The stock market continues to be euphoric, and gold & silver continue on with their "corrections".
Considering the two fundamental factors currently driving the market and investment decisions, we still see that much uncertainty remains. The winner of the 2020 US Presidential Election is still in dispute, and despite the hope that some people have in a coronavirus vaccine, without a doubt, if there is a trend, that trend is more and more states are increasing their restrictions by means of shuttering businesses & schools, implementing statewide curfews, setting-up manned checkpoints and more.
If there is good news from all of this uncertainty, it is that the mainstream media appears to be moving full steam ahead with a Biden victory, as well as reporting heavily on the possibility of up-and-coming coronavirus vaccines, and by presenting both of those topics in that way, the MSM is spinning these two dynamics, right or wrong, as bullish for stocks and bearish for gold & silver. That said, investors are able to enjoy a slightly deeper pullback, just at a time when some sweet bullion deals are to be had for Black Friday!
The question is, how much lower can gold & silver go?
Gold has put-in a lower-low:
Gold’s 50-day moving average is clearly pointing down and making a B-line for its 200-day, pretty much where the price is perched right now.
Considering the fundamental drivers, however, the outlook is actually very bullish. As states lockdown and shutter businesses and schools, this causes governments to go deeper into debt in order to keep their finances afloat and their constituents housed and fed, and whether one agrees with the governments’ responses to Covid or not, there comes a point where all of this “money printing” must be reflected in the gold price.
I would say “deficit spending”, or “additional debt”, or something like that, but in all reality, if we’re not ever going to pay back the debt, which we’re not, then isn’t “money printing" the actual term? I think it is, even though it’s not really money they’re printing but unbacked, debt-based fiat currency dependent on exponential, unsustainable growth, but the term fits perfectly because it ties in with one very simple yet critically important concept: You can’t print gold.
Or silver.
And, considering “premium creep”, we’re very near the bottom now:
Unlike gold, with silver, we have not put-in a lower-low.
I do not think we will, either, because that would show silver's spot price with a 21-handle, but if we do go that low, the risk that Silver Bugs, stackers, and other smart investors are taking by holding off for just another dollar or two drop in the spot price when considering premium creep, means that a person could actually end up paying more for silver in-hand because the increase in premiums, due to natural market supply-and-demand forces, which more than offsets any savings due to a drop in the spot price.
There is a calculation I like to do from time to time, and I haven’t done it for a while, so let me do it now.
Ignoring the “exotics”, there are four precious metals: gold, palladium, platinum, and silver.
Excluding silver and using $1800 gold, $2300 palladium, and $900 platinum, the average price for one ounce of precious metal is over $1,600.
When we include silver, the price for one ounce of precious metal still averages out to over $1,250.
And yet, in making that calculation, I’m assuming $25 silver!
Said differently, If an investor wants an ounce of precious metal, it basically costs over $1,000, but if an investor wants something so precious that not even every person on planet earth could have an ounce if they wanted one, silver, the price is less than thirty bucks.
Wow!
Talk about a bargain!
Gold & silver are pulling back in near-perfect harmony:
Palladium's seas may have been choppy, but its smooth sailing now:
There is barely any movement to either side of palladium's 50-day moving average.
Platinum has nearly clawed its way back to "unch", year-to-date:
Before 2020 is over, I think we'll see some nice gains in price.
Copper continues to sound the alarm bells:
Copper is not signaling inflation is coming, but rather, that inflation is here.
Inflation is now also starting to show up in the price of crude oil:
Is crude oil breaking out here?
Many market participants think the bond market is telling us inflation is coming:
I think nominal interest rates can be wherever the Fed and the US Government wants them, however.
I mean, as I scanned the financial news media this morning, the MSM isn't even trying to hide it anymore:
Honest Question: If there is now all of this newfound "cooperation", then what is the point of even having the Fed again?
Cooperation or not, the US dollar index looks like it is about to fall out of bed:
If consumer prices are already rising, which they are, what's going to happen to prices when the US dollar really starts to weaken against other currencies?
For now, market participants don't care about any of the stuff I write about:
There is an interesting thing about fear, however, in that it comes out of nowhere and all of the sudden.
There may be an economic collapse on Main Street, but it's pure euphoria on Wall Street:
The question now is whether or not we'll get another crash in the US dollar-denominated stock market before the US dollar hyperinflation?
Thanks for reading,
Paul Eberhart
