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 Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
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

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Biden Bailout, Democrat Takeover to Drive Americans into Gold

Commodities / Gold and Silver 2021 Jan 20, 2021 - 11:35 AM GMT

By: MoneyMetals

Commodities

As investors await the incoming Biden administration and the uncertainties that a transition of power may bring, precious metals markets regained some ground through Thursday’s close but have pulled back again on Friday, especially silver and platinum.

Precious metals prices and financial markets have seemingly been unaffected by recent political turmoil. Investors have been nonchalant in the face of Capitol unrest and a second impeachment of President Donald Trump – not to mention fresh new records in daily COVID deaths.


Against this unfavorable backdrop, the stock market continues to hit new highs on an almost daily basis. Fundamental analysts are left scratching their heads as to what’s fueling such elevated valuations.

The most likely explanation is that there hasn’t yet been a downside catalyst powerful enough to take investors’ eyes off the prospect of more fiscal and monetary stimulus to come.

Joe Biden is calling for $1,400 stimulus checks to be delivered to Americans on top of the $600 payments that recently went out. The total cost of the President-elect’s COVID relief plan, which includes a $15 minimum wage, enhanced unemployment benefits, and a variety of other handouts, comes to over $1.9 trillion.

Joe Biden:    Direct cash payments, extended unemployment insurance, rent relief, food assistance, keeping essential frontline workers on the job, aid to small businesses. We'll focus on minority-owned small businesses, women-owned small businesses, and finally having equal access to the resources they need to reopen and to rebuild. Our rescue plan also includes immediate relief to Americans hardest hit and most in need. We will finish the job of getting a total of $2,000 in cash relief to people who need it the most. The $600 already appropriated is simply not enough.

All this new spending will be done with money the government doesn’t have. But borrowing another $1.9 trillion into existence would be just a formality at this point.

Biden is already set to inherit a record budget deficit.  The Treasury Department reported Wednesday $573 billion in red ink over the last three months alone. That’s over 60% higher than the same period a year ago.

Deficit hawks are virtually nowhere to be found in Washington, D.C.  And the Federal Reserve Board is full of doves who intend to keep pumping out easy money into the financial system.

Monetary policy is one thing that investors can count on not changing in the new administration.

When he leaves office next week, Donald Trump will go down in history as one of America’s most controversial Presidents. He continues to have passionate supporters as well as passionate haters.

Trump can certainly claim some major accomplishments on taxes, deregulation, and border security as part of his legacy. But he won’t earn high marks on his handling of the national debt. It has surged by a staggering $7.8 trillion over the past four years.

As a candidate, Trump had vowed to reduce the nation’s debt burden. But as President, he rarely used his veto pen to try to hold Congress’ spending ambitions in check.

Even before the COVID outbreak, big spenders in both parties were fueling more federal borrowing than ever before.

Now it’s not even a question of whether the next President will pay down the debt or balance the budget. It’s a question of what will be required of the Fed to enable four more years of annual deficits measured in the trillions of dollars.

The risk is that more explicit central bank monetization of federal borrowing causes the bond market and the U.S. dollar itself to lose credibility in the eyes of global investors.

As a consequence, price inflation could run much hotter than most investors currently expect. It’s possible that stocks could continue to push higher in such an environment, but it’s also likely that we would see some major sector rotation.

Mining companies have big upside potential in an inflationary environment. But they also have big downside risks, especially if the political environment turns hostile.

The safer play is to own the mined products themselves – physical metals. Gold, silver, platinum, palladium, and copper are all easily accessible to investors in the form of bullion bars, rounds, and coins.

At Money Metals Exchange, we are seeing signs in the first two weeks of 2021 that investment demand for bullion is in a word: strong. Some tightness is emerging in popular products.

As Democrats take power with a massive spending and borrowing agenda, safe haven demand for sound money will likely remain strong.

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.

© 2021 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