What Is Silver Saying about the Precious Metals Bull Market?
What the Gold Market Is Saying about Global Risk, Bank of England Rate Cuts, Japanese Stimulus
Michael Preiss of Taurus Wealth Advisors believes the global economic outlook is recession and stagnation. In his analysis on CNBC he stated that the gold market can reveal much about the state of the economy. He points out that gold is the best performing asset class of 2016 and has outperformed the S&P by 19%. Much of the world’s sovereign debt is seeing low and negative yields.
Watch the video here from Yahoo Finance UK.
What this means for investors: Financial stress is becoming more apparent in the global system. If the recession that Preiss believes to be inevitable does occur, gold and silver will see more gains.
Silver’s Performance for the Year Optimistic for Precious Metals Bull Market
Silver has been a top performer so far for 2016. Silver often outperforms gold in a bull market for precious metals, which most strategists are agreeing is where the market currently is. The white metal is up more than gold overall for the year with both over 26% in the green for 2016. Georgette Boole – commodities and currency analyst at ABN Amro Bank – believes that silver will continue to outperform gold into 2017. An ounce of gold right now is able to buy the least amount of silver since 2014. The ratio was at its lowest in three decades during the record prices that we saw in 2011. This is an indicator that the bull market has a way to go yet.
Both metals gained early and mid-week after the Federal Reserve announced no interest rate hike and the Bank of England cut interest rates.
What this means for investors: Both metals have a bright outlook through 2017. Silver is driven by many of the same economic factors as gold, but its price is also dictated by industrial demand. It can also move more sporadically than gold. With an increase in usage in things like solar panels, touch screens, and RFI chips, the metal is seeing increased demand, which has lifted the price. Silver is a lucrative way to diversify a precious metals – or any investment – portfolio, and many first time silver investors are taking advantage of the price now to buy.
The Bond King: “I Don’t like Stocks, BONDS or Equity…gold and land are favored asset classes.”
This week in his August letter to investors, Bill Gross, portfolio manager at Janus Capital, issued a warning against investing in stocks and bonds and advised investors to move into gold, land and other real assets.
The reason for his dour prediction is central banks’ monetary policies of low and negative interest rates and other foreboding signs of a weakening financial system. Low interest rates raise asset prices, but impede savings and business investment. He also stated that capitalism cannot function properly with interest rates at zero and negatives, and that global monetary policies will not succeed without nominal growth, which we are not seeing.
Bill Gross manages the $1.5 billion Janus Global Unrestrained Bond fund, which is up 3.93% for the year. He has also written acclaimed books on investing. Gross is the latest to join the swelling ranks of fund managers and investors who have gone bullish on gold. Stanley Druckenmiller, Paul Singer, Jeff Gundlach, and George Soros are just some of the other prominent names that have recently recommended gold to investors and cautioned against stocks in the current economic climate.
We sent out a mid-week blog post about this on Thursday Aug 4th which you can check out here.
What this means for investors: In times of market turbulence and volatility, gold becomes a more attractive investment. Demand increases, as investors become more risk adverse. Economic growth around the globe is slowing due to central banking stimulus policy, and without growth, high yields on stocks and bonds will become more difficult to find. Gold both preserves wealth during economic downturn and offers a return. The metal is up 26% for the year with many strategists projecting it to climb as high as $1400 by the end of the year.
Gold and Silver React to July Jobs Report
After gaining all week, gold and silver both fell Friday following the release of the July jobs report. The data was better than expected – especially after the dismal May numbers – with 255,000 new jobs added last month. Unemployment held steady at 4.9% as well. Targets had been 4.8%. It was a positive for the U.S. economy after the weak GDP growth from the second quarter. Stocks responded by rallying and precious metals fell as the dollar strengthened. Earlier in the week the case had been the opposite with stocks falling and gold gaining following European volatility and the Fed’s low interest rate policy.
Despite the robust numbers however, some analysts are still worried about the labor force participation rate, which is lower than what some targets call for. Corporate earnings for the second quarter are lagging in some sectors, causing concern over how strong the business cycle actually is.
What this means for investors: The jobs data gave stocks a much-needed boost on Friday after being down all week, as investors became more risk adverse. Friday’s slump for metals could likely be a short-term event, however, as the economic data is more indicative of economic slowdown ahead. The Federal Reserve may read the labor data as a sign to finally raise interest rates if they believe the economy is strong enough.
Here are some articles from the web discussing the topics in this week’s post:
What the Gold Market Is Saying about Global Risk, Bank of England Rate Cuts, Japanese Stimulus
Watch Video Here
Silver’s Performance for the Year Optimistic for Current Bull Market
Read Here
“I Don’t like Stocks, Bonds or Equity…gold and land are favored asset classes.”
Read Here
Gold and Silver React to July Jobs Report
Read Here
As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at 602-955-6500 or toll-free at 877-354-4040.
