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Metals Market Report Weekly Archive
 

The Mike Fuljenz Metals Market Report

February 2019 - Week 4 Edition

Gold Surpasses 10-Month High

Gold surpassed $1,345, a 10-month high last Wednesday before retreating to $1,322 Friday and then bouncing back to $1,330 over the weekend.  Silver closed over $16.00 in London on Wednesday but then retreated to the $15.90’s the rest of the week. On Monday, the metals slipped slightly, but since their mid-November lows, silver is up 14% and gold is up 11%, surpassing the net gains of stocks in that period.

Silver May be Just Beginning to Soar

Congratulations if you bought some of our silver specials in November.  Last November 14, silver slipped below $14 per ounce to close at $13.97 in London. During intra-day trading silver reached a low of $13.82. Now, with silver prices $2 above those November lows, we could be at the beginning of another major bull market in silver over the next 3-5 years. The last century has seen three dramatic surges and retreats in the price of silver. This could be the start of the fourth cycle.

(1) First, silver rose from $0.50 to $1.34 during and just after World War I, followed by a collapse to $0.25 in 1932, in the depths of the Great Depression.

(2) Then came a long 200-fold price increase from $0.25 to $50 in the next 48 years, from 1932 to 1980, followed by a 21-year 92% price decrease.

(3) Finally, we saw a 12-fold increase from $4.06 to $48.70 in the 10 years from 2001 to 2011, followed by a 72% price drop from 2011 to 2015.

Since their mid-November lows, silver is up more (+14%) than gold (+11%). In part, that’s because silver has more industrial uses than gold. Along with gold, silver has profited from its role as a crisis hedge and monetary metal, but silver also has an industrial side, which is not true for gold. Silver’s high conductivity to electricity and heat makes it valuable in countless industrial usages. Silver is used in making solar cells, computer touch screens and medicine, as well as in jewelry and tableware.

On the supply side, silver is usually only mined as a byproduct of a search for other metals. Due to the low prices of those metals, mining exploration is down this year. The expected new supply this year is 26,000 tons, the lowest new supply totals since 2013, according to estimates by Societe Generale SA.  

According to a recent Bloomberg survey of 11 silver traders and analysts, silver could rise to $17.50 an ounce later this year. Bloomberg Intelligence’s analysts Eily Ong and Tobias Nystedt also predict a 50% growth in silver demand by 2023. And, as we reported three weeks ago, demand for the American Eagle Silver coins hit 4,017,500 ounces in January 2019, up 24.2% from January 2018 and 720% above December 2018’s totals. The January total was the highest of any single month since January 2017. It is not too late to take advantage of our many high quality silver offers.  Call our friendly account representatives today!

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, unfortunately 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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