Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Precious metals markets are giving mixed signals this week as interest rates continue to spike.
The yield on the benchmark 10-year Treasury note now stands at 4.2%. That’s a 14-year high.
And since mortgages and many other types of loans are keyed to the Treasury market, borrowers are facing major financing pains. Many prospective home buyers have now given up trying to make a purchase.
Sales of existing homes sank 1.5% in September, marking the eighth consecutive monthly decline. Another housing crisis could be in the making.
And there will be wider economic pain to come from the end of the era of low interest rates. Investors are currently feeling the pain in their portfolios. It’s been one of the worst years on record for a conventional stock and bond portfolio.
Gold and silver markets are also struggling to gain traction against relentlessly rising interest rates. Some metals investors are frustrated by the poor performance this year, but it’s easy to forget precious metals are still holding up better than long-term bonds and formerly high-flying stocks.
This week gold prices are up now, but by a very slight 0.3% to come in at $1,656 per ounce. Silver, meanwhile, shows a weekly of gain of 4.0% to trade at $19.22 an ounce as of this Friday morning recording.
Bulls are hoping gold and silver prices continue to hold above their lows from last month and build on a broad base of support.
We are certainly seeing strong demand for physical bullion. At the same time, supplies of coins and other minted products are becoming strained. These forces are driving bullion premiums higher. It is likely only a matter of time before spot prices confirm these bullish dynamics.
But futures speculators are more focused on interest rates and the U.S. dollar’s exchange rate. We will likely need to see the Dollar Index finally turn down before traders pile back into metals on the long side.
Of course, the Federal Reserve note dollar’s value is in fact going down steadily in real terms. That’s why consumers are facing the worst inflation surge in decades.
And the root of the problem is that the dollar no longer has precious metal backing or any other constraint on the ability of politicians and central bankers to pursue inflationary policies.
America’s currency would regain stable footing for the first time in half a century if a bill recently introduced by U.S. Representative Alex Mooney becomes law.
Mooney notes that the dollar has lost more than 30% of its purchasing power since 2000 and 97% since the passage of the Federal Reserve Act in 1913.
His Gold Standard Restoration Act calls for repegging the Federal Reserve note to gold. Mooney sees gold as the way to finally address the ongoing problems of inflation, runaway federal debt, and monetary system instability.
He spoke with Fox Business host Kennedy to make his case.
Rep Alex Mooney (WV-Rep): It’s been 40 years now since we got off the Gold Standard and everything that was predicted when Richard Nixon “temporarily” took us off the Gold Standard, all the predictions have proven the opposite. Inflation’s out of control, spending’s out of control, our dollar’s worth less to the average American, and it was terrible policy to get off it to begin with. So, I thought we need to put this bill in and start having a real discussion about how to have our dollar bills be stabilized.
Kennedy (Fox Business): What is the relationship between having a Gold Standard and inflation? Because people are now looking around for some sort of alternative because in Washington with this central banking, they’ve really, really screwed things up, but just explain to people how that happens.
Rep Alex Mooney (WV-Rep): Well, the federal government, with their out-of-control spending and continually having more money being borrowed, the value of your dollar just goes down, as you said, by fiat, the value of dollar is simply “full faith” in credit in the United States, it’s not tied to anything.
Under Mooney’s bill, the U.S. Treasury and the Federal Reserve would have 30 months to publicly disclose all gold holdings and gold transactions over the past 6 decades. After that, the dollar would be pegged to a fixed weight of gold at its market price.
Federal Reserve notes would become fully redeemable for and exchangeable with gold at the new fixed price.
As I mentioned, the Gold Standard Restoration Act would also require full disclosure of all central bank and U.S. government gold holdings and gold-related financial transactions since the 1960s. To date, neither the Fed nor the Treasury have been forthcoming about their activities in the gold market.
Th markets need to know the status of America’s gold reserves in all respects so that the market price of gold, as measured by Federal Reserve notes, can adjust to an appropriate level before the link is reestablished. The language of Rep. Mooney’s bill shows some real savvy as the mechanics of going back to gold convertibility.
While the issue of gold isn’t something central bankers and politicians typically feel the need to talk about, inflation will be among the top concerns of voters as they head to the polls next month. And currency backed by gold rather than faith and credit has obvious appeal.
It now appears very likely that Republicans will win a majority in the House of Representatives. They also have a good chance of retaking the Senate. GOP candidates have gained ground in the key battlegrounds of Arizona, Nevada, and Pennsylvania.
The sound money movement is also gaining ground in many states. Several have recently enacted laws to eliminate discriminatory taxes on precious metals and remove other barriers to sound money adoption. A new Congress might be a golden opportunity for sound money advocates to gain ground at the national level as well.
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.