Arizona Authorizes Gold as Legal Tender and Why the Yield Curve Matters Right Now

04 Jun
Gold legal tender in Arizona

Arizona Authorizes Gold as Legal Tender and Why the Yield Curve Matters Right Now

Gold Market Discussion

Arizona Authorizes Gold as Legal Tender as Alternate to Fiat Currency

Governor Doug Ducey (R-AZ) makes gold legal tender in ArizonaThis fall, Arizona authorizes gold as legal tender with Governor Doug Ducey’s signing of House Bill 2014 this past week. The bill eliminates capital gains tax on gold and silver, which encourages its use as currency. Previous version of the bill passed the state house and senate but resulted in veto from Governors Jan Brewer and Doug Ducey. However, a stronger grassroots movement this time encouraged Ducey’s signing. The legislation defines legal tender as “a medium of exchange, including specie, that is authorized by the United States Constitution or Congress for the payment of debts, public charges, taxes, and dues.” Specie is defines as coins having precious metals content.

What this means for investors: Don’t expect that gold and silver will suddenly become a common medium of exchange simply because of this vote. However, this vote is significant for other reasons. The grassroots nature of the movement shows that Americans are, in greater numbers, seeking greater monetary security. People are discovering the inherent flaws and dangers of the Federal Reserve banking system. Perhaps a shift back to Article I, Section 10 of the Constitution – “No State shall…make anything but gold and silver coin a tender in debt payment” – is coming. In addition, such legislative efforts are in motion at the state government level in Ohio and Idaho.

The Yield Curve Could Point Towards Recession

Economist David Rosenberg
Economist David Rosenberg

Economist David Rosenberg warned that the Strategic Investment Conference this week of a telling recession sign that we are starting to see. The shape of the yield curve is the thing to watch now, he cautioned. It appears that it is near to inverting. Every time the yield curve has inverted – that is, short term rates go above long term rates – it has preceded recession. The only time three times it has not is when the Fed stopped short of inverting it. However, right now the curve is flat enough that four more rate hikes could invert it, and the Federal Reserve seems on track for another rate hike in June. Rosenberg also pointed out that 23 million Americans between the ages of 23 and 54 are out of the labor work force, and believes current political volatility is noise over the deeper economic currents.

What this means for investors: The yield curve is a reason that gold has been getting a boost every time the Fed talks about raising interest rates. In China, the yield curve is already inverted. It does not bode well for the global economy with the two largest economies flashing this warning sign.

Moreover, it is worth noting that despite Fed expectations for a rate hike next month, the Fed is issuing caution and less optimism in the economy. Gold was trading over $1,250 this week, and as these indicators become stronger, it will likely continue to see demand and prices rise. Silver hit its highest mark since April 28.

Geopolitical Worries Are Still a Key Market Driver

Greece BanksSafe haven buying in Europe helped boost gold prices to nearly $1,270 on Wednesday. The French presidential elections a few weeks ago had been churning uncertainty in the markets, and now other European elections continue to stir the pot. Some of these are elections in Germany and Italy, were populist, right wing, anti-EU parties are gaining traction. Meanwhile, the Eurozone finance ministers failed to reach an agreement with the IMF about Greek debt relief. Geopolitical tensions over trade, Syria, and North Korea continue to drive safe haven demand as well.

What this means for investors: Gold was at a 4-week high, and silver had its longest winning streak since January. As political uncertainty continues to cloud a shaky global economy, precious metals will be the safest wealth preserver. Meanwhile, the dollar’s strength’s days look numbered. Take advantage before prices climb higher.

Silver Is Oversold Right Now

silver bars

I have been writing recently about silver being at the right dip to buy. More analysts are starting to agree with the technical case for silver. Silver is oversold right now, and the oversold case makes this a compelling buying opportunity.

What this means for investors: Silver is the perfect option for investors with a budget. It can be more volatile than gold in movement, but historically, it is a safe haven as well. Consider silver diversification for wealth protection along with gold as we move into further uncertainty.

 

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 Here are some articles from the web discussing the topics in this week’s post:

Arizona Authorizes Gold as Legal Tender as Alternate to Fiat Currency

Read Here

The Yield Curve Could Point Towards Recession

Read Here

Geopolitical Worries Are Still a Key Market Driver

Read Here

Silver Is Oversold Right Now

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

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