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China Threatens to Stop Exports of Vital “Rare Earth” Metals to U.S
Celente: An Oil Shock Could Be the Black Swan That Finally Drives Gold Higher
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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Coming up the top trends forecaster Gerald Celente of the Trends Journal joins me to discuss a myriad of topics. Gerald gives us more insight on why the precious metals are struggling, why he recently changed his economic forecast and also shares why he believes a continuation of the rising tensions in both Venezuela and the Middle East could lead to a spike in oil prices that the world simply cannot afford. Don’t miss another wonderful interview with the great Gerald Celente, coming up after this week’s market update.
As global stock and commodity markets gyrate, gold and silver markets are gaining some safe haven strength.
Gold prices moved back into positive territory on Thursday but is little changed for week now. The yellow metal is up a slight 0.4% since last Friday’s close to trade at $1,284 per ounce.
Silver has been beaten down this spring but is at least showing some signs of life here during the later part of the week, or at the very least has appeared to stabilize a bit. The white metal is now up a 0.9% for the week to bring spot prices to $14.61 an ounce.
Turning to the platinum group metals, platinum registers a weekly loss of 2.2% to trade at $805. And finally, palladium shows a 0.7% decline to come in at $1,332 per ounce as of this Friday morning recording.
Crude oil prices plunged 8% this week on the heels of rising U.S. inventories and fears that trade wars will crimp global demand. An even more dramatic move was seen earlier this week in some of the so-called rare earth metals. Rare earths and related equities catapulted to the upside as rumors spread that China may seek to restrict exports of these critical elements.
News Reporter: There's speculation that rare earth elements will act as the next bargaining chip for China in the ongoing trade war with the U.S. after President Xi Jinping visited a local company specializing in the sector earlier this week.
David Stringer – Bloomberg News: Rare earths are a collection of about 17 elements. And when they're processed in their mineral form, they turn into these industrial chemicals that are absolutely critical for things like magnets and motors used right across the electronics sphere. These are things that are contained in missiles to electric vehicles to wind turbines and consumer electronics. They really are absolutely ubiquitous throughout the devices that we carry around and rely on. So clearly, any move to restrict exports out of China, to restrict the flow of these materials into the U.S. would be very problematic for the U.S. The US relies on China for about 80% of its imports of rare earths.
Beijing currently has a stranglehold on over 80% of the global market for rare earth metals. The Chinese have previously leveraged their near total control to win concessions in geopolitical clashes. In 2010, China briefly blocked exports to Japan over a territorial dispute.
Trade wars can quickly escalate into resource wars. With U.S. domestic oil production continuing to rise, America is relatively secure on the energy front – at least for now. But when it comes to rare earth metals and precious metals, the country remains heavily reliant on output from hostile and unstable countries including China, Russia, and South Africa.
South Africa is a major supplier of gold and the world’s leading producer of both platinum and palladium. But in recent months, mining output there has been declining.
Fears of a chronic supply deficit drove palladium to record highs earlier this year. No such move has occurred in the other precious metals. But they too face potential long-term supply shortfalls.
Many mining industry analysts believe peak gold and peak silver have arrived. If so, then global production of precious metals will enter a period of annual declines. Prices are disconnected from this fundamental threat. The currently low prices further disincentivize exploration and development of new mines.
At under $15.00 an ounce, some primary silver mines are actually producing at a loss. This situation obviously can’t sustain itself for long.
Historically, when a metal sells for right near its cost of production, it tends to be a good long-term buy. But the silver market will put your patience to the test. Lately, it’s been consigned to the bargain bin.
It won’t stay there forever. But for those who simply want to accumulate ounces of hard money at the lowest cost, the bargain bin is the place to shop.
If you don’t mind buying silver products that may be tarnished, scratched, or dented, then you’ll want to check out bargain bin silver from Money Metals. Our bargain bin silver includes a mix of pure silver coins, silver rounds, and different silver bar sizes…all as close to the spot price as possible.
Bargain bin silver is for those investors who know that silver is silver, and know that it’s prudent to pay as little over the silver spot price as possible. Our bargain bin products come in any variety of forms. They could be highly scuffed sovereign minted coins. Or they could be unusual silver rounds or bars that we do not carry in bulk. But they’re all pure silver, and that’s what matters most.
