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Gold & Silver Rise as Stock Valuations Become Stretched
Here’s Why Gold & Silver Have More Utility Than Stocks, Bonds, Cash…
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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
No guest interviews this week, as we’re back to an all-hands-on-deck situation servicing all our Money Metals customers. A new demand spike in recent days harkens back to the pandemonium we saw in the precious metals markets back in March. So, let’s get right into today’s market wrap, because there is plenty to talk about...
Gold and silver markets advanced this week to hit new milestones.
Gold traded up to a 9-year high of nearly $1,825 an ounce on Wednesday before giving back a few dollars on Thursday. As of this Friday recording, the monetary metal comes in at $1,813 – good for a weekly gain of 1.7%.
Turning to silver, prices are up 3.7% this week to trade at $18.86 per ounce. The silver market traded up to the $19 level on Wednesday and moved above it during the day on Thursday to reach a slight new high for the year. But it fell back below that level at the close.
We’ve talked about $19 before as a major resistance line. Silver has now made three attempts this year going back to February to bust through it. When the market finally does post a strong close above $19 an ounce, we suspect it will be followed through with a sharp breakout rally.
Far from being mired in the summer doldrums, metals markets appear to be on their way to making this summer one for investors to celebrate. $20+ silver and new record highs for gold are both well within reach.
Even as the big tech stocks that make up the Nasdaq are posting rip-roaring gains, the best performing sector of 2020 has actually been the gold miners. The HUI gold mining stock index is up 30% year to date – and up over 90% since bottoming in March.
Investors who bought just about any stock market sector near the climax of the panic selling have since been able to make big gains. But valuations are now becoming stretched while the earnings picture for most companies remains shaky.
Perhaps equities will be able to ride the rising tide of liquidity provided by the Federal Reserve to still higher heights. But Michael Howell, the CEO of Crossborder Capital, urged CNBC International viewers to consider diversifying into gold.
Michael Howell: The worry is that we're inflating a bubble. And bubble's burst, as we know, but we still have, may have, several months of gains before that happens. But what we would urge investors to do is to start to diversify on the one asset that is bound to go up a lot more, which is gold. And gold goes up when two things happen. Number one, the Federal Reserve eases aggressively, and number two, the People's Bank of China starts to ease. And that's what we're seeing. The concurrence of these two big central banks pumping in money is magic news for the gold price.
Unfortunately, the vast majority of investors have no exposure to precious metals at all.
Surprising as it may seem to those of us who view owning some gold and silver outside of the financial system as common sense, lots of investors don’t yet understand the first thing about precious metals. They don’t know where to buy them, or what to do with them, or what the point of owning them even is.
They understand stocks, bonds, and bank accounts – perhaps even cryptocurrencies. But for some reason they can’t grasp the least complicated and most enduring way to hold wealth.
It could be our lousy educational system, our biased financial media, our corrupt monetary system, or all three that are leaving much of the public dangerously ignorant about sound money.
Perhaps, too, the bullion industry needs to do a better job of communicating the benefits and features of gold and silver ownership and combat the myth of the “barbarous relic.” Bullion isn’t just for people who are nostalgic for the past. It also offers a host of benefits for these modern-but-turbulent times.
Physical precious metals offer far more versatility than conventional paper assets in terms of what you can do with them. About all you can do with a stock or bond is sell it for cash, donate it, or in some cases borrow against it.
You can do ALL those things with bullion – and much more. Since precious metals exist outside of the financial system, they can serve many non-financial purposes. Bullion coins and rounds can also be appreciated for their aesthetic qualities, which confer a pride in ownership and add a special sentimental value when given as gifts.
Since gold and silver have near-universally recognized value, they can be used as money around the world in transactions with any willing party.
Gold and silver can also be used to achieve conventional financial goals such as estate planning and tax savings. Precious metals IRAs are a great way to shield gains from taxation.
Precious metals can be used as collateral to obtain loans with favorable terms. Money Metals Exchange is proud to play a leading role in helping people tap the hidden utility of gold and silver. And Money Metals Capital Group can now extend cash loans on your gold, silver, platinum, or palladium bullion.
If you own at least $35,000 of precious metals and store them in the Class 3 vaulting facility operated by Money Metals Depository, you are likely eligible for a loan of $25,000 or more.
Borrowing against your precious metals assets can be a far more efficient way of accessing their buying power as compared to selling and facing transaction costs along with potential tax consequences.
However, this strategy isn’t suitable for everyone.
The main conditions are that you have an acceptable credit rating, use loan proceeds for business or investment purposes rather than for personal needs, and don’t use loan proceeds to purchase additional precious metals for at least 30 days.
And the Money Metals loan program isn’t currently available for residents of roughly 5 states.
For more information on precious metals-backed loans or to begin an application, go to moneymetals.com/gold-loan or give us a call at 1-800-800-1865.
Well that will do it for this week, thanks for listening. Be sure to check back next Friday for our next Weekly Market Wrap Podcast. Until then, this have been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.