The Fed Talks Interest Rates
This week, the Federal Open Market Committee released minutes from their May meeting. Some speculated the minutes would indicate that the Fed was reconsidering hiking rates in June. This thinking created downward pressure on the US dollar. However, the minutes offered little to support that view.
Earlier this month, the price of gold rebounded nicely from a low in the $1,210 range. Now, gold buying has slowed with Fed Fund traders placing an 83 percent chance that the Fed will hike rates in June.
Thus, we are witnessing a continuation of gold and silver being stuck in a range between $1,200-$1,300 and $16-$18 respectively. This range bound trading is likely to continue while global markets seek to understand if the Trump administration is going to be able to implement some of its pro-business policies. Also adding to market uncertainty is whether geopolitical tensions are going to either significantly subside, or escalate.
For those steadily accumulating gold and silver, this price action isn’t a bad thing at all. In fact it allows dollar cost averaging into physical metal at today’s lower prices.
State Legislation on Gold and Silver
On a completely unrelated front, the Governor of Arizona signed into law a repeal of all state capital gains taxes on gold and silver. According to one analysis of the law,
“The bill 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” means coins having precious metal content.”
Arizona now has become the fourth state since 2011 to enact laws aimed at enabling gold and silver to be re-monetized. Utah, Idaho, and Texas have also enacted similar bills.
We have long stated that despite the promises of Financial Technology, gold will always have its place in any future monetary system. Passage of these bills continues to support that view.