Exclusive Precious Metals Outlook and Recommendations

Index updated November 1, 2017

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The Blanchard Economic Report

Heading Into the Final Two Months of 2017 and What A Year It’s Been!

The gold market traded in a range during October, but still closed out the month with a double-digit 10% gain on the year. Geopolitics have cooled with the North Korean nuclear scare receding deep into the Twitter history feed, for now. Stocks continue grinding higher boosted by expectations of a tax cut package that is expected to add to the federal deficit, over the long-term.

October Jobs Report

The U.S. added 261,000 new jobs in October. Looking at the employment picture over the last year, the economy has been adding about 170,000 jobs per month, on average. The overall unemployment rate fell again to 4.1%, hitting its lowest level since 2000. Only time will tell if this long economic expansion under President Trump’s economics team can beat the 10-year record for economic growth seen under the Clinton presidency in the 90s.

Digging deeper, the report underscored the question nearly every worker in American continues to wonder: “When will I get a raise?”

The job growth in this recovery phase has still not translated into wage gains for American workers. Average hourly earnings stood 2.4% higher in October, which means wages are barely keeping pace with inflation.

Nonetheless Consumers Feel Good

Consumer confidence remains high, despite the spike in jobless claims (number of people filing for unemployment) and higher gasoline prices at the pump. In October, the University of Michigan Consumer Confidence hit 100.7. That represents only the second time that survey results climbed above the 100 mark since the record 1990s expansion.

Focus on Capitol Hill

The House recently released its tax bill, suggesting Republicans are making ground toward their goal of passing tax reform this year. Corporations will get a major boost from the bill, shaving their tax obligations from 35% to 20%. Current proposals would add $1.5 trillion to the deficit over 10 years. The bill will likely be amended amid negotiations in the Senate, but the odds favor some form of tax cuts passed by early next year.

The rising federal debt levels underscore the value of diversification to gold in one’s portfolio. As the federal government borrows more and more dollars, it diminishes the value of all the other dollars already in existence. These 5 charts reveal a fascinating look at the rising debt levels in America and what it means for gold.

Federal Reserve – Say Goodbye to Janet

President Trump gave Janet Yellen her notice when he nominated Jerome Powell to be the next Federal Reserve President in late October. What does this mean for gold and markets? Right now, perhaps not that much.

The next interest rate hike is expected at the Dec. 12-13 Fed meeting. Financial markets have priced in a 70% probability of a Fed rate hike at the December meeting. From there Wall Street analysts expect anywhere from 2 to 4 additional rate hikes in 2018.

The real issue could arise when the economy begins to run out of gas. Powell is a lawyer, not an economist by training. For the better portion of the last three decades, all Fed Chairs from Yellen going back to Alan Greenspan have all had a Ph.D. in economics.    

Odds Favor a Recession in Powell’s Term

The current economic expansion is long in the tooth in its 9th year. That means odds are that Powell will be leading the Fed as the economic cycle turns back into recession.

What will the new Fed Chief do then? If interest rates are not normalized before then (around the 3.5-4.0% range), the Fed will be out of its proverbial “bullets” to stimulate economic growth. What then? Move rates below zero? Buy more assets? Powell will not have extensive academic knowledge of economics to inform him.

The real test for Powell will be when a recession or crisis hits. A move to negative interest rates or new quantitative easing will be bullish for gold. Stay tuned.

View from 35,000 Feet

The U.S. Economy

  1. U.S. economic expansion is old, currently in its 9th year.
  2. Consumers are taking on more debt.
  3. Interest rates could rise 3-5 times in the next 14 months.

The U.S. Stock Market

  1. Bull market second longest since WWII at 8.5 years.
  2. Valuations are high.
  3. Fed rate hikes typically depress stocks.

Rebalance Your Portfolio

Gold has been a solid contributor to portfolio performance this year. New research shows that physical investment in gold of 30% of your total assets is optimal for portfolio performance.

It’s time to rebalance your portfolio now. With an aging economic expansion and old bull market in stocks, the tide will turn at some point. When that cycle shift comes it will provide even more fuel to the rising trend in gold and other precious metals. Current levels offer long-term investors good value in both gold and silver. It may be time to batten down the hatches. There are some storm clouds on the horizon.


Predicted Price Trading Bands, Next 90 Days

Gold $1,260-$1,400

Silver $16.80-$17.80

Our Recommendations

The high-end rare coin market continues to increase in value as economic, political and geopolitical uncertainty climbs.

For investors able to hold at least 10 years, ultra-rare acquisitions offer the safest store of wealth and strongest growth potential.

Buying Rare Coins

The high-end rare coin market continues to grow.
For investors able to hold at least 10 years, ultra-rare acquisitions offer the safest store of wealth and strongest growth potential.

Buying Precious Metals

The trend is up. Any modest price pullbacks would offer an excellent buying opportunity as higher levels are forecast ahead. An accumulation strategy is probably the best option for clients wishing to add to holdings.

Trading Precious Metals

Silver continues to offer a better value than gold.

Ratio: 75 oz. silver = 1 oz. gold

This ratio has averaged 55 to 1 over the past five years

You may want to consider converting some gold holdings to silver

Popular silver products: 10 oz & 100 oz. silver bars, Silver American Eagles in monster boxes

Current price levels and any minor price retreats offers investors an excellent entry point for both gold and silver investments. Give your portfolio manager a call today at 1-866-827-4314 to discuss current market conditions and potential shifts you may want to consider to your investment picture.