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Metals Market Report August 2019 - Week 3 Edition

August 2019 - Week 3 Edition

September is the Beginning of Gold’s Peak Demand Season

So far, gold has risen due to global currency devaluations in a “race to the bottom” among paper money currencies, but that is separate from gold’s normal demand cycle, tied mostly to jewelry fabrication for holiday gift-giving in a variety of global cultures. September to February is the greatest time of the year for gold demand, accounting for virtually all of the price appreciation in the years 1975 through 2018.

Gold’s average price change: March 1 to August 31 (1975-2018) = -0.15%
Gold’s average price change: September 1 to February 28 (1975-2018) = +6.05%

Gold’s Best Months (1975-2018)

January                 +1.99%

September           +1.71%

This year, gold is already up about $200 (+15%) from the end of February to mid-August, based on the global currency devaluation trend, so if it merely grows by the average 6% by next February, that’s over $1,600 per ounce. But if nations continue to devalue their currencies over the next few months, gold could go even higher, above $1,700 or $1,800 or even into new high territory above $1,900 by the end of 2020.  This typically results in many new and old customers buying gold with many of these buyers also entering the rare gold coin market!

Silver Could Outpace Gold, Reaching $22

In a bull market, silver often outpaces gold. Witness silver’s rush to $50 in 1980 and $48 in 2011. In a past weekly Metals Market Report, we went on record predicting $18 silver this year and $20 next year on July 8, when silver was just $15.07.  Silver has already surpassed $17, rising far faster than gold.  And now we see a research report from the prestigious Bloomberg Intelligence commodity strategist Mike McGlone predicting $22 silver, even if gold doesn’t move much higher than the $1,500 range.

In a research note released last week, McGlone echoed what we wrote about “the elevated gold-silver ratio and its potential for reversion” to the mean, favoring a higher silver price. Even with gold “unchanged near $1,500 an ounce, reverting to the mean would imply a silver price near $22 an ounce,” he wrote. McGlone also said he is watching investor demand for silver and gold-backed exchange traded funds very carefully. McGlone noted that silver ETF demand has reached a record high: “The 10-week rate-of-change in silver holdings at about 20% to August 15” is “the sharpest gain since the height of the financial crisis in 1Q09.” He reminded investors that “that spike in silver ETF inflows preceded the price launch to the 2011 high close of $48.44 an ounce.”  While he said that a run to $48 silver is unlikely, he did say “the yellow metal is only about 20% below its peak. Unless the trend reverses in ETF inflows, it should be a matter of time for new highs in the gold price.” (We have monitored the same trend – the difference in demand for American Eagle silver vs. gold coins, with silver exceeding gold this year.)

McGlone remains bullish on both gold and silver since the Federal Reserve is expected to start a new easing (rate-cutting) cycle, which should weaken the U.S dollar.  Now is the time to buy gold and silver bullion and rare coins!

Gold Reaches Another 6-Year High

Gold reached another 6-year high of $1,527 last Thursday, August 15, and silver reached a 19-month high of $17.45 on August 13, due mostly to the global devaluation of currencies. All major currencies are falling as central banks seek to print more money or devalue their currencies to seek trade advantages, leaving gold the clear winner. Last week, the Argentine peso was the latest currency to collapse after the reform-minded incumbent was defeated by the populist challenger in the primary elections there.


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