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Metals Market Report Weekly Archive
 

The Mike Fuljenz Metals Market Report

February 2019 - Week 3 Edition

Gold Soars to a 9-Month High

Gold rose to a 9-month high of $1,327 on Monday, February 18. After reaching $1,323 on January 31, gold traded below $1,320 for the first half of February but rose above $1,320 on Friday. Silver has trailed gold so far in 2019, but if you go back just one month, silver is the star. Since November 30, silver is up 11.2%, gold is up 8.6% and the S&P 500 is up only 0.5%. Although the stock market has recovered strongly since Christmas, December was so bad for stocks that stocks have been flat since November 30.  Add gold to your portfolio now!

With Trump’s “State of Emergency,” Democrats’ Cry for Impeachment Resumes

With President Trump declaring a State of Emergency while also declaring “I didn’t need to do this,” various Democrats have resumed their calls for impeachment proceedings. There’s also the ongoing investigation of Adam Schiff (D-Ca), the new (2019) chair of the House Intelligence Committee, into all manner of dealings by the President, going back to the intersection of his candidacy and his various businesses. Schiff has said that there is “evidence in plain sight” of Trump colluding with Russia, despite the fact that an exhaustive Senate Intelligence Committee bipartisan report – taking two years and including over 200 interviews – found no collusion between Trump or his campaign team and Russia.  Obviously, Adam Schiff is biased.

The current issue of a left-leaning mainstream magazine, The Atlantic, has a huge headline calling for impeachment, with a subtitle: “It’s time for Congress to judge the president’s fitness to serve.”

Last November, after the mid-term elections gave Democrats control of the House, we started writing about this rising tide of impeachment talk and what it might mean for the gold and coin markets vs. stocks. In our Metals Report published during the week of November 19, we wrote specifically about the Nixon impeachment years, predicting a coming rise in the price of precious metals as a crisis hedge.

Using November 19 as a starting point, here’s how gold and silver have compared to stocks since then.

Here’s part of what we wrote last November 19. Recent events convince me that it bears repeating.

The Nixon Impeachment Threat Pushed Gold and Rare Coins to Record Highs

With the Democrats taking over the House and all sorts of partisan investigations being threatened, the chances for articles of impeachment against President Trump have increased. He may not be convicted, but neither was President Nixon. It was the process of investigation and impeachment that tore apart the nation, ravaged the stock market and pushed gold prices above $180.  In 1972, President Nixon was re-elected in a landslide, but he faced a 255-180 Democratic majority in the House.  When the details of the June 1972 Watergate break-in and subsequent cover-up began to surface, Nixon’s popularity and political support began to unravel. When that happened, the stock market peaked in early 1973 and went into its worst bear market of the postwar era, while gold began its longest and strongest bull market, with rare coins leveraging those gains with one of its strongest bull markets.

The Dow Industrials declined from 1051.70 on January 11, 1973 to 577.60 on December 6, 1974, falling 45% in less than two years. That coincided with one of the biggest bull markets in gold and rare coins.  Gold nearly tripled, from barely $60 to over $180.  Here are the December prices from 1972 to 1974:

The bulk of the stock market decline came during the third quarter of 1974, during the time leading up to President Nixon’s resignation and then President Ford’s pardoning of the disgraced past President. Here are three specific dates, one month apart, showing how fast the Dow declined after the President resigned:

* On October 8, 1974, President Ford addressed Congress in a televised speech entitled “Whip Inflation Now,” calling inflation “public enemy number one.” In the speech, Ford called on the nation – not the Federal Reserve or Congress! – to solve inflation through micro-managing their lives by turning down their thermostats, carpooling, starting their own vegetable gardens and wearing “WIN” buttons (WIN = “Whip Inflation Now”). Some skeptics turned their WIN buttons upside down and said “NIM” stood for “No Immediate Miracles” or “Need Immediate Money” or “Nonstop Inflationary Madness.”

In this inflationary environment, bonds were “certificates of guaranteed loss,” cash was losing ground and stocks not only lost value in nominal terms but were losing money twice as fast in real (after-inflation) terms. At the same, the Fed was raising interest rates to new postwar highs, raising rates nine times in 15 months, from 4.5% to 8.0%. Gold was one of the only investments going up, but it was illegal for Americans to own gold until the final day of 1974, when that 41-year-old law was finally repealed.  As gold kept rising, many U.S. investors turned to numismatic gold coins.  From 1972 to 1974, many rare coins rose five-fold to 10-fold, far more than gold or silver bullion prices alone. Overall, the Rare Coin CU 3000 index rose 348% – more than four-fold.

Could this happen again if President Trump comes under investigation and impeachment pressure?  Probably not at the same percentage levels as in the early 1970s, when gold prices were so low, but the stock market could indeed fall by 40% or more, as it did in 1973-74 and 1987, with an equivalent rise in rare coins.  As in all those past episodes of political uncertainty and wild stock market gyrations, it pays to take some stock market profits off the table and invest in gold and silver bullion and rare coins. It never pays to wait too long, since stocks can fall very fast – and coins can rise very fast – in times of national uncertainty.  Please call our experienced representatives today.  They will be glad to assist you.

 

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