Some policy shifts recently announced by the Indian government in its Union Budget will likely have a positive impact on the country’s gold market. India ranks as the second-largest gold-consuming country in the world, second only behind China.
The three key policy changes that will likely affect the gold market are:
The Federal Reserve expanded its record holdings of US Treasuries in the fourth quarter of 2020 as it continued monetizing the massive federal debt.
The Federal Reserve added another $253 billion to its Treasury holdings in Q4 according to the Fed’s Treasury International Capital data released on Feb. 16. That brought the central bank’s US bond holdings to $4.7 trillion. The Federal Reserve now holds a record 17.5% of all US debt.
The Federal Reserve increased the money supply at a record rate in 2020. And a move recently announced by the US Treasury Department will mean even more money flooding into the marketplace. In other words, another tidal wave of inflation.
Is Jerome Powell the most dovish Fed chair yet?
Peter Schiff said he wasn’t when he first took the position and was raising interest rates. But he is now. The minutes from the January FOMC meeting released last week bear this out.
“We’re all doves now. That is the problem, the Fed gets progressively more dovish,” Peter said in a recent podcast.
A bill introduced in the Kansas House would recognize gold and silver specie as legal tender and repeal all taxes levied on it. The legislation would pave the way for Kansans to use gold and silver in everyday transactions, a foundational step for the people to undermine the Federal Reserve’s monopoly on money.
Silver enjoyed a moment in the spotlight when the Reddit Raiders turned their attention to the white metal. The online investors weren’t able to pull off a short-squeeze in the silver market, but we’ve said all along that there are fundamental reasons to be bullish on silver. Given the supply and demand dynamics coupled with the prospect of inflation, $30 silver is likely quite a bargain.
After running the biggest December budget deficit in history, the US government followed up with another massive budget shortfall in January.
According to the Monthly Treasury Statement, the January deficit came in at $162.83 billion. That’s nearly five times bigger than the January 2020 shortfall.
Last month, we reported on signs of revival in the Indian gold market. Gold imports hit a 19-month high in December.
That revival has continued into 2021. Gold imports in January were up 72% year-on-year, and some shifts in government policy could give demand another shot in the arm.
Silver got a brief boost when the Reddit Raiders turned their attention to the white metal. The online investors weren’t able to pull off a short-squeeze in the silver market, but we’ve said all along that there are fundamental reasons to be bullish on silver, the attention of Reddit Raiders notwithstanding.
New demand projections for silver in 2021 bear this out. Silver demand is expected to rise 11% this year and reach 1.025 billion ounces, according to the Silver Institute’s forecast.