Precious metals markets are attempting to stage a rally this week from oversold conditions, although investors remain skeptical amid rate hikes.
Several Federal Reserve officials came forward and suggested they endorse further rate hikes as inflation numbers continue to heat up. Some analysts are calling for a return to 50 basis point hikes. But markets continue to anticipate a pause through the summer.
Expect gold and silver prices to move ahead of an announced pause or formal dovish turn by central banks.
Interest in precious metals among general investors and speculators in the futures markets has been meager so far this year. Although physical buying of bullion has remained brisk, it has not been enough to move spot prices much.
But one of the biggest sources of bullion demand is aggressive buying. Central banks around the world continue to be net accumulators of the monetary metal. They increasingly see the need for hard money in reserves amid geopolitical tensions and risks to the US dollar’s status as a world reserve currency.
A more prominent role for gold in the world monetary order could have significant implications for available physical supply and ultimately prices.
After record-breaking gold purchases in 2022, central banks will continue to stockpile in 2023. The World Gold Council reported Thursday that central banks bought 31 tons of gold in January. This corresponds to a monthly increase of 16%.
Leading official gold purchases were China, which reportedly increased its reserves by 15 tons, and Turkey. Last year, Turkey emerged as the largest single buyer of state-owned gold.
Russia also made some big moves to acquire gold and encourage its trading partners to send and receive payments in precious metals. Countries caught in the crosshairs of international financial sanctions have an obvious incentive to turn to the world’s most recognized store of value. This also applies to countries struggling with inflation.
Last year, central banks bought over 1,100 tons of gold – a 150% increase over the previous year. The World Gold Council expects 2023 to be another peak year for monetary gold demand.
This does not mean that central banks will adopt an actual gold standard. Nor does it mean that central bankers will adopt sound money principles.
But they want to get inflation under control and project stability to the public. And they increasingly see holding US dollars and other fiat currency promissory notes in reserves as risky. Gold helps mitigate the risks of holding financial assets.
Individual investors can also hold precious metals in their personal reserves to protect against inflation and other risks associated with traditional financial assets.
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While it is impractical for central banks to acquire silver in large enough quantities to fulfill the same role as gold, individuals with more limited budgets may find silver more practical than gold for their needs. Silver currently has the advantage of being cheap compared to gold and almost every other asset on the planet.
And like gold, silver is historically and constitutionally considered money. In the worst-case scenario, when the banking system collapses, the internet collapses, and the fiat currency system collapses, silver coins would be far more convenient than gold coins for buying groceries and other basic necessities.
But of course, most owners of physical gold and silver are not doomsday preppers. The primary concern for most bullion buyers is to obtain tangible long-term value that also has upside potential should things get worse.
In other news, there has been a lot of action on the sound monetary policy frontlines over the past week – both positive and negative.
On the downside, the Wyoming House Treasury Committee absolutely threw out the forward-looking bill recently passed by the Wyoming Senate.
The state’s authority to purchase gold was removed, as were provisions to make certain tax payments in gold and silver.
Rep. Mark Jennings tried to salvage Wyoming’s solid cash bill on the floor of the House of Representatives with an amendment that mandated his state finally own at least some gold or silver. This compromise amendment would have given Wyoming a small step forward in terms of sound money.
Unfortunately, Jennings’ amendment failed by a vote of 34 to 27.
The members of the Wyoming House who voted down the Jennings amendment did so because they absolutely hate solid money — and don’t mind (or realize) that Wyoming is a sitting duck today, with limited ability to speak out against the To protect inflation and financial instability caused by the central government bankers and tax-and-spend politicians in Washington DC.
In recent years, the state of Wyoming has lost hundreds of millions of dollars investing in emerging market debt — which is a fancy term that actually means loans to third-world countries. Still, the Cowboy State doesn’t have an ounce of constitutionally sound money — even if gold is up 50% since Wyoming lawmakers first began debating the issue in 2019.
However, solid bills are being pushed ahead in other states. This week, the House of Idaho circulated a bill requiring the State Treasurer to hold some physical gold and silver and sent the bill to the Idaho Senate. A similar bill in Tennessee was passed by a House committee and is now going to the floor of the Tennessee House.
There are now 30 solid bills pending in 19 states – the most we’ve ever seen! Most of those bills will likely fall short, but the momentum is there to make some key gains this year. Stay tuned.
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Mike Gleason is a Director at , a national precious metals dealer with over 50,000 customers. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government, and the Austrian school of economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics, and precious metals investing. He also leverages his long broadcasting background by hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands every week.
Written by:
Stephen Glason
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