Exclusive Precious Metals Outlook and Recommendations
Index updated June 1, 2021
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 Tops $1,900, Jumps 8% in May
Gold prices sped higher last month, fueled by growing signs of inflation, a crash in Bitcoin and as unprecedented monetary and fiscal stimulus continue to drive an already hot U.S. economy forward.
Gold blew through $1,900 an ounce late in May, marking a new four-month high. Silver also climbed steadily higher throughout May, ending the month around $29 an ounce.
Skittish investors turned to gold amid signs of widespread selling in the cryptocurrency market, which saw a roughly 50% decline in Bitcoin. After climbing above $64,000 in mid-April, Bitcoin crashed to just under $30,000 in late May. The crypto volatility suggests that Bitcoin is failing to act as a store of value – a quality that gold has proven through its centuries of performance of a valuable asset class. That’s why Goldman Sachs analysts have written: “The use of precious metals is not a historical accident…Gold wins out over cryptocurrencies in a majority of the key characteristics of money.”
Inflation Worries Rise, as Fed Stands Idly By
Consumer prices jumped 4.2% last month. That marks the fastest pace since 2008. The recipe for classic inflation exists: too many dollars chasing too few goods. Yet, the Federal Reserve continues to maintain its wildly expansive monetary policies with interest rates stuck at rock-bottom zero to 0.25%.
The Fed continues to minimize the data which reveals inflation coursing its way through the economy fast – suggesting the increase is merely ‘transitory.’ Investors, economists and billionaire hedge fund managers aren’t so sure.
Billionaire hedge fund manager Stanley Druckenmiller points his finger at the Federal Reserve’s experimental monetary policy efforts to boost the economy. He told CNBC last month that the Fed’s ongoing stimulus efforts were “the most radical policy” since World War II— and one that could ultimately destabilize the U.S. dollar and send asset values sharply lower.
Legendary investor Warren Buffet and billionaire investor Bill Ackman also warned about the dangers of inflation ahead. In fact, Ackman said a sustained rise in inflation could be a ‘black swan’ event to the stock market. While the stock market continues to trade near all-time highs, many are now warning the recent gains are a Fed-liquidity fueled bubble – that could burst if the Fed begins raising interest rates to combat inflation.
Here’s what GoldHub said in a recent investment update: “Gold protects purchasing power in the long run against more than just the price of goods and services. In tracking money supply, gold can help investors protect against potentially excessive asset price inflation and currency debasement.”
New All-Time Highs Ahead
The gold market is kicking into high gear and the $2,000 an ounce level stands as the next bullish target.
In late May, European asset management firm Incrementum AG published its annual In Gold We Trust report.
Inflation is just beginning. Prices are rising and will begin to spiral even faster once money supply velocity kicks into gear. This year, the firm targets gold to climb to new all-time highs above the $2,067 high level hit last August.
What’s more? Incrementum targets gold to hit $10,000 this decade.
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.
Current Ratio: 68 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’re 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.