What the Historic Wall Street Tumble Means for Gold and Silver

01 Mar

What the Historic Wall Street Tumble Means for Gold and Silver

Blood Running on Wall Street Creates Buying Opportunity for Precious Metals

You might not have been too worried last Monday when the Dow Jones Industrial Average fell 227 points.  But you certainly must have taken notice of the carnage on Tuesday when it fell 1031 points.  The collapse was confirmed for any doubters by midweek because on Wednesday the Dow plunged another 879 points.  And then came the worst day in the history of the Dow, Thursday, February 27, when the Dow fell 1190 points.  

Friday’s loss of another 357 points capped off the week, the worst stock market performance since the last fiscal crisis, the Mortgage Meltdown in 2008.  Altogether the Dow had a loss of 12 percent for the week; the S&P fell 11 percent.  

Look closely at this, one of the ugliest charts we’ve ever seen, as the Dow falls off the cliff:

For our part, we wrote last Monday that New York stock brokerages that were calling for a mere correction in response to the coronavirus were guilty of “gross understatements.”

Even more absurd was the comment of Jim Cramer on Wednesday (2/26) as he urged his viewers to get off the sidelines and into the stock market.  “If you haven’t put anything to work, I think you’re playing with fire,” said the CNBC “Mad Money” host.

Huh?  If you are on the sidelines, avoiding the danger entirely, you’re playing with fire?

In early October we warned about the spread of disease (Gold Coins for Black Swans) when we wrote about unpredictable events that make gold a crucial part of your portfolio:

“Those include everything from the sudden outbreak of war, widespread crop failures, and the spread of disease like the flu epidemic of a century ago, to uncontrollable civil turmoil, power grid failures, earthquakes, volcanic eruptions, and even less likely events like an asteroid impact.

“Unexpected?  Unlikely?  Precisely the qualities of the Black Swan events that order and reorder just about everything in our lives.”

Since then, the unlikely events that have actually occurred are the fires that devastated Australia, a plague of locusts in Africa, and bats in Australia.  Outbreaks of Swine Fever and bird flu.  All that and earthquakes, too.  

Yet the worst of these unexpected events appears to be the COVID-19 outbreak.

The stock market has been whistling past the graveyard about the coronavirus from the beginning of the news from China.  

Last week it could no longer avert its gaze.  The Wall Street Journal summarized the bad news with a headline:  “The Week that Wiped $3.6 Trillion Off the Stock Market.”

Gold was caught in the crossfire.  Although it surged close to $1,700 on Monday as the virus news spread, it fell hard on Friday amidst what could be called a low-grade panic on Wall Street, finishing at $1,566.  

We Have Seen this Kind of Action Before

Traders in markets with perfectly sound economic fundamentals can sometimes liquidate their positions in other things to meet margin calls in collapsing markets.  It appears that in the general carnage of the stock market, large investors scrambling for cash to meet margin calls took profits in gold, the most liquid commodity of all.

To repeat, we have seen this kind of action before, and we know what happened then.  Gold fell hard – but only briefly – in the fall of 2008 during the stock market carnage of the mortgage meltdown.   

But that margin call selling opened a window of opportunity to buy gold at “sale prices.”

Of course, it didn’t last long.  Soon gold was racing to new all-time highs.  Three years later it was up well over 2 ½ times its October 2008 low.  

We haven’t liked what we have learned so far about COVID-19.  As we have said repeatedly, we are not epidemiologists and don’t pretend to know what even the experts themselves don’t yet know either.  But having spent a lifetime learning about how money reacts in a crisis, so we urge you to avoid any further bloodletting in the stock market as this pandemic plays out.  Take advantage of the dip in gold and silver prices while you can.

As we wrote in October, “Owning physical gold and silver is the single most important thing you can do to protect yourself from low predictable events that carry outsize impacts.”

Take action now.  We could be witnessing the beginning of the 2020 economic crisis. Analysts have been saying for years that the next one would be way worse than 2008. It’s still not too late. Contact Republic Monetary Exchange today and diversify your portfolio with physical gold and silver.