Revisiting the Gold and Silver Shortage

24 Oct

Revisiting the Gold and Silver Shortage

(And a bill to restore the gold standard!)

We have written several times of late about the recent shortages of gold and silver and the way prices in the “paper gold” or gold-substitute markets have decoupled from the prices of real, physical gold and silver coins and bars.

In essence, the question is how can the international benchmark prices (spot market prices) for gold and silver be lower while, due to rising premiums reflecting thin supplies, the real market prices of silver coins and bars are higher. (See our October 3 post Market Condition Alert! Gold and Silver Shortages!)

Republic Monetary Exchange’s trading department still has gold and silver in stock for immediate delivery for many items, although we are experiencing strong demand and we cannot guarantee that this crisis is only temporary. 

While premiums are high, worsening conditions may mean that no physical gold and silver will be available at any price.  

These market conditions have been noticed in Washington, and have provoked one congressman to demand answers.

In a September 2 post (Explain the Silver Shortage:  Congressman Demands Answers from the US Mint and Treasury Secretary!), we reported on Congressman Alex Mooney’s (R. -WV) attempt to get answers. In light of the Mint’s statutory obligation to provide sufficient coinage to meet market demand, Congressman Mooney wants to know how this shortage has been allowed to happen, driving premiums on American Eagle US silver coins to such heights, and what the authorities intend to do about it.

Due to keen interest in this story from many of our clients, here is a link to Congressman Mooney’s letter to Treasury secretary Janet Yellen and US Mint Director Ventris Gibson.

Meanwhile, we note with both interest and enthusiasm that just two weeks ago Mooney introduced H.R. 9157, the “Gold Standard Restoration Act.” 

The legislation calls for the U.S. Treasury and the Federal Reserve to publicly disclose all gold holdings and gold transactions within 30 months, after which time the Federal Reserve note “dollar” would be pegged to a fixed weight of gold at its then-market price. Federal Reserve notes would become fully redeemable for and exchangeable with gold at the new fixed price, with the U.S. Treasury and its gold reserves backstopping Federal Reserve Banks as guarantors.

“The gold standard would protect against Washington’s irresponsible spending habits and the creation of money out of thin air,” said Congressman Alex X. Mooney. ”Prices would be shaped by economics rather than the instincts of bureaucrats. No longer would our economy be at the mercy of the Federal Reserve and reckless Washington spenders.”