I once had an unpleasant boss who believed quite genuinely that people only say 10% of what they mean. It was almost certainly a case of filtering his world through his own rules. But let's say he's right. I'm a believer that some life lessons can be found by embracing the small percentage of truth found in an otherwise false and unpleasant delivery. But, what if only 10% of the truth got out? When it comes to headlines in Gold and Silver, sometimes it does feel as though you have to go hunting for the truth. Even friends in the Bleyer office say "If you hear Gold and Silver news via the BBC you're already too late."
So, it really is a wake up call to read an article entitled "Gold Demand Hits Four Year High" in yesterday's Telegraph because when Gold and Silver facts get into the main broadsheet money sections, you know the real iceberg is a whole lot bigger under the surface:
"Private investor appetite for gold hit a four-year high last month." Now, I'm going to highlight one fact right there. Last month, as many of you know, the price of physical Gold and Silver corrected. It cooled a little from the previous highs and I often write about these pull-backs being a "buying opportunity." Seems as though many, many British private investors believe this too, as proven by their investment actions throughout August.
"Private investors continue to grow their gold holdings against a trend of both rising prices and rising financial risks. Last time net gold investing demand was this strong, prices were retreating hard from the late 2012 rally. August 2016 in contrast marked the fourth time running that average monthly gold prices rose against the dollar, a pattern not seen since the metal peaked with the global financial crisis in summer 2011." (Telegraph Business, 6th September 2016)
If you've been watching the price closely, you'll have noticed that both Gold and Silver have once again started to rise since just before the weekend. Why? There may always be several reasons. But one clear reason is investors are reacting to news that came out Friday of poor U.S. jobs data. This in turn points to the belief that the next U.S. interest rate hike may be delayed, which in turn means investors prefer to hang onto their Gold and Silver. Now, although I don't necessarily agree with this herd mentality, I do agree with the eventual conclusion. But, Gold and Silver historically are safe havens both against inflation AND deflation, so I believe either way is an eventual historical win-win for physical Gold and Silver. I also find it puzzling that government data should determine one's investor choices, when the fundamental economic equation beneath the surface hasn't changed. The U.S. is bankrupt; profoundly. The kind of bankrupt of which only war is the reset button. To act on slightly better or worse jobs data in the midst of that truth is a little like being pleased one is walking on an momentary decline rather than an incline, while disregarding the overall fact that the path still eventually leads off a cliff.
But, nonetheless, the financial markets move like a shoal of fish to these kind of data releases. So, perceiving that the interest rate will not be raised at the next U.S. rate hike date (21st September), Gold and Silver investors are continuing to hold firm and accumulate. This is pushing the price of Physical Gold and Silver per ounce back up again.
But, wisely, some other economic commentators are also noting that it's all fleeting semantics, because either way, it's a buying opportunity:
"The gold price has struggled to break free of its post-Brexit range of around $1,340 an ounce in either direction. Market analysts say a possible US interest rate hike could drive the price lower in the months ahead. Saxo Bank’s Ole Hansen said gold could retreat to between $1,267 and $1,250 an ounce, adding that there was a waiting game ahead of a Federal Open Market Committee decision at the September 21 meeting. UBS said it views a September rate hike from the Federal Reserve Bank as “unlikely” but added that “the risk of an earlier-than-expected move by the Fed would weigh considerably on gold". (Jillian Ambrose, 6th September 2016, The Telegraph) “We would view this as an opportunity to build longer-term strategic positions,”the analysts added.
That's why, in sharp contrast to the ephemeral views of stock brokers and lemming-esque investment bankers, that one line has earned its place as the titular and guiding statement of this week's blog.
So, if U.S. jobs data is just the noise, what are the real drivers of the price of physical Gold and Silver underneath the surface? I hope that, since last week's blog on the G20 that the headlines from China have sparked our readers to think "Gold." This week, I found some fascinating historical facts and figures re: China's stock-piling of Gold. But, as I often say, never take our eyes off of Silver. In March 2015 I wrote a piece entitled "All that glitters is not Gold, it's Silver." and although I touch on Silver throughout many of Bleyer's blogs, another blog to highlight here is "The Outlook for Silver in the face of a Global Recession" written in September 2015. It would probably be wise of me not to take as wrote that all our readers know what an astounding investment Silver is alongside Gold. If you haven't considered adding Silver to your physical Gold please do take a few moments to enjoy these and other previous articles.
So, I was fascinated to read some historic figures on China's quietly hidden relationship with physical Silver! It took some searching but here are some astounding facts for us all, written in 2012:
"The World Gold Council (WGC) data for 2010 back up Leeb’s analysis. (Stephen Leeb, investment analysist and author). According to the WGC, after being a net exporter of approximately 3,500 tons of Silver in 2009, China has become a net importer of Silver. In 2010, the WGC reported China suddenly became a net importer of 3,500 tons of silver. And that abrupt turnaround is just for starters.
“China's stated goal is: they want 15 percent of all energy consumption in the country, and I don’t mean just electricity,” Leeb explained. “I mean cars, etcetera, all of it, to be on renewables by 2020. I think their goal is more like 25 percent by the early 20s.” To accomplish that ambitious goal for a nation of 1.2 billion Chinese, it will require staggering tonnages of copper, nickel, silver and other base and rare earth metals.
As an example, windmills, off the coast of China, Leeb said, will require more copper and silver than is currently available—which then leads Leeb to another logical conclusion: suppliers of these valuable commodities will not accept dollars some time this decade.
