Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Feds Seek Huge Royalties from Gold Miners in New Crackdown

Commodities / Gold and Silver Stocks 2023 Sep 24, 2023 - 05:44 AM GMT

By: MoneyMetals

Commodities

Fears of inflation remaining stubbornly high, and interest rates going higher, rattled financial markets this past week.

On Wednesday, the Federal Reserve left its benchmark funds rate unchanged as expected. However, Fed chairman Jerome Powell left the door open for another hike in the near future. He also suggested rates may need to stay higher for longer than previously expected.


By Thursday, investors were fleeing from stocks and bonds. The S&P 500 broke down to a three-month low as long-term bond yields surged to their highest levels in more than a decade.

There were few places for investors to find shelter from the carnage except in precious metals markets.

Earlier in the week, crude oil futures ran up to a new high for the year above $92 per barrel. Oil prices pulled back following the Fed announcement. Some commodity analysts still see the potential for crude to exceed $100 per barrel before the end of the year.

Americans are feeling the pain at the pump. Motorists in some parts of California are now paying over $6.00 per gallon to fill up their gas tanks.

It’s not just an inflation problem. America is also facing a resource scarcity problem.

The Biden administration moved recently to crimp energy production out of Alaska by cancelling oil and gas leases on hundreds of thousands of acres of land, this despite the fact that top elected officials from Alaska as well as Native American groups opposed the move.

The administration has also drained America’s strategic petroleum reserve down to a multi-decade low. Despite promises to refill it, America’s oil reserves continue to remain historically low, leaving the country vulnerable in the event of an emergency. 

Russia announced this week that it will ban exports of gasoline and diesel fuel to most countries, further crimping global supply chains.

Meanwhile, the U.S. continues to be dependent on China for supplies of critical metals used in electric vehicles and other technologies. The Biden administration risks increasing that dependence by threatening to impose royalties on metal producers operating under federal land leases.

The government is not able to collect royalties on minerals extracted from federal lands under a law that has been in force since 1872. But the Biden administration wants to change that. It proposes taking an 8% cut on the copper, gold, silver, and other metals extracted by miners.

At a time when the mining industry is already struggling with rapidly rising operating costs, government demands for royalties could drive some producers to operate elsewhere or significantly reduce their output.

Domestic mining and energy companies are also finding it difficult to obtain financing under new regulations that discourage banks from lending to carbon-emitting industries.

President Joe Biden claims that his policies are bringing down inflation. But restricting domestic supply of resources does the opposite. It puts upward pressure on prices.

The administration seems to believe it can work around the problem by aggressively pushing electric vehicle mandates and launching government programs aimed at transitioning the country to alternative energy.  It is now launching a so-called “Climate Corps” program that will create more than 20,000 jobs for people who are supposedly going to combat climate change.

Whether they will have any measurable effect on global temperatures is in doubt.  But the tens of billions of dollars they will receive in government funds will doubtlessly add to the national debt.

That debt just surpassed $33 trillion, by the way. And nobody in Washington, Republican or Democrat, seems to have any idea of how to pay it down. But servicing that debt is going to get a lot more expensive thanks to higher interest rates. 

Individuals and businesses who face overwhelming debt burdens risk having their credit lines cut off if they don’t scale down their spending.

The political class in Washington feels no such urgency to get its finances in shape. That’s because it has access to a printing press. Even though the U.S. government’s credit rating was downgraded this summer, the Federal Reserve won’t hesitate to buy up Treasury bonds in unlimited quantities whenever the need arises.

Under our fiat monetary system, staving off a sovereign debt default is always possible. But it comes at a cost. That cost is paid through the inflation of the currency supply and the resulting devaluation of the currency’s value.

The risk is that given prevailing fiscal and political trends, central bankers may never be able to get inflation back down to target again.

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.

© 2023 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