Interest Rate Markets Flash Warning Signs

As the U.S. dollar continues to lose purchasing power at home and prestige around the world, a major presidential candidate is calling for a return to sound money.

More on that in moment. But first, let's review this week's market action in precious metals.

Gold and silver sold off on Thursday, but the yellow metal was still clinging to a small weekly advance through yesterday's close. As of this Friday recording, the gold market is up a slight 0.3% for the week to come in at $1,971 an ounce. Silver, meanwhile, is registering a weekly loss of 1.3% to trade at $24.83 per ounce.

Turning to the PGMs, platinum is off 1.2% to trade at $977. And finally, palladium is putting in a weekly gain of 0.6% to command $1,330 per ounce.

Despite some constructive price action this month, it's still too early to conclude the summer doldrums are over. But there is a good chance that the seasonal lows for gold and silver have already been seen. If that's the case, then any pullbacks that do come in the weeks ahead could be shallow and short-lived.

As investors anticipate the Federal Reserve to soon declare an end to its rate hiking campaign, they will be looking to position themselves for an eventual pivot back toward monetary easing.

Although recent economic data has prompted many establishment economists and Wall Street cheerleaders to downplay the odds of a recession this year, it's only a matter of time until the next one comes. The warning signs from the interest rate market couldn't be clearer – an inverted yield curve, unaffordable mortgages driving real estate sales volumes way down, and a tightening of credit available to consumers and small businesses.

We've seen this setup before. It almost always leads to a financial crisis of some sort. And that inevitably causes central bankers to try to come to the rescue with emergency liquidity – also known as money printing.

These Fed-induced booms, busts, and bailouts are the consequence of a fiat monetary system that is no longer restrained by gold or any other sound backing.

Ever since President Richard Nixon severed the last official link between the U.S. dollar and gold in 1971, both Republican and Democrat administrations that followed have financed their favored domestic and foreign policy priorities by running up debt to unpayable levels.

The Biden administration is undeterred from continuing to borrow by the trillions because officials know they can count on central bankers at the Fed to buy government bonds in unlimited quantities.

Some say the last President who tried to push back against central bank power and toward sound monetary policy was John F. Kennedy. His nephew, Robert F. Kennedy Jr., is currently running for President.

He recently delivered remarks warning that Washington's abuse of fiat currency will lead to the destruction of the U.S. dollar's global reserve status.

Robert Kennedy Jr: My uncle, President Kennedy, when he was in office, understood the importance of hard currency and the dangers of having pure fiat currency with no other option. He created silver certificates. He created gold certificates. After his death, those were discontinued, but he understood the relationship between fiat currency and war, fiat currency and large-scale, very, very destructive environmental projects, and also these giant aggregations of wealth, and the unbalance, the disparities in wealth that are the ultimate yield of every fiat currency, and then also the threat to America from the inflation, and ultimately, the destruction of the dollar as the global currency.

Kennedy testified before Congress this week about the weaponization of government in directing social media companies to censor content. RFK was specifically targeted for censorship after he raised doubts about the effectiveness and safety of experimental COVID vaccines.

House Democrats responded to his testimony by accusing him of "hate speech." They pushed a motion to ban him from appearing ever again before the Committee. Kennedy, in turn, blasted them for "trying to censor a censorship hearing."

The attacks on free speech, the collusion with big corporations, the reckless borrowing and spending, and the deliberate debasement of the dollar represent a dramatic shift in the party line from John F. Kennedy's time. Of course, he wouldn't have been able to fathom much of what has now been enshrined as Woke ideology.

Robert F. Kennedy Jr. faces an uphill battle in trying to defeat Joe Biden and the Democrat party machine that backs him. Many of his ideas are proving to be more popular among independents, Libertarians, and Republicans than among fellow Democrats of the current year.

One of his boldest policy proposals is to move the United States back toward hard currency.

