Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Trump’s Covid Infection, Bailout Negotiations Raise Market Uncertainties

Stock-Markets / Financial Markets 2020 Oct 05, 2020 - 03:17 PM GMT

By: MoneyMetals

Stock-Markets

Precious metals markets are advancing this week as a massive new stimulus bill makes its way through Congress.

On Thursday evening the House of Representatives passed a $2.2 trillion coronavirus relief bill on a party line vote.

It’s a big deal whenever Congress commits to spending that kind of cash, especially when it’s money that has to be borrowed into existence.  These days, though, it’s not that unusual for Washington to dole out trillions of dollars at a time.


The bill in its current form will almost surely die in the Republican-controlled Senate. Meanwhile, negotiations on a compromise bill are expected to continue. Both the White House and Democrat leaders say they want additional stimulus checks handed out.

Nobody seems concerned about the ballooning federal budget deficit – which is already on track to exceed an unprecedented $3 trillion this year. Perhaps that’s because nobody doubts the Federal Reserve will provide whatever liquidity the government needs to pay its bills.

Stimulus from the Fed has helped pump up the stock market. The S&P 500 rallied this week despite more bad news on the economic front for airlines, restaurants, hotels, and other hard-hit industries.

Also rallying are precious metals markets. And today’s news that President Trump has contracted Covid-19 could add more fuel to the fire.

The metals have been moving inversely to the U.S. Dollar Index, which fell this week after rising the previous one.  The negative correlation is often strong, though not always.

Over a period of years to decades, the dollar’s strength or weakness versus foreign currencies tends not to matter as much as its actual rate of depreciation.  These are two very different things.

It’s possible for government officials to actively pursue a “strong dollar” policy against the currencies of foreign rivals while at the same time deliberately debasing the value of the currency at home.

Ever since President Richard Nixon de-linked the U.S. dollar from gold in 1971, government debt has accelerated to the upside – as has the total currency supply.

In the process, the purchasing power of the dollar has steadily diminished. What cost $1.00 in 1971 costs $6.37 in 2020, based on the government’s own Consumer Price Index.

It’s all reflected in gold prices, which recently surged to a record high of over $2,000/oz – 100 times higher compared to gold’s dollar price a century ago. Measured by gold, that’s a 99% decline in the currency’s purchasing power!

Further declines are guaranteed by the Fed’s own avowed inflation-raising objectives and the exploding debt spending by government.

The answer to how all the trillions in “free” money being handed out by Washington will ultimately be paid for is through inflation. All holders of Federal Reserve notes will take a hit on their purchasing power.

Holders of precious metals stand to retain purchasing power over time and increase it during a bull market.

In the very long run it really doesn’t matter what gold and silver’s nominal prices, or exchange rates versus the U.S. dollar, are. As sound money, the metals’ real value can’t properly be measured by any fiat currency.

It’s more accurate to view long-term gold and silver price uptrends in terms of dollars as measures of the dollar’s loss of value.

You can hold gold and silver knowing that regardless of where they trade next year, next decade, or a generation from now in terms of dollars, they will at least retain meaningful purchasing power in terms of real goods and services in the economy.

The same can’t be said for fiat currencies that can collapse, bonds that can default, or shares of companies that can go bankrupt.

By Mike Gleason

MoneyMetals.com

Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2020 Mike Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in