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Last Updated on: 10th March 2023, 12:02 am
With central banks continuing last year’s record-breaking gold buying spree into 2023, some lawmakers are considering using physical gold and silver to protect their state’s coffers.
On March 3, 2023, the Idaho State House of Representatives approved House Bill 180 (HB180), a bill enabling the Idaho State Treasurer to use precious metals to shield public funds from inflation.
The bill passed the legislature by a 40 to 29 vote on its third reading, with one abstention, and has now been referred to the House State Affairs committee for further studying and revision. Should the bill be signed into law by Governor Brad Little, it would come into effect on July 1, 2023.
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What Idaho’s Precious Metals Bill Means for Idahoans
With February’s national Consumer Price Index (CPI) at 6.4%, legislative efforts are being taken to protect the state’s record $1.4 billion budget surplus. One such effort is HB180, which would amend Section 67-1210 of the Idaho Code to allow “idle moneys” of the state Treasury to be invested in physical gold and silver.
Gold has been shown to act as an inflation hedge, which means that diversifying idle funds (in the form of cash, bonds, or other paper instruments) in gold could mitigate some of the negative effects of monetary devaluation for Idahoans.
Inflation can evaporate the value of a state’s public funds. Therefore, the difference in value saved by diversifying in gold bars can be reinvested in Idaho’s social programs, schools, infrastructure, or applied toward tax relief.
Source: Rob Kientz (@goldsilver_pros)
Some observers, such as Rob Kientz (quoted above), consider HB180 to be a positive economic development for the state. The same goes for the Idaho Freedom Foundation, who wrote that the bill will “[P]rotect the state’s resources from the volatility of the bond market and the wealth destroying scourge of inflation.”
Will HB180 Become Law?
It’s improbable, but not outside the realm of possibility, for HB180 to become law. There is no historical precedent for such a law to be passed in modern American history, despite several legislative attempts at the state level since 2019. All previous attempts have failed.
However, there are no political roadblocks in the way of HB180 becoming law. Idaho enjoys a political trifecta in which both chambers of the legislature and the governorship are controlled by the Idaho Republican Party. With all three loci of power dominated by the same party for nearly 30 years, it’s unlikely that the bill will face any resistance on partisan grounds.
Given the commanding majority with which the bill passed on third reading, HB180 appears to be the strongest contender we’ve seen since 2019 in support of state gold buying.
Segment of HB180 Draft Bill (Source: Idaho Legislature)
Central Banks Are Buying Gold; Will States Follow Suit?
Last year, central banks worldwide added over 1,136 metric tons of gold bullion to their reserves. The trend appears to be carrying over into the new year, as over 77 tons were added in January 2023 alone—the lion’s share being purchased by the Monetary Authority of Singapore, who bought 44.6 tons.
Global institutional gold buying is largely the result of systemic concerns about the stability and resilience of global financial markets. With economic reserve currencies, like the U.S. dollar, on uncertain ground, many central bankers are looking to shore up their reserves with hard assets.
There is also growing speculation about anticipated changes to the international monetary system, including a growing interest in de-dollarization.
Although central banks and state governments may not share the same motivations for gold buying, this only proves that gold can offer appealing and diverse benefits from its stability.
Protection as Good as Gold: Consider Diversifying Today
There are few assets as resistant to inflation as gold. If you’re serious about combating inflation in 2023, consider opening a gold IRA with one of America’s most trusted gold IRA providers. They offer all the tax benefits of a traditional or Roth IRA, but with the stability of gold diversification.