Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold & Silver Shine as Fed Targets Bondholders for Capital Losses

Commodities / Gold & Silver 2020 Sep 08, 2020 - 06:44 PM GMT

By: MoneyMetals

Commodities

As the tech-heavy stock market indexes sold off on Thursday, many investors were forced to re-think their positions.

For the past few months, mega cap technology companies like Apple, Amazon, and Tesla have led the market higher. Yesterday they led the market lower.

Now the question is: Where can investors look for leadership going forward?


As would be expected during big down days for equities, gold held up relatively better. For the week, though, gold, silver, and platinum prices are all down.

Palladium has certainly shown leadership within the metals space in recent years. But despite this week’s gains, palladium prices still sit below their highs from February. And despite this week’s setbacks for gold and silver, they still trade well above their levels from when the coronavirus lockdowns began.

Silver has vastly outperformed all the precious metals as well as copper and most base metals. You’d never know it from watching CNBC, but silver is also besting the stock market year to date – outperforming even the high-flying Nasdaq.

Unlike stocks, which have been going up for years and reaching overbought extremes, silver is likely still in the early stages of a bull market. As it is prone to do, silver will both rise and pull back sharply along the way.

So, the possibility of some additional downside price action in the near-term shouldn’t discourage long-term bulls. What should provide encouragement is the fact that silver and gold markets stand to benefit from negative real interest rates and a tsunami of new unbacked paper debt hitting the economy.

This week, the Congressional Budget Office projected the annual budget deficit to hit a staggering $3.3 trillion.

News Anchor: The United States hasn't seen debt like this since World War II. Officials say the national budget deficit will hit $3.3 trillion this year, more than triple that of 2019. And next year, the nation's debt will likely be bigger than the size of the entire economy. It comes as the federal government ads $2 trillion in spending to fight the coronavirus and an economic recession.

When government debt grows faster than the economy and ultimately exceeds the country’s entire GDP, that signals financial distress.

A private company that was carrying more debt than the value of its total underlying assets would be facing insolvency. Its bonds would be rated as “junk.”

U.S. Treasury bonds face no such downgrade on the horizon. It’s not necessarily that investors have confidence in the full faith and credit of the United States government itself. But they believe the Federal Reserve would step in to buy Treasuries in unlimited quantities if necessary.

The Fed’s printing press won’t save holders of Treasuries and other dollar-denominated financial assets from real losses. In fact, the Fed’s open program of raising inflation rates will ensure bondholders and savers lose purchasing power over time. It’s just a question of how much.

What person in their right mind would hold assets that are virtually guaranteed to lose value? Perhaps the fact that Federal Reserve notes are, for now, losing purchasing power at a gradual pace offers some the illusion of safety.

It’s true that precious metals markets can be volatile by comparison on a day to day basis. But that’s just noise if your time horizon is measured in years.

The major trend for gold and silver prices is up in terms of dollars. In terms of the stock market and other major asset classes, precious metals also have the potential to make gains in the months and years ahead.

At the very least, hard money serves as an indispensable portfolio diversifier in uncertain times. When markets gyrate and U.S. dollars depreciate, physical gold and silver provide a tangible hedge against inflation and financial insecurity.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2020 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in