Month: April 2022

According to recent U.S. Mint production reports, demand for gold coins remains super strong.

Rampant global inflation, the war in Ukraine, stock market volatility, and central bank missteps have fueled retail interest.

Last week, the U.S. Mint reported sales of 426,500 ounces in gold coins during the first quarter of 2022 – up 3.5% from the first quarter of 2021 and the highest in 23 years! In fact, March sales for the U.S. Mint was its best since 1999.

Even as the government-run institution continues to be plagued by its ongoing mismanagement, it sold 155,500 ounces of various denominations of the American Eagle gold coin in March alone, up 73% from the prior month.

With this morning’s 8.5% Consumer Price Inflation (CPI) reading from the Bureau of Labor Statistics, inflation is no longer a topic confined to pundits and economists; its painful bite on Main Street has become widely acknowledged and felt.

Extremely high inflation globally, combined with war in Eastern Europe and a shaky start to the year for equities, should underpin volatility-based demand for bullion throughout the year.

Meanwhile, although the U.S. Mint’s silver coin sales remain strong, high premiums caused by production shortages at the dysfunctional government “enterprise” has put a crimp on sales as compared to early 2021.

The U.S. Mint reported silver sales of roughly 7.5 million ounces in the first quarter, a decline of 37% from the year prior.

Extraordinarily high premiums on silver American Eagles have pushed savvy investors to consider the wide array of more affordable silver options – especially silver bars and rounds along with silver coins produced by other sovereign mints.

      

(Richmond, Virginia – April 12, 2022) – By signing sound money legislation last night, Virginia Governor Glenn Youngkin has ended Virginia’s discriminatory practice of assessing sales taxes on smaller purchases of gold, silver, platinum, and palladium bullion and coins.

Virginia’s House Bill 936, originally introduced by Del. Amanda Batten, was considered by multiple House and Senate committees before passing overwhelmingly out of both chambers and reaching the governor’s desk.

Virginia had been one of only seven states in the United States maintaining merely a partial sales tax exemption on purchases of precious metals. Virginia’s regressive practice of taxing only purchases under $1,000 singled out small-time savers for a tax penalty that larger gold and silver purchases do not face.

By enacting HB 936, Virginia has set an example for legislators in California, Connecticut, Florida, Massachusetts, Maryland, and New York, where smaller-sized purchases (under $500, $1,000, or $1,500) of precious metals are still hit with sales taxes.

The full Virginia sales tax exemption on the monetary metals will take effect on July 1 and remain in effect until at least June 30th, 2025.

Meanwhile, full exemption bills are pending in Alabama, Hawaii, New Jersey, and Tennessee, as the national backlash against taxing constitutional money accelerates in today’s environment of rising inflation and geopolitical conflict.

Including Virginia, 41 U.S. states now fully or partially exempt gold and silver from the sales taxes. That leaves 9 states and the District of Columbia as the primary jurisdictions that still harshly penalize citizens seeking to protect their savings against the serial devaluation of the Federal Reserve Note.

Jp Cortez, policy director for the Sound Money Defense League, explained that “by eliminating sales taxes on purchases of precious metals under $1,000, a huge impediment has been removed to storing one’s wealth in gold and silver.”

In her testimony in support of the bill, Del. Batten explained that it doesn’t make sense for someone to make large purchases of gold and silver tax free, but someone who wants to invest a smaller amount is punished with a tax… a tax which targets those who can afford it the least.

“Inflation has become an undeniable problem due to financial mismanagement by the Federal Reserve and by the politicians in Washington DC. Thankfully, both large and small investors in the Old Dominion can now protect the purchasing power of their wealth with sound money without being taxed,” said Money Metals Exchange president Stefan Gleason, whose company has helped lead sound money policy efforts.

States have been removing sales taxes from monetary metals for the following reasons:

• Taxing precious metals is unfair to certain savers and investors. Gold and silver are held as forms of savings and investment. States do not tax the purchase of stocks, bonds, ETFs, currencies, and other financial instruments, so it makes no sense to tax monetary metals.
• Levying sales taxes on precious metals is illogical because gold and silver are inherently held for resale. Sales taxes are typically levied on final consumer goods. But precious metals are inherently held for resale, not “consumption.”
• Taxing gold and silver harms in-state businesses. It’s a competitive marketplace, so buyers in states with precious-metals sales taxes often take their business to neighboring states that have eliminated or reduced sales tax on precious metals. Coin conventions also tend to avoid the sales tax states.
• Taxing precious metals is harmful to citizens attempting to protect their assets. Purchasers of precious metals aren’t fat-cat investors. Most who buy precious metals do so in small increments as a way of saving money. Precious metals investors are purchasing precious metals as a way to preserve their wealth against the damages of inflation. Inflation harms the poorest among us-including pensioners, Virginians on fixed incomes, wage-earners, savers, and more.

The Sound Money Defense League, a non-partisan, national public policy group working to restore sound money at the state and federal level and publisher of the Sound Money Index. Money Metals Exchange is a national precious metals investment company and news service with more than 500,000 readers and 350,000 customers. It also operates Money Metals Depository for vaulting of gold and silver and Money Metals Capital Group, a collateral lending institution.

