Exclusive Precious Metals Outlook and Recommendations

Index updated October 1, 2019

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The Blanchard Economic Report

Gold Hits New Six-Year High in September

Gold climbed again in September.

Spot gold hit a new six-year high early in the month, just above the $1,546-an-ounce level. Light profit-taking weighed on gold slightly toward month-end. However, gold demand remains strong, and buyers are using price dips as opportunities to accumulate gold.

Political Drama Heightens with Impeachment Inquiry

Domestic political risks spiked in September as Democrats launched an impeachment inquiry into President Trump. Impeachment news will likely dominate headlines in coming months but for now is unlikely to have a major impact on financial markets or the economy. There is currently skepticism that the Republican-controlled Senate will vote with the two-thirds majority needed to remove President Trump from office.

Looking ahead, there are potential ramifications for markets and gold depending on the investigation’s outcome and who earns the top spot on the Democratic ticket. Elizabeth Warren is climbing in the polls; if she earns the Democratic nomination, it could spark jitters on Wall Street amid worries over her plans to break up tech companies and investment banks. A Warren presidential win in 2020 could hit stocks hard and unleash even further gains in gold.

Global Risks Remain High

Elsewhere around the globe, geopolitical risks are elevated. In September, a drone attack on Saudi Arabia oil facilities took out roughly half of the country’s production capacity. Brexit talks continue to drag on between the United Kingdom and the European Union, with no current prospects of an imminent deal. Global chaos favors gold. Geopolitical uncertainties underpin demand for gold and will keep a floor under the market throughout the fourth quarter.

U.S. Data Signals Weakening Economy

The U.S. economic expansion is now in its 11th year. However, cracks are emerging in the growth picture. Stocks cratered toward the end of September in reaction to the news that the manufacturing sector continues to weaken.

The September ISM manufacturing index skidded to 47.8, which marked its worst reading since June 2009. Any reading below the 50% level indicates that the manufacturing sector is contracting. Stocks fell and gold rallied in response to the news.

Prepare for Risks That Lie Ahead

The economy is still growing, but at this point in the economic cycle, it’s important to prepare your portfolio for the risks and opportunities that lie ahead. If you haven’t fully protected your portfolio with up to a 15% allocation in physical gold, act now before the cycle shifts negatively impact your bottom line.

Predicted Price Trading Bands: Next 90 Days

Gold: $1,590–$1,490

Silver: $19.75–$17.25

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 severely undervalued and is a strong buy signal for the metal.

Ratio: 84 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.