Blanchard Index

Exclusive Precious Metals Market Outlook and Recommendations

Index updated November 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

Gold Climbs Four Percent in October

The gold market climbed steadily throughout October, gaining 4% in four weeks. Gold eclipsed the $1,800 an ounce level for several days – but pulled back slightly to end the month off its highs as uncertainty over the early November Federal Reserve meeting dominated.

Will the Fed Taper or Won’t It?

All eyes are focused on the U.S. central bank meeting in early November amid rising inflation numbers. The Fed has artificially held U.S. interest rates at zero percent and flooded the market with liquidity via its monthly bond purchases since the Covid crisis began.

If the Fed continues to hold back from normalizing monetary policy – that opens the door for inflation to run wild – and could be strongly supportive for gold.

Economic Data Shows U.S. Economy Slowing Down as Consumers Spend Less

The U.S. economy grew at a 2% pace in the third quarter, the Commerce Department reported in late October. That marks the slowest pace since the Covid recovery began and was below the 2.6% rate economists anticipated.

A huge drop in consumer spending from a 12% jump in the second quarter to a mere 1.6% increase in the third quarter weighed on the growth picture.

Consumer spending, which makes up nearly 70% of our economy, dramatically slowed in recent months. People are traveling less and not eating out as much driving a massive decline, from 68% to 12.4%, in food services and accommodations.

“Overall, this is a big disappointment given that the consensus expectation at the start of the quarter in July was for a 7.0% gain and even our own bearish 3.5% forecast proved to be too optimistic,” Paul Ashworth, chief U.S. economist at Capital Economics wrote.”

Slower growth could be the first indication that the current business cycle is peaking.

What comes next in the business cycle? The contraction phase, also known as recession. While the stock market is strong right now, the writing is on the wall. An economic slowdown is coming, which could spell the end of the bull market in stocks. Fortunately, there are options for investors to diversify and protect their assets – if you act now – before the cycle turns.

Gold and rare coins are a hedge for many economic variables including a bear market in stocks. Historically, gold becomes inversely correlated to the stock market during times of equity market stress. That means when stock prices go down sharply, historically gold prices have climbed significantly.

Capitol Hill Wrangles over Infrastructure Bill

Lawmakers on Capitol Hill continued to debate and negotiate a massive $1.75 trillion U.S. infrastructure bill late in October, with still no compromise agreement seen.

President Biden traveled to Rome for the G20 summit late in October where global leaders endorsed a new plan for a minimum corporate tax rate of 15% to begin in 2023. The plan is designed to prevent large corporations like Google, Amazon, Facebook and Apple from locating offices in low-tax countries to avoid taxation.

Crude Oil Climbs Stunning $20/Barrel in Two Months

As prices climb on everything from food, clothing, appliances and cars – filling up your pump continues to get more expensive. The price of a barrel of West Texas Intermediate Crude Oil skyrocketed in recent months, from just under $62 a barrel to as high as $85 in late October.

Higher energy prices don’t just affect your pump price – they filter throughout the economy as transportation costs rise for everything from the trucks that deliver milk to your grocery store to the Amazon delivery driver who drops packages at your front door.

Inflation is taking hold in the U.S. economy and once it gets a strong grip can be hard to eradicate quickly. Rising inflation is one of the key factors that is underpinning the recent gold rally and will continue to support the market in the weeks and months ahead.

Stagflation is Bullish for Gold

The combination of rising inflation and slowing growth – called stagflation – is another reason many investors are turning to gold now.

Gold is the best stagflation performer since 1973 with a 12.8% annualized return, according to a recent Gold Hub investment update.

Indeed, a new commodity bull, or rising super cycle has begun, according to the Wells Fargo Investment Institute. Commodity prices tend to move in large up and down cycles – the so-called super cycles last decades.

The current conditions leave gold poised for a breakaway rally to new all-time highs in the months and years ahead.

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.