      

Source: McAlinden Research   04/12/2022

With geopolitical tensions rising, the US recently banned defense contractors from purchasing REE metals from China and will consequently attempt to revive its domestic rare earths industry. However, the US has just one rare earth mine and no processing technology, which highlights the need for a new wave of investment, writes McAlinden Research Partners.

Rare earth elements (REE), which consist of a group of seventeen metals, are some of the most important minerals on earth that are used to manufacture several products key to the future of the modern world.

Rare earths are used in the production of smartphones and semiconductors, both of which are expected see increased demand throughout the coming years as the world shifts online and becomes more and more reliant on technology.

MRP has recently highlighted the importance of semiconductors amid the ongoing shortage and a permanent shift in behavior due to a global digital transformation. As that transformation accelerates, the role of rare earths will also rise.

These metals are also an integral part of the renewable energy transition sweeping across the globe.  According to a report from the International Energy Agency (IEA), the amount of minerals necessary for a new unit of power generation have increased by 50% since 2010 and that number is likely to rise as the United States continues to embrace clean energy.

Wind energy is especially dependent on rare earth metals. According to Lynas Rare Earths, the wind turbine market is expected to account for approximately 30% of the global growth in the use of rare earth magnets by 2025.

Last week, MRP highlighted the growing demand for battery metals due to the rising number of electric vehicles hitting the road. Demand for rare earths is also expected to increase due to those lofty EV goals currently set by the Biden administration. Per a September report from Forbes, the United States needs more than ten times its current rare earth supplies to reach Biden’s goal of having 50% of cars sold in 2030 be zero-emission electric vehicles.

To meet the burgeoning needs of the rapidly expanding green economy, the US will need more than 20 to 25 times its current supply as investment into electric vehicles, wind power and other renewable technologies climb through the decade.

These minerals are also imperative in the production of many defense applications. In the industry, two rare earth metals, neodymium and samarium, are used to create magnets that are resilient to high temperatures which is important for mission-critical electronic and defense applications.

Other rare earths are used to manufacture fighter jets and soldier semiconductors, a sector that Army Technology notes is projected to be valued at $17.5 billion by 2030. With global tensions rising around the world amid the Russian invasion of Ukraine, building up domestic supplies of these metals is key to avoiding reliance on Chinese imports.

Bank of America predicts that demand for rare earths is set to increase by 500-600% in the coming decades, while US policymakers have acknowledged that relying on China and other international suppliers is no longer a feasible strategy.

US Looks to Ease China Dependence, New Funding Key to Securing Supply

While the importance of rare earth metals cannot be understated, the level of investment put into domestic production in the United States is certainly a cause for concern.

Roughly 38% of the world’s rare earth reserves are found in China, and the country was responsible for 90% of all global exports in 2019. China accounted for roughly 80% of the Unites States imports of those metals two years ago, a worrying sign that the US is entirely too dependent on foreign nations for their rare earth supplies.

Army Technology points out if China were to close the tap of their rare earth reserves or reduce their exports amid a trade war with the US, US rare earth supplies would be significantly limited at a time when demand is soaring. China has previously temporality blocked rare earth exports to Japan in 2010 and has also formerly made vague threats that it could do the same to the United States.

Pini Althaus, founder of USA Rare Earth, told Global Defence Technology that the US is in an extremely precarious position and the only way to have a secure rare earth supply chain is to start developing projects domestically.

The US has made efforts to boost domestic production of these metals, but they remain woefully lacking. Reuters reported in January that the US only has one rare earths mine in the US and currently has no capability to process rare earth minerals.

To try and ease the dependence on China, the Restoring Essential Energy and Security Holdings Onshore for Rare Earths Act of 2022 was introduced that would essentially force defense contractors to stop buying rare earths from China by 2026. The bill is expected to be looped into Pentagon funding legislation later this year.

A month after that bill was introduced, the Pentagon announced it is developing plans to boost the current stockpiles of both rare earths and battery metals, a move that would require much more domestic mining production, per Reuters.

Real Clean Energy believes mining is only the first step. The US must put that same amount of investment into the refining and processing parts of the domestic rare earths supply chain, which while currently a small sector, has significant growth potential in the coming decades.

To conclude, rare earths remain a critical group of minerals for the global defense industry, renewable energy development and the rapidly accelerating digitization of the modern economy. The US is at risk of falling behind in the race to secure rare earth supplies if it does not soon boost domestic mining and processing of these metals and shift away from the overwhelming reliance on China.

Originally published April 11, 2022.

McAlinden Research Partners (MRP) provides independent investment strategy research to investors worldwide. The firm’s mission is to identify alpha-generating investment themes early in their unfolding and bring them to its clients’ attention. MRP’s research process reflects founder Joe McAlinden’s 50 years of experience on Wall Street. The methodologies he developed as chief investment officer of Morgan Stanley Investment Management, where he oversaw more than $400 billion in assets, provide the foundation for the strategy research MRP now brings to hedge funds, pension funds, sovereign wealth funds and other asset managers around the globe.

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