Biden Bailout, Democrat Takeover To Drive Americans Into Gold

The comments below are an edited and abridged synopsis of an article by Mike Gleason

Precious metals and financial markets seem to have been unaffected by recent political turmoil. Investors have largely a second impeachment of President Trump, not to mention new records in daily Covid-19 deaths.

Biden Bailout, Democrat Takeover To Drive Americans Into Gold | BullionBuzz | Nick's Top Six
Newspaper headline “Bailout Plan” and currency

The most likely explanation is that there hasn’t yet been a downside catalyst powerful enough to take investors’ eyes off the prospect of more fiscal and monetary stimulus to come.

President-elect Biden is calling for $1,400 stimulus cheques on top of the $600 payments that recently went out. The cost of his Covid relief plan, which includes a $15 minimum wage, enhanced unemployment benefits and a variety of other handouts, comes to over $1.9 trillion.

Biden is already set to inherit a record budget deficit. The Treasury Department reported $573 billion in red ink over the last three months alone. That’s over 60% higher than the same period a year ago.

Trump can claim some major accomplishments on taxes, deregulation and border security as part of his legacy. But he won’t earn high marks on the national debt. It has surged by a staggering $7.8 trillion over the past four years.

Now it’s not a question of whether the next president will pay down the debt or balance the budget. It’s a question of what will be required of the Fed to enable four more years of annual deficits measured in the trillions.

The risk is that more explicit central bank monetization of federal borrowing causes the bond market and the US dollar itself to lose credibility in the eyes of global investors.

As a consequence, price inflation could run much hotter than most investors currently expect. It’s possible that stocks could continue to push higher in such an environment, but some major sector rotation is also likely.

Mining companies have big upside potential and also big downside risks, especially if the political environment turns hostile. The safer play is to own physical metals. Gold, silver and platinum are all easily accessible to investors in the form of bullion bars, rounds and coins.

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