Blanchard Index

Exclusive Precious Metals Outlook and Recommendations

Index updated March 1, 2017


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The Blanchard Economic Report

The precious metals sector posted significant gains in the first two months of 2017. Gold, silver, platinum and palladium surged sharply higher and the trend points up projecting more gains for these metals in the months ahead.

Many analysts on Wall Street believe the December low in gold marked a bottom and an end to the price correction seen in the second half of 2016. We agree and believe that current price levels in metals could be the lowest investors will see in 2017.  

Asset Performance: Silver is the best performing asset year-to-date, with an impressive 15% gain, compared to a 13% gain in both palladium and platinum and an 8.24% jump in gold prices. All the metals are outpacing gains in the stock market with the S&P 500 up 7%.

Silver Focus: Silver has the added benefit of acting as both a precious metal and an industrial metal. The dual demand base is boosting silver prices higher, as expectations for new infrastructure spending and faster economic growth increase industrial demand for silver. Investors can buy an ounce of silver for around $18.40 an ounce right now, versus $1,247 for an ounce of gold. Silver is a more cost-effective approach to gain precious metals exposure and has attracted significant buying interest in recent months.

Macro Picture: Investment demand for precious metals has soared in recent months. Some of the positive factors include uncertainty regarding the potential inflationary impact of proposed U.S. infrastructure spending, the potential impact of proposed border-tariffs and protectionist policies and uncertainty regarding the stability of the European Union ahead of a number of key elections this year.

The Stock Market: The S&P 500 has climbed to new all-time highs this year, but still underperforms the metals markets. The Dow Jones Industrial Average blasted through the 21,000 barrier for the first time ever. The stock market rally has been fueled on hopes for corporate tax reform and infrastructure spending. Equities are flashing extremely overbought signals and are vulnerable to a correction at any time. The devil is in the details and the market focus will soon shift to getting these proposals passed through Congress, funded and then implemented. The stock market has priced in a lot of good news and failure to deliver on any of these fronts could be the trigger for a bearish equity turn.

The Federal Reserve: Fed Chair Janet Yellen and other Fed officials have telegraphed the potential for two to three interest rates hikes in 2017. There is potential for the central bank to hike at the March 14-15 meeting. If the Fed holds steady, the next likely time is the June 13-14 meeting. The interest rate hikes have been communicated to Wall Street and the policy shifts would not be a surprise. Gold and silver have been rallying in the face of expected higher interest rates, which demonstrates how uncertainty and safe-haven buying have played a role in recent metals gains. Any minor price pullback which could be seen on a rate hike would offer investors a buying opportunity in gold and silver.

Economic Outlook: The U.S. economy is expected to grow at around 2% in 2017, positive but still below the historical average around 3.5%. The labor market remains strong. In January, non-farm payrolls rose by 227,000 leaving the 3-month average for job gains at 183,000 per month. The unemployment rate stands at 4.8%. Most economists consider current labor market conditions at near full-employment. New job stimulus measures would have an inflationary impact on wages and push general inflation higher as well.

There are signs inflation is picking up, which is a bullish gold factor. The PCE Price Index rose 1.9% on a year-over-year basis in January, and is nearly touching the Fed’s inflation target at 2%. There is the potential that rising crude oil prices, tighter labor market conditions and infrastructure spending could boost inflation more significantly in the months ahead.

Predicted Price Trading Bands, Next 90 Days

Gold  $1,220-$1,320

Silver $17.90- $19.00

Our Recommendations:

The high-end rare coin market continues to increase in value as inflationary expectations build.

For investors able to hold at least 10 years, ultra-rare acquisitions offer the safest store of wealth and strongest growth potential.

Buying Rare Coins:

The high-end rare coin market continues to grow.
For investors able to hold at least 10 years, ultra-rare acquisitions offer the safest store of wealth and strongest growth potential.

Buying Precious Metals:

The December 2016 low in precious metals marked out a major bottom. The trend is up. Any modest price pullbacks would offer an excellent buying opportunity as higher levels are forecast ahead. An accumulation strategy is probably the best bet for clients wishing to add to holdings.

Trading Precious Metals:

Silver continues to offer a better value than gold

Ratio: 67 oz. silver = 1 oz. gold

This ratio has averaged 55 to 1 over the past five years

You may want to consider converting some gold holdings to silver

Popular silver products: 10 oz & 100 oz. silver bars, Silver American Eagles in monster boxes

Current price levels and any minor price retreats offers investors an excellent entry point for both gold and silver investments. Give your portfolio manager a call today at 1-866-827-4314 to discuss current market conditions and potential shifts you may want to consider to your investment picture.

Call for personal acquisition assistance: 1.800.880.4653

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