Gold Holds Steady as Stock Market Weakens

As the stock market starts off September with a sharp selloff, gold and silver markets are showing relative strength.

The S&P 500 has shed nearly 3% over the past few days on fears of a slowing economy. Gold, meanwhile, is holding steady near record highs.

As of this Friday morning recording, the monetary metal trades at $2,497 an ounce and is now down a slight 0.3% for the week. Silver, which was positive through Thursday’s close is taking it on the chin here today and now shows a weekly loss of 3.3% to bring spot prices to $27.94 per ounce. Platinum is off 0.7% at $927. And finally, palladium is off 3.4% this week to come in at $947 per ounce.

Investors are reassessing their allocations as employment data continues to come in weaker than expected. Last month, the private sector added the fewest number of new workers in three and a half years. That comes after the July jobs number was revised significantly lower.

Warnings by economists that a massive injection of government deficit spending into the economy would crowd out the private sector appear to be coming true.

The Biden administration has so far managed to keep official unemployment and GDP statistics from fully reflecting weakness in the real economy. Transfer payments combined with a massive federal hiring spree have masked a decline in economic productivity.

When the government spends money it has to borrow into existence into the economy and employs more bureaucrats, that functions as statistical stimulus. It doesn’t matter whether those resources or those employees are being directed to productive endeavors. All that matters is that money is being spent and jobs are being created.

The Internal Revenue Service is in the process of hiring tens of thousands of new agents. Thanks to the so-called Inflation Reduction Act, the IRS has been given a massive $80 billion funding boost. That's more than the entire GDP of Slovenia.

A national fortune is being spent on tax auditing and enforcement at the federal level. And that doesn’t even include the billions upon billions of dollars individuals and corporations must spend on tax compliance and accounting services.

None of this activity creates new wealth. It all goes to facilitate the transfer of wealth to the government.

Everyone from waitresses trying to get by on tips to small business owners and high net-worth investors will be at heightened risk of being audited by a newly beefed-up IRS.

It’s more important than ever for taxpayers to make sure their financial records are in order. It’s also important for taxpayers to make sure they don’t fork over more money to the IRS than they are legally required to. Many taxpayers overlook opportunities to save on what they will end up owing to the government.

One way to reduce tax liability is to fully fund retirement accounts, including 401(k)s and IRAs. The upshot for precious metals investors is that they can hold many common types of physical bullion in tax-advantaged accounts.

Not only can you purchase, hold, and sell real precious metals inside a tax-advantaged Self-Directed Precious Metals IRA, but also you can withdraw your bullion and take direct physical possession of it under normal IRA distribution rules.

The IRS does impose certain restrictions on size and purity, but a wide variety of bullion coins, rounds, and bars are eligible. In addition to gold and silver, you can even hold physical platinum and palladium within an IRA.

To get started in funding a Self-Directed Precious Metals IRA, choose a reputable account trustee then arrange for a bullion dealer such as Money Metals Exchange to ship your IRA-eligible bullion to your designated depository. (Money Metals Depository is approved by many IRA trustees such as New Direction and Mountain West.)

What if you have an existing IRA but don't want to make new cash contributions to fund a precious metals purchase?

A conventional IRA, whether Roth or traditional, can be converted to a Self-Directed Precious Metals IRA. Switching is easy. Most providers can enroll you right online and work directly with your existing IRA custodian to transfer funds.

Your broker may have never told you about these fantastic options for obvious reasons. But they are totally legitimate.

That said, as every individual's tax situation is unique, we urge clients to consult with their own tax advisor to determine their best course of action.

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