Blanchard Index

Exclusive Precious Metals Market Outlook and Recommendations

Index updated September 1, 2021

Blanchard's Monthly Index

The Blanchard Monthly Index is a roll-up of industry news and economic trends affecting the precious metals market and trading world.

Check back each month for insights and commentary from our leading experts and contributors.

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The Blanchard Economic Report

Investors Buy the Gold Dip

As the hot, steamy days of summer come to a close, uncertainty from the spread of the Delta variant and rising inflation clouds the economic outlook. U.S. growth still remains strong but has slowed in recent weeks, marked by a drop in consumer confidence. Some regions, including Blanchard’s home state of Louisiana, were battered by catastrophic winds and rain from Hurricane Ida. While Ida weakened into a tropical storm, the Northeast also suffered heavy flash flooding, loss of life and damage.

In the markets last month, gold investors jumped into action in early August using a price retreat to the $1,700 an ounce area as a buying opportunity. The macroeconomic picture for gold remains positive, with decade high inflation rates, low real interest rates and excessive Federal Reserve money printing.

Economic growth is beginning to slow

Consumer demand remains strong, but global supply chain disruptions and shortages are leading to delayed deliveries and higher prices on everything from couches to lumber to cars.

Wells Fargo Investment Institute lowered their full-year GDP growth forecast to 6.3% as uncertainty around the impact of the Delta variant and various supply chain disruptions could slow down the recovery.

The August employment report registered a sharply weaker-than-expected picture of the labor market. Last month, economists projected that 720,000 new jobs would be created. Instead, the U.S. Labor Department reported that only 235,000 jobs were added to the economy. The U.S. dollar fell on the economic news and gold gained.

Jackson Hole Fed Meeting

The Federal Reserve Bank of Kansas City hosted its annual economic policy symposium in Jackson Hole, Wyoming last month. This year’s symposium and Federal Reserve Chairman Jerome Powell’s headline speech failed to make a big splash for the markets. He used his speech to reaffirm the Fed’s continued commitment to support the economy, but failed to offer up any fresh news or forecasts of when the central bank might pull back on its emergency monthly bond purchases it began during the pandemic.

The Fed chief continued to reiterate his view that the high levels of inflation will be transitory despite the largest year-over-year core PCE increase since 1991. Investors will watch the September Fed meeting closely as many believe an official tapering announcement could come at the September 22 announcement.

Billionaires continue to bet on gold

John Paulson, who made $20 billion in the 2008 Global Financial Crisis said last month he believes inflation could shoot sharply higher. He predicted that rising inflation could trigger a run out of both bonds and cash into gold. Paulson is investing in gold as one strategy to position for that outlook.

Meanwhile, legendary money manager Mark Mobius said investors should hold 10% of their portfolio in gold in anticipation of currency devaluation in the wake of the historic monetary stimulus and money printing.

Navigating the second half of 2021

Investors should prepare for stock market volatility in September, which is historically the worst month of the year for equities. Ahead of the highly anticipated Federal Reserve meeting in September, the stock market volatility may increase ahead of a potential “tapering” announcement by the central bank.

The key macro trends remain in place to support gold – monetary and fiscal support remain robust, inflation is rising and the dollar’s structural value is weakened by the historic levels of monetary expansion. In this environment, gold continues to shine bright and offers the opportunity for effective portfolio diversification and a store of value for your wealth.

Our Recommendations

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. Generally, readings above 65 signal that silver is undervalued and is a strong buy signal for the metal.

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’re seeing now.

Current Ratio: 75 oz. silver = 1 oz. gold

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.