During occasional weeks, the Gold and Silver headlines once again rise above an otherwise predictable 'nothing-to-see-here' journalistic horizon of ongoing Brexit criticism mixed with happy Royal news.
Congratulations to the British Royal family on the safe arrival and naming of HRH Prince Louis Arthur Charles. Raising children and family life is a private blessing, which I hope they all enjoy peacefully behind the scenes of an un-chosen public life.
But, why the renewed scramble to discuss the Gold and Silver price this week? Giving a mini-update now seems valid once again as the economic news heats up. Key gold and silver points we'd like to focus on are as follows:
Gold and Silver punished by powerful Dollar gains
The follow-the-dollar mentality remains strong but is essentially smoke and mirrors for physical precious metals in the long-term. This week proved this point once again. Make no mistake, the dollar is not strong. Nor is the US economy and a wise mind balances that reality with short-term stock gains, even as the headlines mix hopeless optimism with a heavy dose of white-wash:
“Gold and silver prices are solidly down and have dropped to 4.5-month lows in early-afternoon U.S. trading Tuesday. Gold is struggling to hold above the very important $1,300.00 price level. The recent solid rally in the U.S. dollar index, which hit a four-month high today, continues to squelch buyer interest in the precious metals markets.” (Kitco News)
With financial headlines such as these, it is so important to hold our Physical Metal in our hands and remind ourselves this is not the same 'product' as a paper contract. The fickle world of paper trading is full of lemming mentality and behaviour. The physical world of real precious metals, by comparison, seems to have a rather large contingent of the 'awakened' population, including many of our readership!
Gold and Silver rise on Chinese buying
The hilarity of this U.S. weighted economic worldview is highlighted the very next day. If we just looked West we may remain puzzled. But look East and bingo, the rather bouncy price charts in precious metals this week immediately begin to make more sense.
“Gold prices rose on Wednesday, ticking up from a four-month low hit in the previous session, as Chinese buyers returned to the market following the Labour Day holiday,” (Times of India).
Here is the classic West-East push-pull on the price of Gold (and Silver). I personally think in the long run the East will win. Why? Because they hold more physical Gold and Silver. It’s that simple. Yes, even the Times of India rightfully acknowledges that paper investors are still waiting “for cues on US monetary policy from a two-day Federal Reserve meeting.” But the mindset towards physical precious metals has always been more ancient, visceral and historical in the East of the globe than the slightly more frivolous younger West. So the physical bulls just keep on buying.
No More Ancient a View than from the Middle East
If the U.S. foreign policy is colliding with the Chinese and Russian counterpart in the war-mongers playground of the Middle Eastern states, then it makes sense to also listen to voices from that often volatile neighbourhood, on their perception of Gold and Silver.
Where policies and worldviews collide, a stable view on Gold and Silver emerges, like a focussed laser through the opposite temporal nature of stocks. If stocks and shares are the golden boys of a modern world, what happens when life is primarily about survival?
Bloomberg ran such a view on Monday from Egyptian billionaire Naguib Sawiris. His view was clear-headed and exactly in line with Bleyer’s encouragement of a long-term view on owning the Physical precious metals – regardless of the noisy short-term financial headlines. Sawiris stated that:
“Keeping most of your wealth in the stock market might not be a good idea, according to one Egyptian billionaire, who invested half of his $5.7 billion net worth into gold believing that prices could rise to $1,800 on “overvalued” stock market.
The stock market is overvalued and I feel that another crash will happen. That is why 50 percent of my net worth is in gold. It’s a very high percentage and it was not half of my net worth when I started,” Naguib Sawiris told Bloomberg in an interview on Monday. “[Gold prices] should go back to five years ago, [when they were] at $1,700-$1,800.
What made gold the right investment for Sawiris was its safety amid rising geopolitical risks as well as its unyielding demand.”
This interview was first published on Monday, with not a whiff of concern as to the very temporary price drop in Gold and Silver about to occur the very next day on the back of predictable dollar news.
And ten years ago the Gold price was around half the price it is today. So, his view is not sensationalistic in the least. What gives us the advantage is remaining on top of the quieter hidden financial interviews such as this, in between the monthly round ups. Because it was first published on Monday and yet today, just two days later, I notice that same interview is being published in a variety of mainstream tabloids and online mainstream websites.
Clearly, it is up to our clients to decide what percentage of their wealth and savings to place into physical Gold and Silver. 50% is considered by Financial Advisors to be a large proportion of one’s portfolio, which is precisely why the interview has now garnered mainstream attention.
The Coming Silver Supply Crunch
With so much focus on Gold, it is worth remembering that Gold’s poorer sister is often the unsung star of the show. With price gains to rival and sometimes out-perform her upfront brother, it is no surprise that Silver bugs love stacking such a beautiful and accessible precious metal.
The ever-so-thoroughly researched news section of GoldSilver.com published on Monday an astounding piece, with the tantalising opener that:
“I’ve got a series of charts for you that point to a silver trend that is so entrenched in its development, so inevitable in its outcome, so inescapable in its consequences that it comes as close as one can get to a guarantee. And once fully underway, it will have major implications for the silver price, along with the availability of investment metal.”
In brief, there are six areas of demand in Silver that are outpacing supply, which I have listed below:
- Demand for ETPs (exchange-traded products, including ETFs) remained near all-time highs,
- Total fabrication demand is up 15% just since 2012, back near all-time highs.
- Demand for solar-panel-use silver rose a whopping 23.1% in 2017. A total of 106 million ounces went toward this use alone—more than a tenth of all silver supply!
- You can’t talk about precious metals without looking at China. Year after year the appetite for fabricated silver products in the world’s largest economy continues to grow stronger.
- Silver scrap is primarily comprised of recycled metal from jewellery and electronics. It is often overlooked by investors, but it amounts to roughly a fifth of all supply sources. Recycled scrap metal supply has fallen a stunning 41% from its 2012 peak.
- Total market economy mine supply declined to 775.4 million ounces in 2017, down 26.5 million ounces, or 3.3%, from 2016 levels. It is no longer a 'prediction' that fewer ounces of silver will be dug up by the mining industry. It’s already happening. And it will continue for the next decade.
As the report concludes: “Silver Mine supply is in a decade-long decline. Fabrication demand is rising globally. These facts are irrefutable. If an analyst says differently, they probably hate precious metals. That’s okay, let them learn the hard way.”
So, in overall conclusion to this shorter news update, and driven by the need to assess why the price of your Gold and Silver investments have fallen, then risen again this week - Gold and Silver have always been a hedge against economic uncertainty. It is not unusual to expect there to be a fair deal of that over the coming months and to prepare wisely.
To invest in your own Physical Gold and Silver please browse the website or call the Bleyer team on 01769 618618.