New Warnings on Silver, Platinum, and Palladium Mine Supply

As President Joe Biden touts “Bidenomics,” ordinary Americans continue to feel the pinch of “Bidenflation.” Meanwhile, the Federal Reserve’s ongoing efforts to fight inflation have Investors fearing more rate hikes to come.

Fed policymakers opted to pause last month. But minutes from that meeting released on Wednesday show nearly everyone sees at least one more rate hike to come. Some central bankers favor two or more increases in the Fed funds rate.

In response to the Fed’s hawkish tone, investors sold off stocks, bonds, and precious metals in a rough day of trading on Thursday.

Metals are bouncing back here today and as of this Friday recording, the gold market is trading up a slight 0.5% for the week to bring spot prices to $1,938 per ounce. Silver shows a weekly gain of 1.2% to trade at $23.28 an ounce. Platinum is up 0.6% to come in at $926. And finally, palladium is up this week by 0.7% to trade at $1,284 per ounce.

Gold and silver entered the second half of the year in the midst of a technical shorter-term downtrend, having pulled back from recent highs.

Gold actually flirted with its all-time high back in May, the third time it's reached the $2,050 level. Triple tops are generally unheard of, implying gold could simply be resting before finally powering through that level to reach new highs above $2,100 later this year.

A big move starting this summer isn't likely, though, absent an extraordinary type of event. Although not a hard-and-fast rule, seasonal factors typically point to summer doldrums.

The forces that move gold and silver prices are of both a fundamental and technical nature. The fundamental factors drive gold prices and silver prices in the longer term, while technical factors play a more important role over the shorter term.

If there are strong indications that silver and gold are going to move higher or lower, seasonality is not likely to change it. However, based on the market action we're seeing, we currently expect the precious metals to trade mostly sideways until late August.

That said, metals markets are now looking deeply oversold on a technical basis. On a fundamental basis, the metals complex is headed for a massive supply deficit this year. Acute shortfalls are expected in silver, platinum, and palladium as demand exceeds the mining industry’s ability to keep pace.

Right now, traders seem less concerned about supply and demand and more focused on rising interest rates which threaten to drive the economy into recession. But under Bidenomics, large-scale government spending and borrowing threaten to counteract the Fed’s attempts at taming inflation through higher rates.

Joe Biden has claimed repeatedly that his policies have actually reduced the budget deficit. But according to Washington Post fact checkers, those claims are highly misleading. In fact, Bidenomics has added $850 billion more in debt than was otherwise projected for 2021 and 2022.

President Biden wants to raise taxes in order to cover some of the excess spending, but no amount of tax hikes will fix what’s fiscally broken in Washington. The political reality is that issuing more debt and expanding the currency supply continues to be the path of least resistance.

At the state level, though, there are some viable efforts afoot to promote greater fiscal and monetary soundness while also reducing rather than raising taxes. The sound money movement is spearheading efforts to eliminate income and sales taxes on precious metals in states that currently impose them.

A four-year campaign by Money Metals Exchange and the Sound Money Defense League led Mississippi to exempt all purchases of gold, silver, platinum, and palladium coins, bars, and rounds from sales tax as of this month.

Mississippi follows Virginia, Tennessee, Ohio, and Arkansas, which have each repealed sales taxes in the last couple of years. Meanwhile, New Jersey and Wisconsin could be the next two states to remove sales taxes from the monetary metals.

In fact, members of the New Jersey assembly unanimously voted last week to pass a bill to that effect. And Wisconsin is expected to hold hearings on an exemption bill in September.

Hawaii, Kentucky, New Mexico, Vermont, Maine, New Jersey, and Wisconsin are the only remaining full sales tax states – and none of them border each other. That means these states are surrounded by tax-exempt states, further increasing the pressure to act.

That's certainly one of the reasons Mississippi passed its sales tax exemption this year. It's embarrassing to the politicians when they see that citizens are taking their business to other states.

Although this year's Wisconsin and New Jersey bills are still moving forward, big government politicians in Maine, Kentucky, and Vermont have defeated such bills for 2023 at least.

Meanwhile, California operates as a “threshold state” for imposing sales taxes. Tax-hungry bureaucrats there bumped up the gold or silver purchase size threshold for a sales tax exemption from $1,500 to $2,000, exploiting an inflation adjustment mechanism in state regulations.

Smaller purchasers get taxed, while those who make larger buys do not. Yes, this supposedly progressive state imposes a regressive tax on bullion that sticks it to the little guy.

Aside from California, New York, Connecticut, Maryland, Massachusetts, and Florida also penalize small-time savers who make precious metals purchases below each state's arbitrarily chosen threshold.

Yet, notwithstanding these challenges, we are making real progress for sound money at the state level – particularly when it comes to eliminating sales taxes on gold and silver.

We want to give a special thanks to the thousands of Money Metals customers who have contacted their legislators in literally dozens of states. Grassroots pressure works, and the momentum is building.

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 weekend everybody.

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