Monday Morning Wrap Up – April 6, 2020

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A message from David Beahm

President and CEO

 

Gold Shines: Shelter in the Storm

Nearly 90% of Americans are now under some sort of lockdown as the coronavirus pandemic halted daily life as we know it. Businesses are closing left and right as the number of COVID-19 cases are exploding in New York City and other parts of the country as well.

Job layoffs are skyrocketing at a faster pace than any time in U.S. history. Over 6.6 million Americans filed for unemployment in the last week of March, which followed a record number 3.3 million people in the previous week.  Service sector jobs suffered most amid social distancing. These massive job losses are unprecedented and warn that the U.S. economy may be skipping recession and moving directly into a depression zone.

Economists now project over 20 million jobs lost by mid-May. While hard to comprehend, the economic consequences of this crisis are just beginning to ripple through the economy.

In the midst of this stunning event, gold is providing investors a safe-haven in the storm. Gold is shining in the midst of carnage across other asset classes. Even U.S. Treasuries are only returning a paltry 0.5%. Here’s a quick look at financial market performance:

Year-to-Date Returns

Gainers

Palladium +11%
Gold +8%
U.S. Dollar Index +5%
U.S. 10-Yr Treasury Yield +0.5%

 

Losers

NASDAQ -18%
Silver -19%
S&P 500 -23%
Platinum -26%
Russell 2000 -37%
Crude Oil -47%

 

Last week, we saw more early damage to the economy from the pandemic, with a surge in the March employment rate to 4.4%. Expect it to go higher. Much higher.

The stock market traded mostly sideways last week as investors hunkered down in a wait and see mode. With the pace of the pandemic still growing here in the U.S., the stock market is unlikely to stage any sort of recovery until there are actual signs the pandemic is slowing with fewer reported confirmed cases. Health officials believe that could be months away.

What about Silver?

Silver has under-performed gold and fell in price the last two months. Why? Silver is both an industrial and monetary metal. Because it is an industrial metal it trades and is vulnerable to commodity cycles. In addition to its monetary value, there are a wide range of manufacturing and technology uses for silver. Silver is utilized in solar panels, electronics, batteries, nanotechnology applications and even water purification systems, to name just a few applications. Industrial demand for silver is expected to weaken in the short-term if we face a global recession.

Yet, it is important for investors to remember that while the current commodity cycle has pressured silver, it is much more than just a commodity. It is a precious and monetary metal.

The gold/silver ratio historically has demonstrated reliable buy signals for silver in recent decades. That well respected technical indicator is flashing a huge “BUY” right now for silver.

Readings above 80 signal that silver is undervalued and is a strong buy signal for the metal.

And, we just hit 114!

A supply/demand shortage appears on the horizon for silver as the slowdown in the global economy will impact mining operations. Truly historical investment opportunities don’t come around every day. Your dollars buy dramatically more silver in the current market environment. If you’ve been considering adding to your precious metals portfolio, silver offers excellent value at current levels. How high could silver go in the years ahead? In 2011, silver climbed above the $49.00 an ounce level.

Stocks Heading Into Worst Six Months Period

Expect the stock market to test the recent lows again as new economic data released each week reveals how badly hit the economy is in the wake of this disaster. The seasonally documented “worst six months of the stock market” are just around the corner. Historically, the May through October period is the worst performing period of the year. Investors should brace for things to get worse in stocks before they get better.

Risky assets like stocks are unlikely to recover their losses for a long time. There is still time to diversify your portfolio and protect your assets with tangible assets. If you would like expert recommendations on asset allocation during these challenging times please contact us. We can help.

In the midst of this pandemic, it is worth remembering that this too will pass. For now, please take care of yourself and your loved ones. Check in on your parents and grandparents. Stay safe and healthy.

Best wishes,

David

What Questions Do You Have?
Email questions for me to answer in next week’s Monday Morning Wrap at: skmunson@blanchardgold.com or email just to let us know if you like this commentary or how we can make it better. Prefer the phone? Call us at 1-866-629-2281. We want to hear from you.

 

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