Robert Kennedy Jr: The Kennedy administration will begin to back the U.S. dollar with real finite assets such as gold, silver, platinum, and Bitcoin. My plan would be to start very, very small; perhaps 1% of issued T-bills would be backed by hard currency, by gold, silver, platinum, or Bitcoin, and then, depending on the outcome, we would increase that annually.

Kennedy also said he would exempt Bitcoin from taxes when converted to or from U.S. dollars. He didn't specifically say whether precious metals would enjoy that same tax-free status. But if he wants dollars to represent gold and silver, then gold and silver should be declared legal tender that is freely convertible into dollars without triggering capital gains liabilities.

RFK's candidacy could potentially bring sound money issues into the national spotlight in a way that hasn't been done since Ron Paul's presidential runs in 2008 and 2012. Dr. Paul had gained a big platform via the Republican primary debates to present his critiques of the Federal Reserve system.

Unfortunately for RFK supporters, there doesn't appear to be any chance that Democrat party bosses will put Biden through any primary debates. And they certainly won't allow Kennedy to speak at the DNC convention.

On the Republican side, the playing field for candidates is more open. Former President Donald Trump is the front-runner at the moment. But he is potentially vulnerable to attacks from challengers on his record of adding to the national debt and installing Jerome Powell to pursue loose monetary policy at the Fed.

Whether a viable sound money candidate emerges on the Republican side remains to be seen. But there are Republican sound money advocates in Congress such as West Virginia Representative Alex Mooney.

He will be gaining a bigger platform for his ideas as he embarks on a campaign for the U.S. Senate. Interestingly, Mooney does have the endorsement of Donald Trump. Trump himself has spoken favorably of gold-backed money in the past. Perhaps he will again in the future.

Moving to a related topic, Money Metals' efforts to promote sound money policies have been building momentum and chalking up wins this year.

Our Sound Money Defense League project has emerged as a formidable national advocate – spearheading state and federal legislative projects, testifying in committee hearings across the country, and garnering grassroots support.

In 2023 alone, we've actively engaged with policymakers and worked on 50 pieces of legislation across 25 states, including Oregon, Maine, and New Jersey, just to name a few.

Now, following our big win in Mississippi this year, New Jersey is aiming to become the 44th state in the United States to end sales tax on purchases of gold and silver. A bill sponsored by Reps. Louis Greenwald and Lisa Swain sailed through the New Jersey Assembly by a vote of 74-0 last month.

Before being voted on by the full Assembly, the Appropriations committee unanimously greenlighted the bill – right after our own Jp Cortez testified at the hearing.

Jp Cortez: Chairwoman Swain and the rest of the members of the committee, thank you for the opportunity to testify before you today. My name is Jp Cortez, and I'm the policy director for the Sound Money Defense League. We stand in strong support of A5294.

Under current law, New Jersey citizens are penalized and discouraged via tax policy from protecting the value of their savings from inflation by holding gold and silver, and that's a large part of why we support A5294. Removing the sales tax on the purchase of gold and silver coins, bars, and rounds would benefit small-time investors and savers, who, unlike the wealthy, have far fewer options of ways to protect their wealth.

Th[is] assembly bill would help level the playing field and provide another option for New Jersey savers. Because inflation diminishes the purchasing power of the currency, it robs the people and the savers of their purchasing power, retirees, people on fixed income. Holding savings in gold and silver is one way to protect the value of one's savings. With housing and other real assets increasingly becoming out of reach for New Jersey citizens, passing this bill would provide another option, another accessible form of tangible assets for people to save in.

Taxing gold and silver has also become an outmoded process or an outmoded practice. 43 states in the US have exempted gold and silver from sales tax. Just in the last two years, Alabama, Arkansas, Mississippi, Ohio, Tennessee, and Virginia have all passed legislation to either enact or extend sales tax exemptions that already existed. This is a bill and effort that would benefit small-time savers. Like I mentioned, the people buying gold and silver typically aren't your wealthy fat cats. These are people that are buying small amounts that of time to try to protect their wealth. And many times, this includes the people on fixed incomes, people on pensions, savers, wage earners, hourly workers. It's also the case that precious metals are held for resale, so a sales tax on this asset is inappropriate."

