Ed Moy, chief strategist at Valaurum, Inc. and former US Mint Director was recently interviewed by Investing News Network. In this lengthy interview “Key Factors for Gold; What Price Makes Sense in 2021” Watch the full interview or read a synopsis of topics below!
READ: KEY TOPICS FROM ED MOY’S INTERVIEW
From current gold pricing to Valaurum, Inc.’s efforts to make gold accessible and available to investors…
Major Influences on Gold Prices
Gold prices are primarily influenced by two major factors: the risk of inflation and uncertainty about the economic recovery after the recent challenges.
- Gold prices are driven by the risk of inflation. Gold is an alternative asset. When the dollar goes down, gold prices usually go up. Since the beginning of the pandemic in 2020, the United States has experienced a dramatic increase in the money supply. We’ve seen a 25% increase which represents the largest growth in the money supply in US history. Today, the risk of inflation in the near, mid and long term is substantial and is having a direct impact on the price of gold.
- Uncertainty over how the United States economy will recover. The private sector is betting on a robust recovery, evident by rapidly rising bond yields while, at the same time, the US government is going into stimulus overdrive. The recent stimulus measures have contributed to the huge increase in money supply. Until the risk of inflation is significantly reduced and there’s more clarity on how the economy will recover, the price of gold is likely to continue to rise.
Gold in 2021
The gold market, following a familiar pattern for Ed Moy, has recently taken a break. He predicts that by the end of 2021 gold will have increased to between $2,000 – $2,100. Today, there’s a big disconnect between the current price and demand for gold. The price has remained lower than expected while the demand for physical gold is through the roof. Various mints from around the world, including the Perth Mint, have all reported robust sales and cannot manufacture enough to meet demand. The top 10 gold retailers are selling their 1oz gold products at historically high premiums, indicating that the spot price for gold is artificially low compared to the increased demand from investors.
A High Gold Demand for Physical Gold and Silver Metals
Why is gold bullion not being produced fast enough to meet demand? Between high demand and supply chain issues, government mints and private bullion manufacturers are struggling to keep a supply of physical gold and silver products in stock. Supply chain challenges include a low supply of gold planchets for producers. The lag time has increased as suppliers work to meet the higher demand. The entire supply chain for precious metals has been affected, all the way back to mining operations. COVID restrictions and lower employee attendance rates have meant that manufacturing plants and suppliers’ processes have been interrupted. When the US Mint sources gold, they’re required to receive it from mines in the US and can’t just buy it anywhere.
Cost effective product production is a factor as well. Mints are able to produce one 1 oz coin far more cost effectively compared to manufacturing the equivalent amount of gold in the form of ten 1/10th oz coins.The drive to produce products with costs in mind has resulted in more gold made available in these larger amounts compared to smaller increments. As gold prices rise, we’re seeing a demand for bullion in ever smaller amounts. Private sector makers, like Valaurum, Inc. are starting to fill this niche by producing investment grade products that contain smaller amounts of physical gold.
Valaurum’s Role in the Current Market
Valaurum, Inc. has been able to use groundbreaking technology to reinvent how physical gold is stored and owned. Through a patented, proprietary process we are able to break gold down to the atomic level and apply it in a very precise, verifiable layer. Our products are making gold available in quantities that are both flexible and easy to invest in. At the same time, Valaurum has been facing the same increased demand and supply chain delays as government mints. We’re currently operating with a backlog of orders and are expanding our manufacturing facilities to meet this increased demand and grow our offerings in 2021.
Regarding the “Silver Squeeze”
There’s a recent movement among retail investors to create a “silver squeeze” by buying up physical silver to drive the price up similar to Gamestop in early 2021. However, Ed Moy doesn’t believe that it will be likely to succeed for two reasons. First, the total silver market cap (all the silver that’s ever been mined in the world) at today’s prices would be 1.4 trillion dollars. Secondly, the silver market is also incredibly diverse. Unlike Gamestop, it’s not consolidated, spanning a variety of industries including jewelry, electronics, etc. A market that size and with that amount of diversity is much harder for a group of investors to capture.
New State Legislation Recognizing Gold and Silver as Legal Tender
The recent movement by several key states to recognize gold and silver as legal tender is a huge deal that should be getting more attention, according to Ed Moy. When the constitution was written, it recognized that the country needed to be unified by a central government. This included granting the government the authority to have control over the currency. However, the states were left with the ability to allow their citizens to settle debts using precious metals in Article 1, section 10 of the constitution. Recently states have started to consider using this ability to operationalize Article 1, section 10. The legislation includes four legislative aspects:
- The state itself can recognize gold and silver as legal tender. As long as two parties (one willing to buy and the other willing to sell) agree to use precious metals as a form of payment, it can now be considered a legal transaction.
- Gold and silver sales become tax exempt. Currently, states charge a tax on precious metals sales unlike the exchange of paper currencies. Some states have exempted gold and silver sales from state sales tax.
- Whether or not capital gains can be assessed at the time you use gold.
- Texas, in addition to the precious metal legal tender laws has created its own state owned bullion depository. The Texas Bullion Depository is the equivalent of a state-owned Fort Knox. Texas created it so that Texans are able retain and deposit their monetary gold within the state. This gives Texas the option to use this depository as the foundation of a payment mechanism that’s easier than some of the existing methods other states are using.
The Future of this Legislation Movement
The legislation described above has passed or is currently passing in 12 states with another 6 states considering similar measures. Ed Moy indicates that, to some degree, there are certain citizens and states wanting private sector alternatives like gold, silver and even crypto currencies. New technologies like the processes Valaurum has patented make it possible to access physical gold in practical quantities like never before. You can see these new systems and legislative measures in practice in both Utah and Nevada where purchases are being made using the Goldback Aurum. Gold is now being used in everyday commerce which is transforming the precious metal market in the United States.
Disclaimer: The views expressed in this article are those of the Ed Moy or the author and may not reflect those of Valaurum Inc. The Ed Moy and the author have made every effort to ensure accuracy of information provided; however, neither Valaurum Inc., Ed Moy, nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Valaurum Inc., Ed Moy, and the author of this article do not accept culpability for losses and/or damages arising from the use of this publication.