by Mike Gleason, Money Metals:
Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Coming up we’ll hear from Michael Pento of Pento Portfolio Strategies on how the broken window fallacy is now becoming a part of the narrative surrounding the terrible tragedy in the Houston area and also talks about an exciting setup he sees in the gold market and what will be the tipping point. Don’t miss another wonderful interview with Austrian economist and money manager Michael Pento, coming up after this week’s market update.
Precious metals markets enter trading for the month of September with strong upside momentum on the heels of a late summer rally.
On Monday, gold prices broke out above the $1,300 resistance level to new highs for the year. As of this Friday recording gold trades at $1,323 an ounce, up 2.4% on the week. Gold’s gains are being confirmed by the gold mining stocks, which are now putting in their biggest weekly up moves of the summer.
Turning to the white metals, silver shows a weekly gain of 3.3% to bring spot prices to $17.69 an ounce. Platinum poked back above the $1,000 level on Thursday and currently trades at $1,007 an ounce on the heels of this week’s 2.9% advance. Its sister metal palladium is up 3.9% to $966.
Metals markets responded to the carnage inflicted by Hurricane Harvey and the inflationary implications for U.S. fiscal policy.
Lawmakers return to Capitol Hill next Tuesday. They will take up a Harvey aid bill expected to cost tens of billions of dollars. Whether it’s a clean bill or is tied to unrelated pork barrel spending or an increase in the debt limit remains to be seen.
The Treasury Department had said that the debt ceiling must be raised by September 29th. Officials now say that the deadline may move forward by a couple days because of disaster relief spending. These developments will make it more difficult for Freedom Caucus members of Congress to win any spending concessions.
President Donald Trump still intends to push for tax reform. Senate Republicans will be under tremendous pressure to deliver something on that front after they failed spectacularly on Obamacare repeal. Here’s what Trump had to say in a speech earlier this year:
Donald Trump: We need a tax code that is simple, fair, and easy to understand. That means getting rid of the loopholes and complexity that primarily benefit the wealthiest Americans and special interests. Our last major tax re-write was 31 years ago. And I am fully committed to working with Congress to get this job done, and I don't want to be disappointed by Congress.
The President did get some good news on the economy this week. U.S. GDP growth got revised upward to a better than expected 3%.
Good news is often interpreted by markets as bad news for metals markets. A stronger economy makes the Federal Reserve more likely to tighten monetary policy. But this week, good news was good for stocks, commodities, and precious metals.
The bad news out of Texas may have something to do with that. Given the tremendous financial stresses on millions of families who have either been impacted or flooded out of their homes, the Fed is likely to hold off on any new rate hikes or quantitative tightening for a while. Central bankers don’t want to be perceived as villains for causing rates on mortgages and home improvement loans to rise.
Yet in keeping rates artificially low, central bankers are complicit in inflating asset bubbles to dangerous proportions. The stock market certainly wouldn’t be trading where it is today without Fed stimulus. The sky high costs of health insurance and college tuitions wouldn’t be where they are now, either.
In order to help qualified students pay for the ever-rising costs of higher education, Money Metals Exchange has teamed up with the Sound Money Defense League for a scholarship fund. It is the first gold-backed scholarship of the modern era. We’re setting aside 100 ounces of physical gold for scholarships to outstanding undergraduate and graduate students who display deep understanding of economics and monetary policy.
For 2017, we will be awarding this scholarship to two incoming or current undergraduate students and to two graduate students. First place winners will receive $2,000 each, with runner ups getting $1,000.
Applicants must submit an essay that answers a specific question about free markets and sound money. Essays will be reviewed by a blue ribbon committee of professors, economists, and executives of Money Metals Exchange and the Sound Money Defense League. The application and essay must be submitted by September 30, 2017.
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