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Metal Market Report December 2019 - Week 4 Edition

December 2019 - Week 4 Edition

Gold Up 15.6% in 2019

Gold rose $12 in the last week and is up $25 since Thanksgiving. Silver is back above $17 after being below $17 during most of December. If gold closes above $1,441, then 2019 will be the best year for gold since 2010, when it gained 29.2%. Looking forward to 2020, gold has a superb track record during the last five Presidential election years. It has also performed well during the impeachment threats against former Republican Presidents Nixon and Reagan, and during stock market crashes in their second terms.


With the stock market at or near unsustainable highs, we may see another stock market crash and gold bull market during the coming election year or early in President Trump’s second term – and especially if a radical Democratic President wins the White House (and/or both houses of Congress) in 2020.  Gold is life insurance for the rest of your portfolio.  Call us today!


When Stocks Fall Fast, Gold Usually Rises Just as Fast


I told you a few weeks ago that many millionaire investors are afraid of this stock market. I cited a survey of 3,400 millionaire investors (those with at least $1 million in investable assets) by UBS, a Swiss investment bank, which found that more than half of them think that there will be a “significant market sell-off” by the end of 2020. They had already moved an average 25% of their portfolio into cash.


Now, we have confirmation that this movement into cash is far more widespread than just the millionaire class of investor. In the weekend edition of December 7-8, 2019, The Wall Street Journal showed evidence that the bulk of investors have pulled out over $220 billion in stock market mutual funds and exchanged-traded funds (ETFs) through the first 11 months of 2019, a record high exit for any full year.


All that money is flowing into cash more than bonds or gold. During the past three years, assets in money market funds (cash on the sidelines) have grown by about $1 trillion, according to the Lipper division of Thomson Reuters, as cited by the Journal’s December 8 article. Money market fund balances are now at their highest level since the 2008-9 Great Recession. Although many big institutions are still in the stock market, the public is afraid of the market and is ready to invest in something else with their pile of cash.


Many big institutions are confident that President Trump will escape impeachment conviction and will be re-elected, but at the same time they warn that the stock market could decline 25% or more if a socialist candidate like Bernie Sanders or Elizabeth Warren were elected. In such a case, gold is life insurance for the rest of one’s portfolio. In past stock market crashes gold has gone up rapidly as stocks have fallen.


Here are some examples of gold’s increase during stock market crashes of the last 50 years:


  • From January 11, 1973 to December 6, 1974, during the Nixon impeachment, resignation and aftermath, the Dow declined 45.1%, while gold gained 178%, rising from $65 to $181, and rare coin prices rose.
  • From September 21, 1976 to April 21, 1980, during the “Carter Malaise,” the Dow declined 25.2% while gold gained 322%, from $120 to $506, and rare coin prices rose.
  • From August 25, 1987 to October 19, 1987, the Dow declined 36.1% in less than two months ending on Black Monday, but gold gained 5% from $458 and $481, and rare coins were soaring.
  • From January 14, 2000 to October 9, 2002, after the “” meltdown and 9-11 attack, the Dow declined 37.8%, while gold rose 12.7%, from $283.30 to $319.35.
  • From October 9, 2007 to March 6, 2009, during the Great Recession, the Dow declined 53.8%, while gold rose 27.2%, from $736 to $936, and rare coin prices rose.
  • From July 5, 2011 to September 6, 2011, during America’s debt crisis, the Dow lost 11.4% while gold rose $400 (+26.8%), from $1,495 to a record $1,895 per ounce.


It’s important to realize that when markets start falling, the money “on the sidelines” starts moving into gold, and some of those selling stocks move into gold as well. Then, experience shows that a reasonable percentage (about 20%, or one in five) of those bullion customers move on to become interested in rare coin purchases over the following years. That has led to rare coin bull markets in the years following stock market crashes beginning in 1973, 1976, 1987 and 2007.  Now is the time to add more gold investments to your portfolio!  Call us today!


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