The state of Texasto build its own gold bullion depository. What does it mean for the global monetary system and the gold market?
On June 12, Texas Governor Greg Abbott signed a(HB 483) establishing the nation’s first state-level gold depository. What does it imply? The depository permits Texans to store and pay precious metals to other account holders. In short, Texans are now able to deposit gold or silver (or platinum, or palladium, or rhodium) and pay other people through electronic means or checks in sound money. Additionally, the state will repatriate $1 billion worth of gold from the Federal Reserve in New York to the new facility in Texas. What is important is that the legislation protects depositors from the seizure or another 1933-style confiscation of their bullion by federal authorities, as section A2116.023 of the bill states: “A purported confiscation, requisition, seizure, or other attempt to control the ownership … is void ab initio and of no force or effect.”
On the surface, the new law sounds rather innocent, just a bill which enables Texas to save some money on fees paid for storing gold in facilities outside the state (in New York), or a vote of no confidence in the central bank’s trustworthiness (as a reminder, the Fed’s gold stocks have not been publicly audited since 1953).
However, in reality the new law has the potential for wide-reaching effects. It could open the market for precious metals in day-to-day transactions. Therefore, it is an important first step towards gold (and silver) becoming commonly-used legal tender in Texas. Some analysts even prophesy that this bill could encourage investors to move their precious metals to Texas, which could become a next center of global finance, while others claim that Texas is preparing to secede. Moreover, by introducing competition into the monetary system, this bill could undermine the Federal Reserve’s monopoly on money.
It is definitely too early to predict the future of this monetary experiment – especially that the federal government and its central bank will certainly not stand idly by – and its impact on the gold prices. What we know is that the bill has just been passed and it will take some time before the system begins to work. The impact on gold price will depend on whether the introduction of the Texan gold depository will spur demand for the yellow metal, or investors will just move their already possessed precious metals to Texas. However, the more gold will be able to function as money, the more it will be precious due to the additional monetary demand. Whatever will happen, the new Texan legislation could affect psychologically the gold market and add some positive sentiment toward gold.
Sunshine Profits‘ and Editor