Maximizing the number of ounces you get for your money is always going to be a winning strategy in an up market. If silver prices rise substantially, the value of your silver will rise in tandem. With any luck, you’ll be able to sell back into the market when silver is a hot commodity rather than the bargain it is today.
Well now, without further delay, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to welcome in Gerald Celente, publisher of the renowned Trends Journal. Mr. Celente is perhaps the most well-known trends forecaster in the world and a regular guest on many financial programs, including right here on the Money Metals Podcast.
Mr. Celente, it's a pleasure as always, and thank you for joining us again.
Gerald Celente: Always my pleasure to be on, thank you.
Mike Gleason: Well Gerald, stock markets flinched right after the recent announcement that tariffs on Chinese goods would increase to 25% but stock prices have since resumed the rally, for the most part, that has been going on since last December. At this point we don't know what it would take to make stock investors cautious. Trade wars, P/E ratios at epic highs, escalating tensions with Iran. There was a time when these things might have worried some people, but not today. It isn't even clear how many actual "people" are making buy and sell decisions in the equity markets anymore with all the high frequency trading going on. What do you make of the action in stocks? Do you think what we're seeing is an honest market, are real people making judgments about what and when to buy or sell or have artificial forces completely taken over? Basically give us your thoughts on the state of the stock markets here, Gerald, as we begin today.
Gerald Celente: Well, it's a combination of the two. Back in September of 2018, we closed for an economic 911. The reason being is that the Federal Reserve said they were aggressively going to raise interest rates. The next day, the S&P 500 peaked on September 20. Then the market started to decline, we saw bear markets going down 20% around the world. In the United States, the Dow had its worst December since the Great Depression. Then on January 4, 2019, Fed Chair Jerome Powell, after we had strong employment numbers, 300,000 plus joined the employment force, wages increased the most in 10 years, for the entire year. He announced that they were going to be "patient" in raising interest rates, and we did a 180 degree turn on our forecast. And we said the markets are going to go back up. It's very simple: It's monetary methadone. More cheap money that they're throwing into the system. And so, what happened?
When we go back to just less than a month ago, the S&P 500 and NASDAQ hit all-time highs. And now again, they backed off with the talk about trade wars. The trade war talk is nothing but talk. They've been saying this now for three years, and the markets keep hitting new highs. It's not going to bring the markets down. What's going to bring the markets down is number one, are higher interest rates. Because all this is, is letting gamblers gamble cheap, and particularly the stock buy-backs, which just saw a record last year; we're headed for another record this year. So they're borrowing money cheap, buying back stocks, driving up the markets.
We just came out with the new edition of the Trends Journal, and our economic forecast is that yes, there's going to be a recession, but not this year, because we're hearing, well, the Fed just came out again, said, "No. Rate moves are coming for 'some time' even if the economy improves."
So, when people ask, "Does the President have power over the Fed?", well obviously they do, because Trump has been pushing the Fed to push down rates, and now they say they're not going to raise them. And when you go back to Richard Nixon telling Burns not to raise them before the election. Paul Volcker, former head of the Federal Reserve under the Reagan Administration in his last book, saying that he was brought into the White House and told by James Baker not to raise rates before the election. We see what's going on in Turkey, whether it's India… you name the country. Yes, the President has power over the Fed. And we're going into this, this is the Presidential Reality Show in the United States. Trump wants to get re-elected, and he's going to do everything he can to keep rates lower, to keep juicing the economy. So it's basically cheap money that's pushing the markets up. Our forecast is the markets are near peak, because we're also seeing, in our forecasts, that corporate earnings are peaked.
So that's the way we see it at this moment. And yes, you know, a lot of it's algorithm, but it's also, they are the real players behind it as well, making decisions. So, it's a combination of the two, but again, what we're seeing now, there's basically a global slow-down. The only reason you're seeing markets going up around Japan, and China, and in the United States, is cheap money, more quantitative easing at different levels, and of course, negative bond yields. And now we're hearing the OECD coming out and saying that in Europe they have to do more to stimulate the economy.
So it's going to be artificially propped up, and that's all it is, it's an artificial market, and they're going to keep propping it up as much as they can.