“And here you revolve right back to Gold. You’re not going to be able to buy copper in three, four, five years with dollars,” Leeb said. “I mean, you can’t have an auction for something that’s scarce and something you can just create at will. You’re going to have to have Gold in there.” How true is that?!
After researching China’s economic policies and the impact on the mining industry Beijing’s stated goals will have on the marketplace, the author of Red Alert: How China’s Growing Prosperity Threatens the American Way of Life, strongly believes that silver will become the new oil due to its unique qualities critical for the production of renewable energies products, such as wind turbines and solar panels." (ETF Daily News)
Bringing it right back up to today, Money Morning published this piece early this morning (Wednesday):
"One interesting anecdote is that silver ETFs saw inflows of 361 tonnes in August, the highest amount since March, according to www.metal.com. Silver ETF holdings have been up every month this year except in January. And despite all that buying, silver still fell in August. So if you don't own any silver or silver stocks yet, I wouldn't wait to buy. Your best bet would be to buy into this sector gradually in tranches. Though I still think we could see lower prices, no one knows for sure. Nonetheless I believe when buying comes back full force, silver has the ability to take out the $22 level this year." [£16.40 or back to January 2013 prices; ("Where is the Silver Price heading?" 6th September 2016)
This month's Silver price high so far is £15.62 so it's close. If you enjoy charts and a highly analytical view, have a check out of this piece by an American company called Silver Doctors; some great chart visuals on the support and resistance channels of the Silver price.
Something ironic occurred at the same time as the rise in Gold and Silver prices since Friday; it was a small headline but momentarily eye-catching. It wasn't just B.A. flights that had a computer glitch over the weekend. National Savings and Investment customers couldn't access their money online over the whole weekend either:
"Many National Savings & Investments customers have been unable to access their online accounts since Friday following website maintenance that was supposed to be completed by Sunday afternoon. The government-backed provider posted a message on its Twitter account on Friday to inform customers that, following the maintenance, online services would be available by 3pm on Sunday. But numerous customers were still left locked out of NS&I's online service today. [5:00 pm Tuesday!]
"Telegraph Money was contacted by one reader who said he had been trying to access his account since Monday. Tim Wilkinson emailed this newspaper at 13:55 this afternoon [Tuesday] after speaking to the NS&I helpdesk. He said the login screen was visible but he could not gain access. He said: "I rang the helpdesk and asked if the problems with their website were fixed. They said no, and they don't have an estimate of when it will be." NS&I posted another message on its Twitter feed on Monday which said: "We’re aware that some customers are experiencing issues when logging in. We’re looking into this now and we apologise for any inconvenience." There was no further update on Tuesday morning and some customers expressed their frustration this afternoon." (6th September 2016)
That would have been more than an "inconvenience" if you happened to be wanting to transfer your money to buy physical Gold and Silver on Monday or Tuesday of this week.
But the headline that brought more than my usual thoughtfulness was one regarding Pensions, which I stumbled upon a few weeks late. It comes from late last month and it exams a growing trend among one of our strongest customer groups; the over 55's. I have elderly parents and had a very close relationship with my late grandparents, whom I still miss to this day, so this bothers me more than a standard financial concern:
"Tens of thousands of people are withdrawing huge amounts from their pension pots only to leave their savings languishing in low-interest bank accounts. Since April last year anyone over the age of 55 can cash in their entire private pension and only pay tax at their marginal rate. But many appear to be making withdrawals only to leave the cash sitting in current accounts where it earns little or no interest, according to research undertaken by Citizens Advice. The charity found one in three people, 29pc, are putting their pension savings into a bank account. The move is equally common with people with small and larger pots worth over £100,000 the charity says."
Cross reference this with the figures released today that; "Now banks pay just £1 a year on £10,000 savings with rates slashed to a paltry 0.01% for loyal customers" and that is a real and deep concern for family wealth preservation.
Now, I will be absolutely clear and state that the price of Gold and Silver can clearly go down as well as up. We always believe at Bleyer that physical is better than paper and that holding long is better than trying to make a profit by dipping quickly in and out. That means it is wise to invest money don't need for a while, so that you are free to choose when to sell it. But if those pension pot examples of £10,000 and £100,000 had been withdrawn a year ago and instead of just sitting in a bank had been put into Gold and Silver, both pots would have grown 36.98% for Gold and 54.45% for Silver. Now, I appreciate it's been an excellent year for our Gold and Silver investors but even if those figures were halved that would still be the equivalent of interest rates of 18% and 27% respectively, compared to just 0.01%. It's almost beyond comparison. Gold and Silver are real money. The high street banks are not. If you or your loved ones haven't explored the possibility of investing even a small amount of a released pension pot into some small Gold and Silver bars and coins do consider giving one of the team a ring for a no-obligation call. Bleyer prides ourselves on listening to our clients and leaving you to make your own decision in your own time. I particularly appreciate that it can take some time to decide to buy Gold and Silver. For the record, I'm usually a slow decision making; I weigh up the facts, talk with one or two trusted friends but also take time to listen to myself, especially on big decisions. It took me a few weeks to decide which restaurant to take my parents to to celebrate their Golden Wedding anniversary last month and two phone calls to the restaurant once booked. It paid off; best table in the house, complimentary champagne and truly warm, gorgeous staff. Holding and investing our wealth, which directly affects our loved ones, is on a whole different level. But if during that process you would value chatting with one of the Bleyer team for some information about what different products can do for you, including TAX advantages, please do call on 01769 618618. To only gain £1 back from savings of £10,000 is wholly avoidable.
To end where we started - and to reference that quote once again - "We would view this as an opportunity to build longer-term strategic positions