is asymmetrically greater risk of spending too little.
Fox Business picked up on Powell’s big push.
Edward Lawrence: This is the biggest push yet that I've seen from the Federal Reserve chairman to get more fiscal stimulus into the economy. He says that too little fiscal stimulus put into this economy would cause possibly a weaker recovery. He says, "You cannot overdo the package." He says, "If it seems to be too large." He says, "The risk is low, because that money would be helped anyway, in order to get this recovery moving." The Federal Reserve will keep rates near zero until they believe they're at maximum employment and the inflation is on track to run moderately above 2% for some time.
If higher inflation and larger government deficits are the keys to a stronger economy, then what’s the point of having the government collect taxes at all?
According to Powell’s own logic, tax evaders as well as currency counterfeiters are doing us all a favor by stimulating the economy and contributing to the depreciation of the U.S. dollar.
Of course, to the elites who rule from Washington, it’s all about control. They want monopoly control over the counterfeiting of currency. They want to determine which parts of the economy get stimulated and which don’t.
A dangerous side effect of all the fiscal and monetary interventions into the economy is that market signals are no longer functioning properly. Fair value is no longer about what something is worth in a free market. It’s about what speculators think the Federal Reserve might buy next or Congress might rescue or subsidize next.
Everyone knows the bond market isn’t a real market when the largest buyer is a central bank set on controlling interest rates.
Some investors still think the stock market is a real market. But clearly, it’s not trading based solely on business fundamentals. It’s getting a massive, artificial valuation boost that just so happens to be tied to growth in money supply.
As artificial as these paper share markets may be, that doesn’t necessarily mean they are overvalued in terms of U.S. dollars. A case could be made that the S&P is actually undervalued – not yet fully pricing in the trillions in phony fiat set to be pumped into the banking system and consumers’ pockets so it can be capitalized on Wall Street.
An even stronger case could be made that precious metals markets are undervalued in terms of both Federal Reserve notes and most other asset classes on the planet. Silver in particular remains ridiculously cheap on a historical basis. Despite recently posting its sharpest rally in years, it has much, much further to run before it even challenges its former highs in terms of nominal dollars.
If the powers that be are actively trying to suppress silver and gold prices while at the same time trying to stimulate higher inflation rates, something will have to give. They cannot succeed at both objectives – not in the long run.
That should give long-term owners of bullion all the confidence they need to keep holding and keep exchanging their fiat money for hard money when opportunities present.
In other news, a major bad actor within the retail precious metals industry just got busted BIG TIME for ripping off people looking to acquire gold and silver bullion.
Regulators in 30 different states just joined together with the Commodities Futures Trading Commission and filed an unprecedented federal lawsuit and enforcement action against Barrick Capital (also known as Chase Metals or Metals.com) accusing the company of operating a large-scale precious metals fraud scheme.
Barrick gathered leads of potential gold or silver investors and targeted them with aggressive sales tactics from boiler-room phone banks, pressured to liquidate stocks in their IRA accounts, and then sold “Canadian Polar Bear” and other bullion coins priced 100% to 300% over the actual melt value. In other words, instead of selling bullion items for the typical 5% to 20% over the silver spot price, they charged premiums amounting to $20 to $50 per ounce!
The scheme went on for several years, with the company and its owners allegedly taking vulnerable investors for about $180 million.
Even as gold spot prices surged to an all-time record high this year (and silver more than doubled off its low), buyers of these ridiculously overpriced coins still lost money on them.
The way to ensure that never happens to you or to someone you love who may be new to precious metals is to be informed!
Part of our mission at Money Metals Exchange – from the very founding of our company over a decade ago – has been to educate Americans to recognize and avoid the bad actors that still operate in our industry.
In fact, these slimy outfits may become even be more prevalent as millions of new Americans wisely seek ownership of physical precious metals in the current environment of exploding debt, money printing, and economic devastation.
Some of the gold dealers you see advertising on TV, especially those with high-priced celebrity spokespeople, are running unethical schemes. They gather leads and then hammer the prospects with high-pressure phone calls in an attempt to peddle their super-marked up gold and silver products, usually in the form of proof, commemorative, or supposedly rare coins.
Fortunately, it’s fairly easy to determine whether you’re buying the right kind of precious metals product from the right kind of dealer.
The right kind of product is one that derives nearly all of its value from its actual metal content. Expect to pay only a modest premium over current spot prices to cover minting costs plus the dealer’s costs of doing business.
There can be periods of time, such as this year, where high demand and the resulting shortages cause premiums on coins, bars, and rounds to rise to some extent, but there are usually other items available where the higher premiums can be avoided.
Always know the melt value of what you are buying… and make sure any markup you pay over that melt value is reasonable.
As for much larger “collectible,” “numismatic,” or “rarity” premiums, these are entirely avoidable. Any coins marketed as such should be avoided entirely unless you have a keen interest in this highly specialized segment of the coin market and know in advance exactly how much premium you’re willing to pay.
Otherwise, any dealer who tries to convince you that high-premium specialty products are a better way to buy than common low-premium alternatives is probably trying to rip you off.
You can also check out a dealer’s reputation online and with the Better Business Bureau before becoming a client. You can also test a dealer’s customer service by making a call and asking a few basic questions about the ordering process.
We are certainly proud of the reputation we have built over the years at Money Metals Exchange. We have been named "Best in the USA" by an independent global ratings group.
We will continue to work hard to keep our reputation as a highly trusted dealer – and to educate the public about avoiding the rip-offs and scams.
Not only are bad actors bringing discredit to our critically important industry, but also their abuses could lead to a regulatory crackdown that harms legitimate dealers and their customers -- through higher compliance costs, higher barriers to entry, clumsy restrictions, and undue invasions of privacy.
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.