Congress Addresses Public Access To Gold And Silver

At yesterday's U.S. House Agriculture Committee oversight hearing, Commodities Futures Trading Commission (CFTC) Chairman Michael Selig pledged to assist efforts of members of Congress who recently introduced the SILVER Act.

This bill, introduced by Rep. Russ Fulcher of Idaho and Rep. Mark Harris of North Carolina, seeks to address longstanding geographic limitations which have blocked out most of the nation from the public markets for gold and silver.

Under current exchange practices, precious metals storage facilities are confined to the Greater New York City area, creating what lawmakers and industry participants like Money Metals describe as a concentration risk with negative implications for market stability, national security, liquidity, and investor access.

Here's an exchange on the topic at yesterday's hearing on Capitol Hill...

Rep. Mark Harris said: “Mr. Chairman, I was concerned to learn that the only approved metals depositories used for deliveries on gold and silver futures contracts are heavily concentrated in the single geographic region around New York City.

“And this level of geographic concentration is troubling to me from a point of national security, market efficiency, and operational resiliency standpoint, which is why I chose to be an original co-sponsor of the SILVER Act that seeks to correct this issue. After all, we've seen firsthand, whether through terrorist attacks like 9/11, extreme weather events like Hurricane Sandy, the New York region is not immune to disruption.

“And so concentrating critical financial infrastructure in a single region like New York does tend to create potential risk and vulnerabilities that we just wouldn't accept in other sectors, especially one that is so crucial to our financial system.

“So with that and our national security, this is why I believe geographic diversity is an important component of operational resilience and risk management. Mr. Chairman, let me ask you, while it made sense 100 years ago for these depositories to be located in the greater New York area, why in our modern age are they still centralized in a single location where they're susceptible to these kinds of events, terrorist attacks, and foreign threats that I just mentioned?”

Chairman Michael Selig: “Well, Congressman, as a regulator of our commodity derivatives markets, it's absolutely critical that we have deliverable supply available as it's possible to take our futures contracts to delivery. And to the extent there's concentration risk, that's certainly something that we'd evaluate as a regulator in ensuring that our contracts have integrity and that our markets are well functioning. So we applaud your leadership on this issue, and we’d be happy to work with your office on it.”

Congressman Harris: “So are you willing to study whether the current concentration of precious metals depositories in a single geographic area does pose a systemic risk to market stability and national security?”

Chairman Selig: “Congressman, we'd certainly work together with your office to better understand the risks caused by this concentration.”

Congressman Harris: “Super. Well, these markets really were designed to help participants manage and mitigate risk, so it stands to reason that we should also ensure the market structure itself is resilient and capable of mitigating its own risk.”

That was Congressman Mark Harris of North Carolina questioning CFTC Chairman Selig.

In other news, consumer spending is “under strain” according to a recent New York Times report. That’s bad news for an economy that depends on people buying stuff.

We see this consumer strain reflected in the slowing growth of consumer debt.

Consumer spending is the engine that drives the U.S. economy, making up about two-thirds of American economic output. As the Times put it, “The enduring strength of consumer spending… has been the main reason that the United States has evaded a recession through successive drubbings over five years: roaring inflation, a rapid run-up in interest rates and a barrage of tariffs.”

The dirty little secret is that “enduring strength” was courtesy of Visa, Mastercard, Discover, and Amex. And the problem with running an economy on credit cards is a pesky thing called a limit. And it appears Americans are getting close to that line.

Showered with stimulus while having no place to go and little to do during the pandemic lockdowns, Americans saved money and paid down their credit card balances. But as post-pandemic price inflation rocked the economy, they blew through their savings and turned to credit cards to make ends meet.

By the end of 2020, revolving debt, primarily reflecting credit card balances, had dropped below $1 trillion to $979 billion. Today, outstanding revolving debt stands at $1.33 trillion.

However, debt growth has slowed to a crawl over the last year or so.

After several months of slowing credit growth, December was an anomaly, as Americans put Christmas on their credit cards. Revolving debt spiked by 7.4 percent that month. But it slowed again in January, charting a tepid 2.3 percent gain. Revolving credit slowed even further in February, growing by just 0.6 percent, according to the most recent data released by the Federal Reserve.

Looking at the broader trend, the growth of revolving credit has slowed markedly over the last year.

Meanwhile, the personal savings rate is at the lowest level since 2008.

Americans have run up a significant amount of debt in just a few years. They currently owe $5.12 trillion.

It’s clear that Americans are struggling under the pile of debt. Meanwhile, consumer debt is just one factor contributing to the massive Debt Black Hole dominating the global economy.

And even if consumers still have some borrowing power, an economy run on Visa and Mastercard simply isn't sustainable. When Americans finally hit their credit limit, it will have major implications for economic growth.

Let’s take a look at the weekly market action here. And with today’s latest news coming out of the Middle East, indicating the Straits of Hormuz is now open again upon the announcement of a 10-day ceasefire between Israel and Lebanon, precious metals and stocks are both ripping higher with oil selling off hard on this news.

Gold is up about $120 or 2.5% now on the week thanks to a nice advance today and checks in at $4,881 an ounce.

Silver is up more than $6.50 an ounce, with nearly 2/3 of that move coming here today. The white metal currently trades at $83.14 an ounce as of this Friday morning recording. If this news of the potential end of the conflict in Iran sticks, this could be exactly what silver needs to continue its march higher after a 2+ month long consolidation period.

As for the PGMs, platinum checks in at $2,133 an ounce, up 3.6% since last Friday’s close. And similarly, palladium is up 3.8% to check in at $1,597.

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