Meanwhile, we've been aiding an effort to remove the Commercial Activity Tax from precious metals sales in the State of Oregon. Here's Jp Cortez again, this time making his case during a hearing before the state's Senate Finance and Revenue committee:

Jp Cortez: Gold and silver businesses operate on extremely small margins, margins that are similar in scale to brokerage commissions that are already exempt from the CAT. And so this CAT imposed on precious metal sales revenue is extremely burdensome when compared to the taxes paid by other current CAT taxpayers.

Furthermore, these increased costs on precious metals businesses ultimately penalize Oregon savers and investors. Oregon is among the 43 states that does not impose a sales tax on precious metals, but Oregon's CAT does this essentially in a backdoor manner.

The trend across the nation is to remove or to the reduce the cost and obstacles in the way of preserving wealth in the form of gold and silver. Mississippi, Alabama, Tennessee, and Virginia just passed legislation in the last few years to exempt precious metals-related purchases from taxation in their states. This is a competitive marketplace with extremely small margins, so buyers will take their business to neighboring states, harming ultimately Oregon businesses and Oregon investors."

The CAT tax repeal passed unanimously out of the Oregon House and then passed the State Senate. The final stop is the Oregon governor's mansion, where Gov. Tina Kotek is expected to sign this bill into law within the next few days.

Moving to the State of Maine, Senator Eric Brakey introduced a bill to exempt gold and silver from that state's sales tax system. Here he is speaking recently before the Joint Taxation Committee:

Eric Brakey: So for thousands of years, we're going way back now, for thousands of years, civilizations across the world have chosen gold and silver as preferred forms of money for the convergence of qualities they possess. The visibility, portability, high value per unit of weight, durability, and uniform quality, establishing them as uniquely effective stores of value and mediums of exchange. Throughout this time, their value has remained remarkably stable. It is often said that in the Roman Empire, an ounce of gold could buy you a well-tailored toga. Today in America, an ounce of gold can buy you a well-tailored suit, the temptation for central authorities, however, to de base the currency is ever present. As I'm sure this committee is aware, raising taxes on the people can be very unpopular, but when you control the currency, funds can be raised from the people without them even knowing it through monetary sleight of hand."

As Sen. Brakey puts it, from time immemorial, civilizations have consistently chosen gold and silver as their preferred forms of money.... money with an array of exceptional qualities, such as visibility, portability, high value per unit of weight, durability, and uniform quality... making them unparalleled as stores of value, and media of exchange.

Nevertheless, the temptation for central authorities to manipulate and devalue the currency persists. Even worse, inflation is a pernicious, yet often unnoticed, tax. And it breeds discontent and frustration.

Speaking at a Joint Taxation Committee hearing in Maine, Sen. Libby answered a fellow legislator's question about what makes gold and silver different than other assets, such as Corvettes.

Sen. Libby expertly responded, "I just would bring up the point that Corvettes aren't listed in the constitution as money." Here's more of what he had to say.

Sen. Libby: That would be one important distinction... I'm not sure why we would depart from that on this issue when clearly there's a substantial move across the country to bring other states into [compliance]. Why would all of the other 43 states exempt gold and silver and Maine not join this? It may make sense to allow Mainers to have the same benefit that so many other states do. And with so many states passing this legislation, our citizens are just going to go through the back door and find loopholes, order online, get it delivered to the holding stations. So I'd rather see that money stay here in our state rather than go elsewhere. And I think it makes sense to move this [sales tax exemption] forward at this time."

Sadly, Maine's partisan Democrat bosses twisted arms in the final moments and flipped some votes – ultimately killing the proposed sales tax exemption by a two-vote margin during the final roll call vote.

But do take heart... momentum is indeed our side. And this year has already been witness to five sound money victories at the state level.

These successes are largely thanks to the grassroots involvement of Money Metals customers across the nation – patriots who taken the time to call and email their legislators at key moments in these battles. So, we want to say again that we deeply appreciate everything you do to advance this important cause.

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.

*********