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Is Biden´s plan going to skyrocket the Silver price?

Published by Karl Martin Karus in category Precious metals on 30.04.2021
Gold price (XAU-SEK)
15 077,00 SEK/oz
  
- 7,00 SEK
Silver price (XAG-SEK)
219,75 SEK/oz
  
+ 1,04 SEK

Last week, US President Joe Biden presented a $3 trillion green infrastructure package. That’s extra on a $1.9 trillion economic relief bill he recently signed into law. Next month, Biden should make plans to spend additional trillions on health, education, housing, and more.

While the plan focuses on infrastructure, it still contains significant amounts of spending that could impact precious metals markets and silver in particular. Here are three ways how Biden’s infrastructure plan could boost the silver prices.

Green energy

Green energy components can create a huge demand for metals, including silver.

The Biden administration is instructing all federal government agencies to change their fleet to electric motors. The administration is also creating incentives for consumers to buy electric vehicles with the ultimate goal to ban the sale of petrol-powered cars. (1)
Biden’s infrastructure plan contains $100 billion in spending to update the United States’ electrical grid, as well as a new national standard for energy efficiency and clean energy that would require a certain minimum amount of electricity to be produced from zero-emissions sources such as solar or wind power. (2)
Silver is a superior electrical conductor. Silver is the metal with the highest conductivity. This is critical at all stages of the electrification infrastructure, from solar panels, charging stations to battery connections and almost all electricity-consuming electronic systems. Electrification has a silver lining – literally. (2)
It isn’t just the solar industry that makes use of silver either. Silver has great electrical conductivity and is corrosion resistant. It is an ideal metal to use in electronic and battery-powered devices. With Biden planning to spend $174 billion to boost the electric car market, that money could very well boost the silver market. (2)

Higher Taxes

According to the New York Times, the taxes Biden plans to raise to pay for his infrastructure plan are the largest tax increase since World War II. Three primary tax increases could affect investors.

  • Increased Corporate Tax Rate – The United States used to have one of the highest corporate tax rates in the world, at 35%. President Trump pushed Congress to lower that rate to 21%. Biden wants to raise it again, to 28%.
  • Social Security Tax on High Incomes – Social Security taxes currently phase out at incomes over $142,800. Biden would plan to impose Social Security payroll taxes on incomes above $400,000.
  • Raising Capital Gains Tax Rates

Rising Inflation

The world has already seen the results of previous rounds of stimulus spending being reflected in higher prices at the pump, at the grocery store, and in housing. Hardly a single facet of our lives hasn’t been affected by the monetary and fiscal tsunami that has overtaken the economy over the past year.

Higher inflation, rising taxes, and a stagnant economy could become the mark of the 2020s. That type of economic climate and investment atmosphere would benefit precious metals, which could end up being some of the top-performing assets of the decade.

The worse the economy gets, the better gold and silver perform, with silver often outperforming gold during the precious metals bull markets. (2)


(1)    https://seekingalpha.com/article/4416773-what-bidens-big-infrastructure-push-means-for-silver

(2)    https://www.kmjnow.com/news/how-bidens-infrastructure-plan-could-boost-silver/

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