Worldwide concern is growing over the dangers of record debt levels and the destructive potential of fiat currency. It’s not surprising that genuine assets such as physical precious metals continue to gain favor. Here in the U.S., three states – Utah, Oklahoma and Wyoming –reestablished gold and silver as legal tender in the last eight years. South Carolina soon could become the fourth U.S. state to affirm physical gold and silver as constitutional money. Are we on the verge of seeing precious metals make a return as mainstream assets and mediums of exchange? This week’s Touchpoint has more on the developments in South Carolina, as well as other news of interest for perceptive retirement savers.
- If it’s passed, a bill prefiled in the South Carolina House of Representatives by Rep. Stewart Jones would declare “gold and silver coins minted foreign or domestic” to be “legal tender in the State of South Carolina.” As The Libertarian Institute puts it, the law effectively would “put gold and silver on the same footing as Federal Reserve notes” and continue the growing trend of states seeking to “undermine the Federal Reserve’s monopoly on money.” More broadly, the effort is one of several signs of growing disenchantment with fiat currency at the grassroots level. Many Americans would like to see physical gold and silver return as mainstream components of the U.S. monetary system.
- According to a recent Bankrate Financial Security Survey, 52% of Americans say they’re behind in retirement preparation. Surprisingly, nearly 40% of Americans say they have never had a retirement account, while half of those who do have retirement accounts report tapping into them before reaching retirement age. Among the most common reasons for making early withdrawals from a retirement plan include unemployment, unplanned expenses and debt repayment. The inability of so many Americans to maintain the integrity of a retirement plan suggests the disruptive influence of underlying factors such as wage stagnation and deteriorating job quality and indicates to retirement savers that the economy could be in great distress in spite of reports to the contrary.
- Many have expressed worry that radical, government-centered monetary policy mechanisms such as Modern Monetary Theory (MMT) are on the way to becoming reality. What does the Federal Reserve think about this? Fed leaders, after all, are the ones in charge of instituting such measures. In a recent Fed paper discussing the rampant national debt, the agency flatly dismisses the notion that unrestrained money-printing would be an effective mechanism for covering deficit spending. The Fed’s paper explains that some countries with unmanageable debt levels have attempted to print money as a way to deal with the burden, but “history has taught us…that this type of policy leads to extremely high rates of inflation (hyperinflation) and often ends in economic ruin.” The Fed paper doesn’t reference MMT directly, but does illustrate an imagined MMT-like scenario where the government would issue bonds and then effectively order the Federal Reserve to buy them. Refer to CNBC.com for more.
- UBS, the popular Swiss multinational investment bank and financial services company, is well-known for being fairly conservative in its projections. That’s partly why it’s so notable that UBS has been firmly in gold’s corner throughout 2019. UBS raised its price target for gold multiple times this year. And despite gold’s most recent pullback, UBS again has gone on record to say it likes gold’s potential at least through 2020. Speaking recently on CNBC’s “Squawk Box,” UBS commodities head Dominic Schnider said he expects U.S. GDP to drop as low as 1% in 2020, which likely would prompt the Federal Reserve to continue cutting interest rates to the point where real rates (nominal interest rate minus the inflation rate) are negative. Schnider believes gold would continue strengthening in response.
Is a new gold rush nearly upon us? Central banks have been stockpiling the metal at a record pace. Renowned asset managers are telling the world to buy gold regardless of price. President Trump’s recent nominee to the Federal Reserve, Judy Shelton, appears to favor consideration of a new gold standard. Moreover, there is clearly a grassroots movement within individual states to see gold and silver regain acceptance as bona fide legal tender. Although the price of gold has been under some pressure lately, there are an abundance of reasons to be bullish about gold’s short-term and long-term prospects.
If gold and silver are absent from your portfolio, maybe it’s time to do something about that. Call Augusta Precious Metals at 800-700-1008.