Mike Gleason: Staying on point there to the extent we have seen artificial forces take over, what do you think that will mean for people, including metals investors, who are still investing based on fundamentals? Would it be wiser to just throw in the towel and stope fighting the Fed, so-to-speak? Buy stocks, buy bonds and sell gold. We've seen some clients doing that, and their logic isn't hard to follow, but it seems to us people are forgetting that central bankers don't always have a stellar track record. They blow bubbles, and bubbles inevitably pop. That said, we suppose it's worth examining whether this time may be different. So tell us what you think? Is this time different, Gerald?
Gerald Celente: Well, no. It's not different. It's just, it's going to wait. It's going to take longer. And the debt bubble, that's the other part that we wrote in the Trends Journal, this is over $250 trillion. And you're hearing warnings coming out from the IMF about corporate debt and personal debt and government debt. And you're also having warnings coming out from people like Bain Capital warning about the great corporate debt that's been taken on because of merges and acquisitions. So, let's go back to the program again, and what happens. Well, if interest rates go up, how are they going to pay back this debt? So the fact is, they're going to keep interest rates lower, and as we said, we're forecasting the Fed is going to lower interest rates this year and next year if and when the economy slows down, and we believe it is going to slow down, because you're looking at situations here, where it just cannot sustain itself with higher interest rates.
And it's true for around the world. And you don't need any more clearer facts than, go back to last December. We saw home sales, for example, in Southern California, plunge 20% when the 30-year mortgage hit around 5%. Now what's the latest news? Mortgage refinances surge 8%. You know why? Because the 30-year mortgage now is at around 4.33%, and we believe it's going to go under 4% by the time of the elections in 2020 in November.
So, no, the bubble's going to pop at some time, but what's going to make it happen will probably be wildcard event, we just don't know what that's going to be. It could be spiking oil prices, it could be war, which is ramping up in Iran and with Venezuela. The gold is the safe-haven asset, and right now, the prices are stuck where they are because there's no feeling of a safe-haven need at this moment.
Mike Gleason: We aren't far off from the 2020 campaign cycle really kicking into gear. We're less than 18 months from the election, and it's hard to know what things are going to look like, say, a year from now, in terms of the field of Democrat candidates that will challenge Trump. Give us your thoughts on the election cycle trends that you're looking at, Gerald. What are some of the main topics on the campaign trail as you see it. Will we see a true socialist become the Democrat nominee? Talk about that and anything else you might want to comment on regarding the campaign silliness, let's hear it.
Gerald Celente: Well, our forecast at this moment, again it's in the Trends Journal, it's about swing states. It's as simple as that. Trump didn't win the popular vote, he won the swing state vote. And what we're seeing now is that the majority of society, on the Democratic side, they want stability and tranquility and safety. And that's why you're seeing Joe Biden leading in the polls. The millennials, which have a voting population almost the size of the baby boomers, are pro- Bernie Sanders, but only by about 2%. So, going back to the swing states, again it's hard to say at this time, there are so many wildcards between now and a year-and-a-half from now when the elections come.
But if the elections were held today, and remember, we were the first magazine in May of 2016 to pick Trump the winner, we would say it would be Biden. Because Biden has strong swing state support, particularly in Pennsylvania where he was born. And he plays the card about he's Uncle Joe, everybody loves him, he hugs you, and shakes your hand, smiles, says nothing and knows how to play the game. And that what the people are looking for right now. So, we don't see it being between socialism and capitalism, although we're seeing more and more people swinging toward, as the polls are showing, wanting to be more socialist. But again, it's the presidential reality show and we have to see the way the acts play out, particularly with the debates. And, but at this time, if the election were held, we would say Biden would beat Trump because Trump will lose to Biden in key swing states such as Ohio, Michigan and Pennsylvania.
Mike Gleason: If you are going to get hug from Biden on the campaign on the campaign trail, just make sure you keep it short.
Update us on the latest news and trends that you're seeing in Europe, Gerald. Is it still hotbed over there with the Yellow Vest Movement in France, and the contention over Brexit and other social and political issues? Give us your thoughts.
