As the gold market marches toward new records, it is proving the naysayers wrong and vindicating longtime bulls.
Gold posted a record high close on a quarterly basis at the end of March. Now the monetary metal has its sights set on setting a new all-time high here in the coming days.
That'll have to wait until next week though as global markets are closed here on this Good Friday. Gold will finish this week at $2,020 an ounce after advancing 2.1%. Silver, meanwhile, gained 3.7% to bring spot prices to $25.30 an ounce. Platinum is up 1.3% to trade at $1,027. And finally, palladium will end the week unchanged compared to last Friday's close to come in at $1,523 an ounce.
Precious metals markets are gaining momentum as $2,000 gold commands attention in the mainstream financial media and stimulates buying interest among the public.
Brisk bullion demand is starting to overwhelm dealer inventories and cause order fulfillment delays. At Money Metals those delays are modest and most popular products remain available without exorbitant premiums being attached – yet, though we do caution that American Eagles and junk silver in particular now come at a high premium and recommend bullion buyers look to other alternatives.
At some point, it's possible that a run on bullion products could cause shortages and premium spikes across the board.
As we welcome newcomers to precious metals investing, we also offer congratulations to longtime holders who have been steadily accumulating. It takes courage and conviction to ignore the anti-gold and anti-silver narratives that get spouted by Wall Street cheerleaders and U.S. dollar apologists.
First, they said investors shouldn't buy gold because there was no inflation.
Then when inflation started taking off, they said investors shouldn't buy gold because inflation would be transitory. Then when inflation proved to be persistent, they said gold isn't a good inflation hedge. Then when the Federal Reserve started to hike interest rates aggressively, they said higher rates would crush the gold market.
With gold now rallying to over $2,000 an ounce, the naysayers are telling investors not to buy gold now because, of course, it's too expensive!
It's true that gold no longer looks cheap in nominal terms. But when measured against alternatives in financial markets such as the Dow Jones Industrial Average, gold is nowhere near expensive on a relative basis.
The Dow to gold ratio currently sits at 16.5 to 1. Major tops in precious metals markets tend to coincide with a Dow to gold ratio in the low single digits. When gold prices peaked in January 1980, the ratio briefly hit 1 to 1. Now parity may never be seen again on the Dow to gold ratio, but even if we see, say, 5 to 1 or 6 to 1, investors who rotate out of stocks and into gold at current levels would stand to make fortunes.
Some will nevertheless find it difficult to justify paying over $2,000 for an ounce of gold. Those who feel priced out of the gold market at current levels may want to consider silver, platinum, or even palladium. These white metals are each close to 50% below their all-time highs. Silver and platinum especially are still cheap and may have much more room to run on the upside compared to gold.
Physical precious metals provide refuge from an unsound U.S. currency and insolvent banking system.
As America faces the twin threats of inflation and bank failures, three U.S. congressmen introduced a pivotal sound money bill that would enable the Federal Reserve note “dollar” to regain stable footing for the first time in more than half a century.
Representatives Alex Mooney, Andy Biggs, and Paul Gosar introduced the “Gold Standard Restoration Act” to facilitate the repegging of the volatile Federal Reserve note to a fixed weight of gold bullion.
It would give the U.S. Treasury and the Federal Reserve 24 months to publicly disclose all gold holdings and gold transactions, after which time the Federal Reserve note “dollar” would be formally repegged to a fixed weight of gold at its then-market price.
Federal Reserve notes would become fully redeemable for and exchangeable with gold at the new price, with the U.S. Treasury and its gold reserves backstopping Federal Reserve Banks as guarantor.
Monetary experts have noted a return to a gold standard would substantially curtail the economic damage caused by inflation, runaway federal debt, and monetary system instability.
The Gold Standard Restoration Act also makes several findings as to the harm the Federal Reserve System has inflicted on everyday Americans – particularly since President Richard Nixon “temporarily suspended” gold backing of America's monetary system in 1971.
Historians have observed that the elimination of gold redeemability from the monetary system freed central bankers and federal government officials from accountability when they expand the money supply, fund government deficits though trillion-dollar bond purchases, or otherwise manipulate the economy.
Needless to say, most politicians today aren't keen on the idea of being restrained by a gold standard. It will take a major grassroots effort – possibly in the aftermath of a currency crisis – to bring forth the political pressure necessary to restore sound money.
In the meantime, investors shouldn't wait around for any legislative solutions to the inflation problem. If they want to protect themselves from inflation, they should adopt their own personal sound money standard by switching out their depreciating dollars for hard assets including gold and silver.
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 wonderful Easter weekend everybody.