Welcome to this week's Market Wrap Podcast, I'm Mike Gleason.
Well, just when precious metals markets seem ready to start warming up for a late spring surge after testing support levels… the Federal Reserve throws cold water on the rally before it can get going. On Wednesday, Federal Reserve chair Janet Yellen testified before Congress and presented a rosy outlook for the economy and financial markets.
Economic growth will pick up later this year, she said. The weak GDP number that came in earlier this year? That was due to the unusually cold weather… which was due to global warming – no, climate change, or something like that. [Chuckling.]
Yellen was asked whether the Fed's policy of keeping interest rates artificially low was hurting senior citizens and others struggling to live off savings. Absolutely not, she insisted. They should be thankful that housing values are being supported and the stock market is near record highs. Does the fact that stock valuations are being supported by Fed stimulus mean there might be an artificial bubble? Of course not, Yellen insisted. Just like her predecessors Ben Bernanke and Alan Greenspan, Janet Yellen doesn't see any bubbles. She almost certainly won't until after they've burst.
What about the persistently weak employment numbers? Yellen and company know full well that the official unemployment rate doesn't tell the whole story. Record numbers of people have dropped out of the workforce entirely, and that grim reality is difficult to put a positive spin on.
Nevertheless, the popular takeaway from Yellen's testimony was that things are good enough in the economy for the Fed to continue gradually unwinding stimulus. Gold and silver prices fell about 1.5% each on Wednesday. For the week, gold is down about 1%, with prices currently coming in at $1,290 per ounce. Silver is off nearly 2% and now trades at $19.20 an ounce, back near critical support levels.
Some theorize that one of the reasons why precious metals prices have remained range bound is because China has a long-term objective of accumulating gold and is fudging its data and intervening in the electronic trading markets in order to hold down prices – so it can snap up physical metal while it still can. The HyperReport likens China's actions to a strategy from the pages of The Art of War.
First, China's Art of War. One of the principles in the Art of War is that you show everybody your weaknesses, and deny your strengths. China may have a low per-capita purchasing power, however, they are or will be the largest economy in the world. China will be introducing the new currency, first for Asia, then the rest of the world, which according to Stephen Leeb will include gold.
Next, young adults not working. 4.3 million Americans ages 25 to 29 were not working in April. The Labor Force participation rate in April, 2014 for this group hit the lowest level that is only recorded since 1982. In January 1982, when the data was first collected, the Labor Force participation rate for this group was 80.7%. When the young adults do not have jobs, that is a recipe for revolution.
Next, disposable income. Since the so-called end of the recession in 2009, Wall Street has seen a 108.2% increase in disposable income. In contrast, American families only saw a 4.2% increase in disposable income. This is more evidence that quantitative easing is helping, bankers.
In a world governed by information and misinformation, perception and misperception, where governments and the media can manipulate the public into being distracted from reality by this or that storyline, there is still reality. And nothing is more real than physical precious metal bullion coins, rounds, and bars. Our Founding Fathers knew this well. The Chinese know this well. And so does Russia's Vladimir Putin. Russia has been quietly converting some of its vast oil and gas resources into physical gold. The Russian central bank has added at least 570 metric tons of the yellow metal to its reserves in the past decade.
A long-term goal of America's major rivals seems to be to untether global trade from the U.S. dollar standard. Americans may not able to save the dollar from its ultimate demise, but they can opt to go on their own hard money standard by converting some of their financial wealth into reserves of physical precious metals.
For more on how to approach the process of accumulating some gold and silver for protection and profit, please check out the brand-new article from Money Metals Exchange's expert analyst David Smith. It's called Tips for Getting Your Precious Metals “Starter Stash.” It's a great read, and you can find it right on our web site, MoneyMetals.com.
Speaking of silver, we thought who better to talk about the silver market than David Morgan, of the Morgan Report. We just had a quick question for him today since he has only a moment to visit with us. David how are you?
Doing well, thank you.
Well, since the big washout in silver took place in the first half of last year, we've hit this $19.00 level a number of times now including two or three times this year. Despite the price weakness, silver just won't seem to stay down under the $19.00 however…it keeps popping right back up above it. But even though we've seen the $19.00 level hold again and again, we've also seen lower highs.
David, are you concerned that we're going to see a breakdown from here, or are we carving out a major base of support for higher prices down the road, what do you think?
As we speak, it's definitely carving out a major base. However, if the market were to close under $19.00, three times, it wouldn't have to be three times in a row, but if we got three closes under $19.00, then that would show that we have weakness, and we'd probably visit those levels that we've seen, which is $18.17 on the 28th of June last year. Unless we get three closes below $19.00, the market is clearly saying: yes it's low, but the base has been formed.
The volatility is at a ten-year low, and whenever summer action in the metals is extremely quiet, that's the time to expect something to go the upside, not the downside.
Well, we know your time is certainly limited this week. We'll be keeping our eyes on that. Thanks very much David, for coming on, and we'll let you run.
I also want to mention to our listeners, that we've created a special limited time offer for them to benefit from the Morgan Report Newsletter, and take advantage of the great precious metals commentary and the analysis David and his team put out on a regular basis. If you subscribe today, Money Metals Exchange is actually going to ship you a free 1/2 ounce silver round. To take advantage of this special deal please look below today's podcast for details.
The information in the Morgan Report is quite literally worth its weight in gold for anyone investing in, or thinking about investing in the precious metal sector.
Well that will do it for this week. Thanks again, to David Morgan. Check back next Friday for our next weekly market wrap podcast…until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.
About the Author:
Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.