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Economy Gold and Silver

Gold Has Good Support Price at $1,500 Amid Dollar Surge

At 1400 EST today the Federal Reserve Bank decided to lower interest rates by a quarter point (25 basis points). As a result the Dow Jones Industrial Average dropped 196 points and the S&P 500 sank to 25 points by 1148 that morning.

By 1445—the 10-year treasury bond dropped to 1.77% and the two-year treasury yield was at 1.78%. The Dollar Index rose 0.38% to 98.64. Gold and silver declined to $1,502.10 and $17.68 respectively. Nevertheless, as a longstanding hedge against inflation these metals have been deemed as “money” since human civilization began 5,000 years ago.

It’s no surprise during weak and volatile economies gold and silver shines, even amid a strong dollar that is artificially propped up. These are signs that the United States economy is falling, and “real money” is rising. Keynesian economics and modern monetary theory (MMT) have wreaked havoc on our once rich and prosperous economy that blossomed during the republic’s early years in the 1700s.

The U.S. has long been a creditor nation, meaning it has loaned money to others. Now, it’s a debtor nation, owing $1.11 trillion to China as of May 2019, with a fiat currency that lost 98 percent of its value since the Federal Reserve was created in 1913. President Nixon took us off the gold standard “temporarily” (or so was the claim) in 1972. The 40 percent backing allocation of gold and silver before this point restrained U.S. monetary policy from overspending.

Further, amid today’s news of weary investor confidence, gold and silver prices stayed above their early August highs. We are still looking at higher highs and lower highs when setting a line between the base of their chart fluctuations since the bull market began in June of 2019.

Gold price remains slightly more stable than silver, although fluctuations have historically caused silver to outperform gold. There widely assumed that silver will have more leverage–in both directions–as it follows the price of gold during this bull market.

It’s also important to note that structural bull markets in precious metals such as this usually last about 5 years. I feel strongly that gold and silver will outperform the U.S. stock market in the coming years. The economy is a mess. Record consumer debt soars at all time highs, while low-wage “server jobs” fill much of the employment numbers. Meanwhile, pundits on CNBC and the Trump administration claim the economy is still strong amid dwindling numbers of economy growth.

Though recent earnings reports from some U.S. retailers (e.g. Walmart) were favorable, they were likely due to credit card borrowing. The reality is, most Americans are broke. They use credit cards to buy necessities, and many do not see what’s coming. Consumerism is a major problem in this nation. Americans’ lack of saving combined with the federal government’s increase in spend will surely reap consequences. We are due for a huge, painful correction, but this is how natural laws work.

Moreover, as usual, President Trump reacted with yet another degrading tweet toward Chairman Powell upon his Fed announcement at 1400, criticizing his dovishness of not lowering interest rates even more. Notwithstanding, Trump’s recent attacks contradict his former condemnation of low interest rates by the Fed during the Obama years, which he avidly denounced.

Donald Trump: Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!

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Behavioral Economics

Wait Until Big Money Moves Into Gold and Silver

If you think the current spikes in precious metals are great, wait until institutional investors and hedge fund managers lay siege to the commodities market. Gold and silver will likely outperform this ever-weakening economy in the coming months.

By 0800 the Dow Jones Industrial Average plunged 333 points as trade tensions escalated, because tariffs took effect between China and the United States on September 1st. The market is long overdue for a recession. It’s been ten years now since the recovery in June of 2009. All analysts who are honest predict this recession to be far worse than what we saw in 2008.

Meanwhile, gold and silver prove to be the standard safe haven for preserving the store of value amidst a waning currency. Over the past few weeks gold hit all time highs in foreign markets. In the United States we are approaching the six-year highs we had during the QE inflationary period under President Obama.

President Donald Trump continues to brag about his “greatest economy,” but the August Manufacturing Index plummeted to 49.1, “unexpectedly,” making U.S. manufacturing the worse it’s been in 10 years since under Obama. Peter Schiff, CEO of Euro Pacific Capital weighed in this morning on Twitter.

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Peter Schiff: The Aug. ISM Mfg. Index “unexpectedly” plunged to 49.1, indicating contraction. U.S. manufacturing is now the weakest in 10 years. It’s weaker than it was when Obama was president. The Trump economy is all government and consumers spending borrowed money as industry collapses!

Amid this constant barrage of negative market statistics, along with a president spending trillions of government money by raising the deficit, I am very optimistic about gold and silver in the coming months, to include physical assets, ETFs, and mining stocks.

This morning on CNBC, some talking heads finally admitted that certain parts of the U.S. economy are already in recession, such as industrial sectors.

CNBC Pundit discusses the topic of recession in the U.S. economy.
CNBC Pundit discusses the topic of recession in the U.S. economy.

It’s only a matter of time until this phony economy built on debt will come crashing down. Markets will adjust to their true prices.

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Behavioral Economics

September is Often Favorable for Gold and Silver

From September and into early October, gold and silver usually rise in price. However the stock market often recedes. There are obvious reasons for this, which underlie basic human psychology. Behavioral economics account for the real reasons behind market moves because people’s innate motives override statistical speculations.

Silver is entering its “sweet spot” of the year. This September, silverhas another special reason for rising – rising industrial demand.  Since 1975, silver has gained an average of 4.1% every September, making September far and away the best month for silver.(Second place is January, at +2.9%.)September is also the #1 month for gold, due to the beginning of the jewelry fabrication season for the gold gift-giving holidays in India (Diwali, followed by the wedding season), America (Christmas, followed by Valentine’s Day) and China’s New Year. Silver often follows gold’s lead – as silver often acts like “gold on steroids.”

Silver Typically Soars in September

Volatility usually surges during the months around August and September, which explains the obvious. Investors—from hedge fund managers to individual traders—instinctively find refuge placing their assets in the longstanding safe havens of value. Precious metals and bonds are fundamentally deemed ‘secure’ when market uncertainty persists. Because gold and silver often do the inverse of the equities market, as retail and other industries sell-off, precious metals rise.

September, of course, has a bad reputation for stock returns. Since 1950, it has been the worst month for the S&P 500, which has fallen an average of 0.5% during the month, Ryan Detrick, senior market strategist for LPL Financial, noted in a blog post. September’s record has been a bit better recently: Over the past 10 years, the S&P 500 has averaged a 0.9% gain in September.

History Says September Will Be Rough for Stocks. How to Invest for an October Turnaround.

Gold and silver preserve the purchasing power of the dollar as it loses value. After all, the U.S. dollar is fiat, meaning it’s backed by nothing. Before 1971 United States currency was allocated at 40% in physical gold and silver. When President Nixon took us off the gold standard on August 15th, 1971, the government’s promise was that it was “temporary”—the perfect statement that means the total opposite when coming from the state.

Nonetheless, upon the fall period from October through December, retail and other sectors usually outperform. These are often the best three months out of the year for stocks since the holidays bring buyers to stores and the season heads into winter. It’s the harvest time for rest and rejuvenation. People become more internal toward materialism, thus causing them to spend more. It’s only behavioral psychology.

I will be watching gold, silver, platinum and palladium closely for the next three months. Now is by far the most important time to be vigilant concerning precious metals—the classic safe-haven for people’s assets. Thus in the midst of a trade war with China, a president that violently moves markets with a single tweet, and an economy that is hang by the threads due to overconsumption, consumer debt, and a Federal Reserve that is heading back to zero interest rates—only the foolhardy will not pay attention to gold and silver.

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Image credit: Andrzej Barabasz (Chepry) [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]