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Crash Coming? Investors Should Move to Gold and Silver

Crash Coming? Investors Should Move to Gold and Silver

Release Date:  Saturday, March 31, 2018

Gold prices ended lower on a shortened trading week with the NY Spot Market closed for the Good Friday holiday. However, gold prices were up for the first quarter of 2018, continuing its winning streak for three consecutive quarters.

“Gold prices settled lower Thursday, building a weekly loss as easing concerns over a potential trade war and a rise in U.S. stocks dulled investment demand for the precious metal, but prices still posted a gain for a third quarter in a row.” (“Gold settles lower for the week, gains for the quarter,” MarketWatch, 3/29/18.)

Crash Coming? Investors Should Move to Gold and Silver - Williams

Lawrence (Lawrie) Williams, a mining engineer and financial author, penned a commentary for Sharps Pixley warning that we may be seeing the beginning of a market crash.

“As I switched on my computer this morning I was faced with a sea of red ink!  Equity prices were down across the board - in the U.S., Asia and Europe and no doubt elsewhere too … So what has changed?  The U.S. Fed seems to be committed to raising interest rates perhaps at a faster rate than had previously been anticipated with higher rate targets for 2019 and 2020.  Wall Street may not be liking this prospect …

Is this the start of the equities crash many commentators have been predicting - and if so how will it affect gold and the other precious metals?  It’s probably too early to say, but after almost nine years of virtually uninterrupted rises in the equities indices we suspect something will have to give - indeed it may already have started … Now the Fed’s policy is in reverse with what many observers now refer to as Quantitative Tightening.  If history is anything to go by, equities markets may well suffer as a consequence of a rising interest rate path, at least initially …

“If I were an investor in U.S. equities or in bitcoin I’d be nervous and with global markets tending to follow Wall Street that nervousness would tend to extend to any major global markets … I would prefer gold and silver as safer investments than equities and see bitcoin as pure speculation with the potential to crash much further than it has already.  Precious metals may well see some falls but these are unlikely to be of the kind of magnitude which could befall equities so we’d continue with the theme of using gold, and perhaps silver, as wealth insurance….” (“LAWRIE WILLIAMS: All fall down? Is the predicted crash starting to hit? Sharps Pixley, 3/28/18.)

Gold to $1500 by Year End, May Reach Record High - Holmes

U.S. Global Investors CEO Frank Holmes told MarketWatch that three factors could send gold prices to $1500 by the end of 2018.

“Gold prices could jump to $1,500 an ounce this year, a level they haven’t seen since 2013, according to Frank Holmes, chief executive officer of U.S. Global Investors.
That would mark a roughly 11% rise from the current price …
“He cites three key reasons for his forecast climb for the precious metal, the first of which is tied to inflation expectations. ‘Inflation could be growing a lot faster than what the government is telling us …’ The Federal Reserve’s preferred gauge, the consumer-price index, rose 2.1% year on year in December and the NY Fed’s recently launched Underlying Inflation Gauge, rose nearly 3% that month, while the alternate CPI estimate, which uses the official methodology before it was revised in 1990, shows inflation closer to 10%, he said …  Gold is traditionally seen as a hedge against inflation.

“Holmes also pointed out that a weaker dollar policy will ‘always benefit commodities and emerging markets…’ Homes believes that President Donald Trump’s actions as president, overall, have been bullish for gold, particularly as they’ve contributed to a decline in the buck …

“Meanwhile, rising gross domestic product figures in China and India, continue to help with what Holmes characterizes as the ‘Love Trade.’ That refers to the coveted yellow metal’s popularity as a gift in the form of jewelry, particularly from the beginning of the Indian wedding season in September until Chinese New Year in February.

“Gold prices may even eventually climb to new highs at $1,900 an ounce, Holmes said. ‘If we see inflation ramp up, then ... we could see gold move to new heights.’ Gold futures reached a record settlement at $1,891.90 on Aug. 22, 2011.” (“Three reasons gold will climb to $1,500 this year,” MarketWatch, 3/28/18.)

Gold Investment Increases for Fifth Straight Year - CPM Group

“Bullion investors, miners and makers of coins will help drive the fifth straight annual increase in total global gold investment in 2018, CPM Group said in its Gold Yearbook 2018 on Tuesday, citing geopolitical tensions and fears that the bubbling U.S. economic expansion will end in a 2019 recession …

“’The changing global monetary policy landscape coupled with long in the tooth growth cycle in the United States, and little fresh ammunition to bolster the U.S. markets further, means that the U.S. economy looks most at risk of recession,’ CPM said. The independent commodities research company said gold coin demand for bullion produced by private mints would be at 6 million ounces in 2018, up from 5.7 million ounces in 2017 and the highest since 2016.

“’Market volatility has been unusual, worried more investors and brought more attention to gold as a haven,” said George Gero, managing director of RBC Wealth Management. “Asset allocators have been looking for assets that could be a hedge with forthcoming inflation….’” (“Global gold investment seen rising for fifth year in 2018: CPM,” Reuters, 3/27/18.)

Goldman Sachs Bullish on Gold

CNBC reported that global investment banker Goldman Sachs has turned bullish on gold.

“Goldman Sachs is expecting gold to ‘outperform’ over the coming months. For the first time in more than five years, commodity analysts at the U.S. investment bank are bullish on yellow metal prices. Goldman's analysts said signs of an uptick in inflation and the ‘increased risk’ of a stock market correction should both prove to be price supportive for bullion.

“’Our commodities team believes that the dislocation between the gold prices and U.S. rates is here to say,’ Goldman Sachs analysts, led by Eugene King, said in a research note published Monday. ‘Based on empirical data for the past six tightening cycles, gold has outperformed post rate hikes four times,’ the analysts added….” (“Goldman Sachs expects gold to 'outperform' amid growing fears of a stock market correction,” CNBC, 3/26/18.)

Congressman Introduces Bill to Return to Gold Standard

Congressman Alex Mooney penned a commentary for the Wall Street Journal explaining why he has introduced legislation to return the United States to the gold standard.

“From 2000-10, U.S. manufacturing employment shrank by a third after holding steady for 30 years. President Trump has rightly blamed bad trade deals, particularly those with Mexico and China, for contributing to this meltdown. But the Federal Reserve deserves a share of the blame, too, since its inflationary policies priced out U.S. manufacturers from global trade…

“The solution is to take control of the money supply away from the Fed and give it back to the American people—in other words, to return to the gold standard. Gold gets a bad rap in some history books because of its misuse during the 20th century. This ignores its peacetime record of high growth and nil inflation between 1834 and 1913 …

“The current Federal Reserve system benefits elites. The gold standard is equitable and puts ‘we the people’ in control of the money supply. That’s why it was part of America’s founding and has been a key to the country’s long economic success.

“On Thursday I introduced a bill that would return the dollar to the gold standard—the first such attempt since Jack Kemp’s Gold Standard Act of 1984. Under this legislation the Fed would still exist, but it would administer the money supply rather than dictate it. Instead the market would be in charge, the supply and demand for money would match up, and prices would be shaped by economics rather than the instincts of bureaucrats.

“Like President Trump, I believe that success is again possible for Americans who go to work every day and build things. Mr. Trump’s vision of how the American economy could and should work resonated with voters in 2016. Returning to the gold standard is a way for the president to deliver on his promise of American working-class prosperity.” (“Steel and Aluminum? Let’s Talk About Gold,” WSJ, 3/25/18.)