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Metals Market Report Weekly Archive
 

The Mike Fuljenz Metals Market Report

June 2019 - Week 4 Edition

Global Tensions Push Gold Up to $1,400 for the First Time Since 2013

Gold reached $1,420 Monday for the first time since August 2013, mostly over fear of war with Iran. Also, European Central Bank (ECB) President Mario Draghi signaled an interest rate cut for the euro, which is already characterized by negative rates (-0.3% for 10-year German bonds) plus more money printing (“quantitative easing”). This caused the euro to fall sharply and cause many European investors to seek safety in gold and other alternative investments.  (Gold is rising faster in euros than in dollars.)

We’ve been predicting a sharp move by gold for months, although we had no way of knowing the precise timing. Last week, fear of a war between the U.S. and Iran pushed gold up to $1,400 on Thursday, with silver reaching $15.50 before war was avoided Friday and the metals corrected slightly, but then gold soared to $1,420 on Monday, with silver’s rise only a portion of that amount, as gold is clearly the star.

Gold’s latest surge began back on Friday, May 3, when gold was only $1,270 and silver was $14.65. The trade talks between China and the U.S. were on track for resolution when China backed out and President Trump sent out a Tweet on Sunday, May 5 saying that he would raise tariffs from 10% to 25% on over $300 billion of China’s exports to America, effective the next week. That sent the stock market into a tailspin and gold began to rise. Since May 3, gold has surpassed the stock market by about 10% to 12%.

 

There are many other global trouble spots erupting now. Last week, The Wall Street Journal reported that at least 7.4 tons of gold were transported from Venezuela to Uganda on two Russian charter flights.  The Journal reported that this gold was then offered for sale in Turkey at a deep discount.  Perhaps President Nicolas Maduro is trying to use this gold to stay in power by funding secret overseas bank accounts for his generals, but it’s interesting that in times of crisis, dictators turn to their gold hoard, not Bitcoins! It appears that selling gold to remain in power may be the only good reason for selling gold these days!

With interest rates falling around the world, gold is an attractive asset once again. A record $13 trillion in sovereign debt (mostly in Europe and Japan) yields less than zero, and the Fed has indicated two rate cuts later this year and four within the next 12 months, so the dollar will likely weaken over the next year.

The old myth says that gold is an “inflation hedge,” but in these times of low inflation, gold is more of a crisis hedge, and there are plenty of global crises escalating now, indicating that gold can continue rising.

Rapidly Rising Gold Prices Lead to More Gold Ads, Generating New and Returning Customers

It’s always smarter to buy gold when it’s down in price, but that’s not human nature. When gold prices shoot up $80 in one week and $140 in six weeks, investors from around the world become interested in gold, spawning ads in newspapers, drawing many new investors to various coin and bullion dealers. 

This cycle helps to create new customers and reinvigorate inactive customers and bid up gold’s price, thus creating a floor under gold’s price. Some of these many new gold and silver buyers are introduced to rare coins by coin and bullion dealers which eventually stimulates the overall coin market.  Call us today before prices rise further!

 

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