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Thoughts on Gold from Austin - May 2018
Thank you for being a subscriber to our email market updates. Below you will find exclusive commentary on the overall economy, stock markets, and how they relate to precious metals. Afterwards, we will share with you our top suggestions if you're thinking about making some timely acquisitions in physical precious metals. Questions? Just call
1-800-928-6468
, we are happy to help you in any way we possibly can.
1. Has 2017's 'Buy any stock market dip' been replaced with 2018's 'Sell into strength'?
For years the Fed had the market's back by keeping interest rates low-way too low, and offering an encouraging word whenever stocks went down. So it was under Ben Bernanke and Janet Yellen, who understood the importance of keeping an upbeat stock market and steady or rising home prices. Since income growth has advanced at a snail's pace during this expansion for most Americans (and memories of the 2008 financial crisis are still fresh), those in higher brackets have been encouraged to spend with the value of their portfolios and homes on the rise. Consumer spending is vital to the economy. A sudden market decline could have an adverse effect, as it can lead to postponement of major economy-boosting investments or changing your vacation plans.
It remains to be seen if this is already happening, to some degree, as consumer spending has been sluggish in the first quarter of the year. Gold has struggled to rise higher with climbing interest rates and a suddenly stronger dollar in April, but stocks have struggled a bit more. Now that the Fed is raising interest rates, seemingly with great confidence, in time we will find out just how resilient the economy is. The Fed's unprecedented effort to push interest rates down to zero-to actually discourage that we save-became one of the most profound economic experiments in financial history.
Make no mistake: Wall Street understands that this is what it was. But, now that the experiment has concluded and monetary policy is moving in reverse and potentially setting the markets up for disruption, we believe the price of gold, ultimate financial insurance, will benefit.
2. What will get gold going-really going?
While gold has held up during the stock market weakness this year and is well off its 2015 bottom of $1,050, it has remained relatively calm within a range of $1,300 - 1,350. The metal has surprised skeptics both by staying firm in the face of rising interest rates and not falling in the March-April period, avoiding the seasonal weakness that often arrives in the spring. But now that the summer is approaching, what will push gold well over $1,350?
One might think this could come from a positive change in demand from India or China, as these countries are the world's largest consumers and their purchases increase late in the summer. Or that the prospect of tax cut-induced trillion dollar deficits lying straight ahead-arriving perhaps as soon as this year-could also help push the price of gold up sharply.
But, we think the most important catalyst is simply that Wall Street turns its attention to gold after a very long bull market in stocks. Fundamentals aside, the reason it would do so is momentum.
We can think of Wall Street simplistically as the collective group of analysts, strategists, fund managers and market participants of many stripes that affect the movement of trillions in wealth each year. And we can add to this group financial journalists, who contribute to the widespread sense that Wall Street tends to look down on gold as an investment. For instance, Jason Zweig of The Wall Street Journal derisively called gold a "pet rock" in the summer of 2015 when the metal was down roughly 40% from its 2012 high and stocks were into a very strong rebound after the financial crisis. Mr. Zweig hasn't said much about precious metals since then, especially now that stocks are struggling, and the reason is clear: the gold chart is looking much better. Interest rates have been climbing, the dollar is recovering, but gold continues to hold up for the year.
Most professional investors, even those who profess to be driven by "fundamentals", tend to pay a great deal of attention to price charts. Silly as it sounds, they are interested in things that are going up and selling things that are going down; in other words, they love investments that have momentum, given the likelihood that significant trends most often persist. Looking at many long-term charts, you will find that currency, stock and bond market movements often have long, persistent trends.
Given that stocks, whose valuation is now clearly elevated, have outperformed gold so significantly during this stock market boom, don't be surprised if you see Wall Street starting to change its views on gold. Bearish talk on the metal has simply vanished in recent months. If gold momentum persists and we break out of $1,350, get ready for lots of bullish talk from Wall Street on gold. The bearish talk on stocks is well under way.
Our Top Gold Recommendations:
(Save 3% with check/wire)
- Top Recommendation: Only 100 coins available at this price!
- Each coin contains just under ¼ ounce of pure gold
- Certified Mint State and over 100 years old
- Orders of twenty will come in NGC/PCGS boxes for storage
- Lowest premiumsover melt value we've ever seen
- Each coin contains just under an ounce (.9675) of pure gold
- Certified Mint State and nearly 100 years old
- Like bullion with muscle-for a small amount over modern bullion you can own classic U.S. gold
Our Top Silver Recommendation:
- Limited mintage of only 75,000 coins---only 750 cases being released worldwide!
- Same price per ounce as Silver American Eagles
- Orders of one-hundred coins will come in sealed cases from the Perth Mint
- Orders of ten will come in mint-fresh rolls of ten
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