Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Gold and silver markets slumped this week as stimulus talks faltered again in Washington.
Even though the White House upped its offer to $1.8 trillion, House Speaker Nancy Pelosi refused it – not wanting to give President Trump any kind of political victory ahead of the election.
Meanwhile, the President continues to campaign for stimulus. He is bucking Senate Republicans by offering to go even higher than $1.8 trillion.
Here’s what President Trump told Stuart Varney of Fox Business on Thursday:
Stuart Varney: You don't expect a phone call from Speaker Pelosi, but you would go higher. How much higher would you go? How much higher would you go?
President Trump: Yeah, I would, and the Republicans will too, because we like stimulus, we want stimulus, and we think we should have stimulus because it was China's fault. It was not the American workers' fault or the American people.
Stuart Varney: If you want to up your offer above $1.8 trillion, what would that extra money go to?
President Trump: It would go to the worker. It would go to the people, directly to the people so they can live nicely and their lives won't be shattered because of China.
Stuart Varney: Okay. Have you told the Secretary Mnuchin to get out there and offer more than $1.8 trillion?
President Trump: I've told him. So far, he hasn't come home with the bacon.
Even if an agreement were suddenly reached to bring home the bacon, it would be nearly impossible this late into the calendar for additional relief payments to arrive in Americans’ pockets before they go to vote.
Perhaps that will clear the way for a deal to be reached. It’s a near certainty that more stimulus will be coming sooner or later, one way or the other.
A case can be made that sending cash directly to millions of Americans is a fairer and more efficient way of artificially stimulating the economy than other alternatives. Feeding stimulus through a labyrinth of programs run by federal and state bureaucrats will inevitably produce waste and corruption as a byproduct. Alternatively, having the central bank pick winners and losers by buying up certain types of financial assets would inevitably favor Wall Street over Main Street.
Of course, “free money” however doled out isn’t without cost. The national debt recently topped $27 trillion. That represents an obligation of $216,000 per taxpayer.
It also represents a massive amount of future inflation if policymakers wish to keep kicking the can down the road and putting off the day of reckoning for unpayable debts.
On Wednesday, the Labor Department reported the producer price index rose in September by 0.4%. That was a bigger increase than economists had been expecting. Food costs surged by 1.2% for the month. That means struggling consumers can expect to pay more for groceries.
This week, though, the U.S. dollar strengthened versus foreign currencies. Gridlock over stimulus is producing de facto fiscal restraint in Washington, however unintentional and temporary it may be.
A rising U.S. Dollar Index put downward pressure on precious metals prices through Thursday’s close.
As of this Friday recording, the gold market is giving back 1.5% on the week to come in at $1,907 an ounce. Silver shows a weekly loss of nearly a dollar or 3.8% to trade at $24.32 an ounce.
Turning to the PGMs, platinum is off by 2.3% this week to trade at $880. And finally, palladium currently checks in at $2,360 per ounce after losing 4.2% for the week.
Will metals markets rally as the election draws nearer? Many analysts think so.
Goldman Sachs recently released a report painting a bullish picture for silver in particular. Goldman strategists believe the “risks are skewed toward dollar weakness” with a possible blue wave in November.
A Biden win and a Democrat takeover of the Senate would clear the way for unimpeded spending. Every item on the left’s wish list would be able to get rammed through with only token opposition from Republicans.
Of course, Democrats now risk being overconfident about Joe Biden’s apparent lead in the national polls. The election will be determined state by state, and Donald Trump seems to remain competitive in the key battleground states he won last time around.
In 2016, most pollsters completely missed Trump’s hidden strength in states like Pennsylvania, Michigan, and Wisconsin. He could afford to lose two of those three this time around and still be able to recreate a winning electoral map by hanging on to all the other states he previously won.
Trump’s poll numbers may have hit bottom around the time he announced he had contracted COVID. If so, then the race can be expected to tighten.
And if it’s still too close to call after election day amid chaos and controversy surrounding mailed-in ballots, then market volatility can be expected to heighten.
Investors would be wise to brace for uncertainty and cover their bases. One of the most important bases to cover is holding physical precious metals outside of the financial system.
Well that will do it for this week. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.