Exclusive Precious Metals Outlook and Recommendations
Index updated September 1, 2020
The Blanchard Monthly Index is a roll-up of industry news and economic trends affecting the precious metals trading world.
Check back each month for insights and commentary from our leading experts and contributors.
The Blanchard Economic Report
Gold Makes History with New All-Time High in August
The historic gold rush of 2020 set a new milestone last month – as spot gold set a new all-time high record at $2,069 on August 7.
Gold pierced the $2,000 per ounce level and continued higher – driven by a bevy of factors including concerns about U.S. dollar – currency debasement, zero-interest rates and a desire for portfolio diversification and protection.
Covid’s health and economic impact runs deep
The daily rate of new Covid-19 cases has declined in recent weeks, with about 46,000 new cases a day in late August, down from 69,000 early in the month, according to Johns Hopkins University. India has shifted to become the world’s Covid hotspot with over 79,000 new cases per day.
The pandemic has left the United States in a deep recession with a still uncertain economic future for many Americans and their employment.
US Layoffs Continue
A new wave of layoffs have become permanent, according to an Aug. 28 report from the Wall Street Journal.
- MGM Resorts International and Stanley Black & Decker Inc. announced that some employees furloughed at the beginning of the pandemic won’t be coming back.
- Salesforce.com Inc. told its 54,000-person workforce that 1,000 would lose their jobs later this year. Coca-Cola Co said last week it plans to lay off some employees and offer voluntary buyouts to about 4,000 employees. American Airlines Group and United Airlines said more than 53,000 workers could be affected in about a month if the airlines doesn’t receive more emergency stimulus funds from the government.
If you are retired or are fortunate enough to have a job, it may not feel like that deep of a crisis. It is increasingly becoming a “Tale of Two Cities” in America – those who have white-collar jobs who are able to telecommute and work remotely, and those front line workers whose jobs working at restaurants, sport venues, entertainment facilities like movie theaters, amusement parks, casinos and more have simply shut down.
Yet the recent corporate announcements reveal the pandemic is already reaching into major companies and affecting white collar workers as well.
Stock Climb As Fed Gives Unfettered Support
The stock market hit new highs last month – as a major dichotomy continues between Wall Street and Main Street. The stock market is running high on trillions of dollars of Fed money printing and a new announcement that the Fed will ease its inflation target. With the promise of zero-interest rates for the foreseeable future, stocks are climbing on juiced up liquidity fumes.
Hard Assets Shine Bright
In the midst of the recession and health crisis, gold and silver have provided a safe haven in the storm.
Gold hit a new all-time high and gained as much as 35% this year. Silver recently hit a new 7-year high and is posting a 49% gain.
Major investment firms remain positive on the outlook for gold ahead. Billionaires and hedge fund managers continue to publicly take new positions in gold – notably, Warren Buffett’s Berkshire Hathaway Inc. announced last month a new $565 million stake in Barrick Gold Corp. – the world’s second largest gold miner.
Congress Takes a Break
Unable to come to terms on a new second round of emergency stimulus before their summer vacation, Congress adjourned and left town – after millions of Americans lost their extra $600 per weekly unemployment insurance at the end of July.
Politics Loom Large
Meanwhile, the Democrats and Republicans both their nominating conventions last month – as the Nov. 3 presidential election will arrive in about two months. Partisan politics remain at some of the highest levels in decades, along with civil rights protestors in the street and on-going issues with racial injustice. Tensions will remain high as presidential politics take center stage and the nation awaits what democracy will bring next.
Gold Still In an Uptrend
While gold action slowed down in late August, the market is taking a much-needed breather after the historic price run-up this year. The outlook remains positive – with higher prices seen after a consolidation phase.
Major investment firms continue to forecast higher gold prices. Goldman Sachs expects gold to climb to $2,300 an ounce within 12 months. Bank of America raised its 18-month forecast this April to gold at $3,000 an ounce.
The high-end rare coin market remains an attractive buying opportunity for long-term investors. Rare coins offer investors an opportunity for significant price appreciation in the current environment.
The appeal of rare coins to investors is their impressive historical price appreciation, which has outpaced the level of the underlying precious metal.
Buying Rare Coins
For investors able to hold 5–10 years, ultra-rare acquisitions offer the safest store of wealth and the strongest growth potential. Accumulate the highest-quality coins that you can afford. This strategy will pay off handsomely as rarity tends to appreciate the fastest.
Buying Precious Metals
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 – even though silver has rallied significantly in recent weeks.
Generally, readings above 65 signal that silver is severely undervalued and is a strong buy signal for the metal.
Ratio: 70 oz. silver = 1 oz. gold
The gold/silver ratio is a way for investors to measure the relative value of these two metals. The ratio indicates the number of ounces needed to buy one ounce of gold. Investors have long turned to this ratio to identify attractive long-term entry points for precious metals purchases. A high ratio is generally viewed as a signal that silver is undervalued relative to gold. That is what we are seeing now.
You may want to consider converting some gold holdings into silver.
Popular silver products: 10 oz. & 100 oz. silver bars, Silver American Eagles in monster boxes.