Gerald Celente: Well, when you look at Brexit, you can see what a freak show most governments are, including ours. And you name the country, and it's another freak show, Yellow Vests as well. The big thing to watch right now, Mike, are the Parliamentary, excuse me, the European election. The European Parliament elections that are coming up beginning Thursday, in the next few days, to see where they go. And if you start seeing more and more going toward the populist movements, whether it's the Five Star Movement, Lega in Italy, or in France with Le Pen's Party, or the Alternative für Deutschland and AFD Party in Germany, it depends on what we see there. That's going to be a real key element of where it's moving. If it stays status quo, and that's what you're going to get, then things like Yellow Vest and the Brexit Movement will quiet down.
And again, going back to the Presidential Reality Show in the United States, there is no movement for a new party, for a new way, and a new type of system. It's just more of the same. And so we don't see much change happening in the United States. But it's very important to watch the EU elections that are going to be happening this week.
Mike Gleason: How about metals, here. Gerald? Do you see the headwinds continuing to weigh down gold and silver, or will we eventually get the spark that we've been looking for in order to finally get them moving to the upside? I know you've been talking about the $1,380, $1,385 level in gold being that key mark that we need to take out. We're about $100 below that, as we're talking here on Wednesday afternoon. Talk about the metals and what you're seeing there.
Gerald Celente: Just to make it clear, I'm heavily invested in metals, so it's not like I don't want them to go up. But I call it as I see it, and I've been saying basically the same thing now for a number of years. And that is that gold has to break the $1,385 mark to hit $1,450. When it hits $1,450, then it goes to $2,000. We need an event that has to bring gold up to the level of being a safe-haven asset. And again, the ones that we see happening that can do that is what's going on with the United States against Venezuela, and particularly against Iran in the Middle East. Because if war breaks out in the Middle East, you're going to see oil prices spike to above $100 a barrel. The globe can't afford that. So what does that mean? Well the dollar's getting stronger, it's not getting weaker. That's another reason why gold is staying weak, because the stronger the dollar goes, the weaker gold goes.
So, going back to oil. As the dollar gets stronger, many currencies are declining in value. Dramatically. So, when oil prices are petrodollars, if your currency is getting weaker, the price of oil is much higher, you have to pay a lot more for your energy. The more that goes into the gas tanks, the less goes into the cash registers.
So, that's what we see as a black swan event that could drive gold prices higher, and that is if oil prices spike. Because it's very important to remember, Mike, that the last five recessions were preceded by spiking, or followed, I should say, spiking oil prices. So that's the one that we're looking at the most, as well as war. But as far as the economic fundamentals as they are, we don't see the debt bubble popping as long as they keep pumping more money into the system, to artificially inflate it at this time.
Mike Gleason: Well, so we wrap up here, any final thoughts, or anything else? Any other trends you believe people should be focusing on, or looking for or paying attention to, as we move into the middle part of the year?
Gerald Celente: I think we've covered it pretty well. What's very important, in talking about this, is not to buy the lines that the media and the government are putting out, that the media is just repeating – the 'press-titutes" as I call them. Because the people in the media just get paid to put out by their corporate johns, and their Washington whoremasters. So, people are being led in directions without substantial knowledge of the facts, and they're just following the lead that they're being taken on by the government, or by special interests, without knowing the facts behind them. So, as this war talk heats up and the war drums keep growing louder, stay in tune to the current events forming future trends. And of course, you can do that with the Trends Journal, because the media's not doing that. But it's very important at this time, because we're very concerned about the direction we're going in now.
Mike Gleason: Well, we'll leave it there, Gerald. We always enjoy it, and appreciate the time, once again today. Now before we let you go, tell listeners a little bit more about the wonderful Trends Journal and any other information they should know about the Trends Research Institute and the various ways that they can follow your work on a regular basis.
Gerald Celente: Well, the Trends Journal is a monthly. We just came out with a new edition. And, of course, we do Trend Vision 20/20 Podcasts, and Trends in the News broadcasts. We get those every weekday night. And we do Trend Alerts each week. It's only $129 a year, money-back guarantee. It's the only magazine, only information source in the world, where you'll read history before it happens.
Mike Gleason: Well, thank again Mr. Celente. It was a pleasure as always, take care and enjoy the Memorial Day weekend.
Gerald Celente: Thank you Mike, and thanks for all that you do.
Mike Gleason: Well, that will do it for this week. Our sincere thanks, again, to Gerald Celente, publisher of the renowned Trends Journal. For more information, the website is TrendsJournal.com, be sure to check that out.