Gold & Silver for Self-Preservation

Legislation has passed the state senate in Missouri and moved to the house that propels gold and silver more into the mainstream of financial transactions and investment in the state. There is an increasing trend in this direction, with more states coming in line with protections and provisions for the owners of precious metals. Gold and silver bullion were already exempt from state and local sales taxes in Missouri. This legislation (Senate Bill 100), however, also makes some important changes regarding state reserves, income taxation, and debt service that will impact the owners of gold and silver. Many states are beginning to realize that in order to protect themselves against the fiat largesse of the federal government, they need to cater to and accommodate citizens of the state who are doing the same thing.

Missouri plans to join Ohio in becoming one of the states that mandate holding a portion of reserve funds in gold and/or silver. The proposed legislation would require a minimum of 1% of state funds to be stored as precious metals. Interestingly, there is no maximum limit of gold and silver listed in the senate bill the state can hold in reserve, only a mandated minimum. The bill also eliminates capital gains taxes on gold or silver sold by Missourians. The state recognizes the difference between real investment gains and the nominal gains often achieved when converting gold or silver back into fiat currency. That is, over time gold and silver maintain purchasing power, while the value of paper currency decreases over time. When gold purchased a few years ago for $1,250/ounce is now sold for $1,900/ounce, the state would recognize the $650 “gain” as merely purchasing power protection from the devalued federal currency (dollars).  

In addition to beneficial tax treatment, this pending legislation would also allow gold and silver to be used to make financial contracts and as legal tender in the payment of obligations. The gold or silver would be valued at spot price plus the premium(s) in effect with the expense to verify the validity or purity of the metal the responsibility of the recipient. Even debts or obligations owed to the state could be paid or settled using gold or silver. Following in the footsteps of the Texas Bullion Depository, the legislation also mandates that state gold and silver reserves be held in physical custody by the state treasurer. This means that provisions will be made to store physical gold and silver in the state, though the mandate for a full-blown state bullion depository was withdrawn from the Senate version of the legislation.

But these developments are not confined to Missouri. There are currently over 30 pieces of legislation working through 19 different states that favor gold and silver. Vermont is considering legislation to become the 44th state to exempt sales taxes on gold and silver purchases. Not to be outdone by a regional neighbor, the race is on between Maine and Vermont to become number 44. Competition and positive peer pressure are building between states who don’t want to be left out of the progress being made in the sound money arena. Mississippi, Wisconsin, and Kentucky are surrounded by states that have exempted gold and silver from sales tax and have recently considered legislation to follow suit. Idaho, Missouri, Mississippi, and Tennessee are considering holding bullion in state reserves, with others moving in that direction. You can see what developments are going on in your state by looking here.

What we see happening in states across the US has also been happening internationally. 2022 was a record year for central bank gold purchases around the world.  I believe much of the impetus surrounding the governmental movement towards gold and silver, whether domestically or internationally, is a desire for self-preservation. The issue is the perceived lack of protection from owning dollar-based assets. Inflation is a major concern today, with Federal Reserve Chairman Jerome Powell continuing to be grilled by Congress about how and what the FED is doing to lower inflation without destroying the economy. While some view inflation through the lens of rising prices, many are beginning to view it instead through the lens of a devalued dollar.  Whether inflation continues to rage, or the economy is sacrificed to defeat inflation, the value of the dollar seems destined to go lower.

Cities, counties, states, and central banks around the world are waking up to the fact that holding dollar-based assets in reserve can be counter-productive when the value of the dollar is declining. Throughout history, gold and silver have outlasted fiat currency as a dependable store of value that protects against the ravages of inflation. Perhaps we as individuals should take a cue from the governmental momentum going on all around us and consider storing a portion of our savings in gold and silver. Notice it is the governmental entities that do not print dollars that are diversifying more aggressively into gold. Even states and municipalities within the United States (that use dollars as their local currency) are recognizing the benefits of diversifying into gold and silver.

What if you had the opportunity to invest in an asset class that is attaining new tax benefits weekly? My hope is that as more momentum builds at the state level to exempt gold and silver from sales tax and capital gains tax, eventually legislation will be introduced at the federal level to accomplish the same things nationwide. States and central banks know what you and I should know; namely, that gold and silver act as a counterweight to a devaluing currency.  When it comes to doing something new to protect our family’s finances, sometimes the best new ideas are forgotten old ideas that have worked for centuries. Regardless as to which state or nation we live in, or which new laws pass or fail, we can choose as individuals to move forward with “sound money policies” simply by purchasing and storing a portion of our savings in precious metals.