Gold & Silver are revving up as turmoil, inflation continue

As the Federal Reserve readies rate cuts, precious metals bulls are eying the next leg higher for gold.

Fed policymakers will convene next week and are widely expected to reduce their short-term funds rate. Recent weakness in the labor market could spur them to opt for a 50-basis point cut instead of the standard 25.

Central bankers may also feel encouraged by the latest official inflation readings.

On Wednesday, the Commerce Department released its Consumer Price Index report for the month of August. The CPI came in at an annual rate of 2.5%. That represents the lowest headline inflation rate since February 2021.

This is likely more of an indication that the economy is in a massive slowdown and demand for goods has been drastically reduced as a result, more so than it is that we’re having a soft landing.

The Producer Price Index did tick up slightly more than expected in August. However, that’s not likely to dissuade Fed Chairman Jerome Powell from declaring inflation is heading back down to target and signing off on rate cuts.

The European Central Bank cut its benchmark interest rate this week. But currency markets barely budged on the news, with traders looking ahead to how big the Federal Reserve goes when it commences cuts of its own.

Even though the Fed has yet to act, the U.S. dollar has been losing ground against the euro and other foreign currencies over the past several weeks. And of course, it has been losing value when measured against sound money in the form of gold.

The monetary metal rose on Thursday to make a slight new all-time high. And on Friday, it rallied another $20 to another all-time high.

Turning to the white metals, silver is surged by $3, this week to almost $31 per ounce.

It was a great week for energy metals including silver, platinum, palladium, lithium, and rhodium. Green energy stocks also rallied, with analysts suggesting they got a Kamala Harris boost. Harris has been rising in the polls and was widely declared in the mainstream media to have won Tuesday’s presidential debate.

Of course, Donald Trump and his supporters say the debate was an unfair three-on-one contest. The two ABC News debate moderators received criticism for repeatedly pushing back against Trump’s arguments while letting Harris off the hook when she gave non-answers to some of their questions.

As with the earlier CNN debate between Trump and Biden, the debate moderators failed to press either candidate about the soaring national debt or the root causes of inflation. Monetary policy wasn’t brought up even once.

Vice President Harris did bring up the budget deficit – not to own up for her role in exploding it to $2 trillion annually, but to claim that it will be even worse if Trump gets elected.

Coming from someone who cast tie-breaking votes in the Senate to ram through key Biden administration spending initiatives, Harris lecturing about fiscal responsibility is a bit like a drunken sailor lecturing about temperance.

Obviously, she has no plan to balance the budget. And, in fairness, we highly doubt a new Trump presidency would lead to a balanced federal budget either.

The Biden-Harris administration has pushed to increase federal revenues by handing more collection power to the IRS. But not even an $80 billion boost in the sprawling agency’s size and reach will bring home enough revenue to make a dent in the deficit.

Federal revenues have actually been growing healthily… thanks in part to rising real estate and stock market values. The federal deficit isn’t the result of taxpayers not coughing up enough cash. It’s the result of politicians spending too much.

But since Harris can’t bring herself to propose cuts, she wants to raise taxes on investors and high earners. She claims she will spare the middle class from new taxes. But the middle class has been hit hard over the past few years by the inflation tax that has jacked up their costs for food, housing, insurance, healthcare, and other necessities.

At the state level, by contrast, both Republican and Democrat politicians have been pushed to make some sound fiscal and tax reforms. Sound money advocates are hailing their latest hard-fought victory, which took place this week in New Jersey of all places.

Democrat Governor Phil Murphy signed a law to remove sales taxes on purchases of gold, silver, and other precious metals above $1,000. Supported by the Sound Money Defense League, Money Metals Exchange, and in-state activists, the sales tax repeal enjoyed unanimous support from both sides of the political aisle. The sales tax exemption will take effect on January 1st of the upcoming year.

New Jersey now sits alongside 44 other states that recognize the importance of exempting constitutional money from burdensome taxation. It is one of seven states this year to have passed legislation that removes taxes on precious metals or expands the legal recognition of gold and silver as money.

The only states that still charge sales taxes on bullion are New Mexico, Maine, Vermont, Hawaii, and Kentucky.