Blanchard Index
Exclusive Precious Metals Market Outlook and Recommendations
Index updated March 1, 2022
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.
The Blanchard Economic Report
February Gold Dip Offers Investors Attractive Entry Point
After climbing to a 10-month high in early February above the $1,900 level, gold retreated later in the month – offering long-term investors an attractive entry point to increase their precious metals holdings.
Gold slipped toward $1,825 in February amid renewed strength in the U.S. dollar, rising U.S. bond yields and fresh expectations that the Federal Reserve could raise interest rates more and keep rates higher longer than originally expected. Strength in the U.S. dollar makes gold less attractive to foreign buyers, while higher interest rates compete with gold, which has no fixed interest rate attached to it.
Inflation Still Hotter Than Expected
Recent economic data reveals that the Fed has more work to do before it can tame the inflation running rampant throughout the U.S. economy.
In January, consumer inflation increased by 0.5% on a month-by-month basis as Americans continue to struggle with soaring prices, with the January consumer price index at 6.4%.
Another key inflation indicator: the core PCE (personal consumption expenditure) jumped by 0.6% to a 4.7% year-over-year reading – higher than economists expected.
Bottom line? Inflation is still spreading like wildfire throughout the economy. That means the Fed will have to raise rates more and keep them higher longer-than-expected – which could almost certainly push the economy into a recession.
Stocks Tumble in February
The inflation news sent stock prices tumbling lower in February. Simply put, investors dumped stocks as concerns over high inflation and a potential recession take center stage. The bear market in stocks isn’t over – and the Santa Claus Rally we saw into the holidays is over.
Looking ahead: March Fed rate hike
Previously economists expected only a .25 basis point rate increase at the next Fed meeting on March 21-22, now some experts say another .50 bp rate hike could be back on the table given the stubborn inflation data.
Money Moves
If you’ve been considering increasing your allocation to tangible assets, the February price retreat in gold offers an opportunity to buy more gold with your dollars.
If the recent sell-off in the stock market, concerns about recession or still-high inflation is unsettling to you, increasing your allocation to gold can buy you not only protection for your wealth but give you peace of mind and help you to sleep better at night.
Gold is a proven portfolio diversifier that is not correlated to the stock market – that means when stocks go down, or the economy falls into a recession – gold historically climbs – often by a lot. Talk to a Blanchard portfolio manager if you’d like a personalized portfolio review with specific recommendations unique to your own financial goals and objectives.
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: 87 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.
