Precious metals markets are struggling to breakout this week. Through Thursday it appeared that a breakout was in place but we’ve seen a bit of pullback here on Friday to throw a bit of water on the breakout idea.
Metals markets were aided by a declining US Dollar index. After rallying to a five-month high versus other fiat currencies last week, the Greenback slipped while top US officials spouted off on inflation and the economy.
Federal Reserve chairman Jerome Powell and Treasury Secretary Janet Yellen delivered remarks Thursday to their globalist colleagues at the International Monetary Fund and World Bank.
Yellen touted the Biden administration’s multi-trillion dollar COVID relief and infrastructure plans. She urged other countries to also go big on fiscal spending.
Secretary Yellen is also pushing for globally coordinated tax hikes. If the US raises its corporate tax rate as the Biden administration proposes, then low-tax countries would enjoy a competitive advantage in attracting business and investment inflows.
To prevent this sort of tax competition, Yellen proposes a global minimum corporate tax rate to be set and enforced by global agreements. Any countries that dare to cut their own tax rates would be punished by a cartel of high-tax countries.
Yellen and her globalist allies apparently can’t conceive of the possibility that high taxation itself is detrimental. If all countries adopted higher taxes, they wouldn’t necessarily benefit by discouraging productive work and investment in tandem.
The Biden administration’s aggressive pursuit of tax and spend policies represents something of a repudiation of the Bill Clinton era. By today’s standards, Clinton was essentially a fiscal conservative. He signed balanced budgets, supported welfare reform, and famously declared “the era of big government is over.”
Since then, both Democrats and Republicans have abandoned fiscal discipline. They have increasingly leaned on the Federal Reserve to facilitate their big government spending programs.
It’s no coincidence that President Biden picked a former Fed chair – and longtime colleague of the current Fed chair – to be his Treasury Secretary. The Treasury and the Fed are effectively operating in tandem, even though the central bank is supposed to be an independent organization.
This week Biden insisted that he hasn’t even talked with Fed chairman Jerome Powell. But even though he has been less engaged on monetary policy than President Donald Trump was, that doesn’t mean his administration is taking a hands-off approach – not with Janet Yellen in charge of the government’s checkbook.
News Reporter: Have you spoken to the Federal Reserve Chairman, Jay Powell, yet?
President Joe Biden: I have not.
News Reporter: Can you say why? Do you plan to speak to him soon, Sir?
President Joe Biden: I am not ... Look, I think The Federal Reserve is an independent operation, and starting off my presidency, I want to be real clear that I'm not going to do the kinds of things that have been done in the last administration: either talking to the Attorney General about who he's going to prosecute or not prosecute, and under what circumstances; or the Fed telling them what they should and shouldn't do. Even though that wouldn't be the basis upon which I'd be talking to them. So I've been very fastidious about not talking to them, but I do talk to the Secretary of Treasury.
Thank you all very much.
President Biden can afford to be aloof when it comes to monetary policy. He knows the Fed will accommodate whatever deficit spending he and Congress manage to push through.
The current political and economic forces in play harken back to the late 1970s under Presidents Gerald Ford and Jimmy Carter. It was a period when economic stagnation coupled with inflation to produce stagflation.
Failed big government solutions gave rise to Ronald Reagan, who declared government to be the problem.
Some political pundits see Joe Biden’s presidency likely playing out like Carter’s.
Regardless of whether you think Biden’s weak dollar policies are good for the economy or the country overall, they could be great for precious metals markets.
Gold and silver prices exploded during the Carter years. Although we haven’t seen a huge pop in metals thus far in Biden’s presidency, we have seen a massive surge in bullion buying.
If investment demand for gold and silver is precursor to price movements, then a price explosion could be coming. Bullion dealers haven’t seen anything like this recent wave of buying in years, if ever.
After pulling back from its all-time high at $2,100 last August, gold is basing out and could be gearing up for a fresh, significant leg higher that could see it reach $3,000 or higher within a couple years.
At the same time, investment demand for silver has been outpacing industrial demand in recent months – something which ordinally never happens. These aren’t ordinary times.
Those who insist silver is just an industrial metal with no monetary properties are dead wrong. The fact that silver coins have circulated as money throughout the ages has something to do with why so many people are now turning to silver as a fungible store of value, as an inflation-resistant alternative to paper cash.
The case for sheltering wealth in gold and silver is made every time Joe Biden or Janet Yellen or Jerome Powell open their mouths. Everything they are talking about doing involves more spending, more borrowing, and higher inflation.