Could Get Worse for Markets But Is a Gold/Silver Buying Opportunity / Commodities / Gold & Silver 2020

Mike Gleason: It is my privilege now to welcomeback our good friend, Greg Weldon, CEO and President of Weldon Financial. Greghas decades of market research and trading experience specializing in themetals and commodity markets and even authored a book back in 2016 titled GoldTrading Boot Camp, where he accurately predicted the implosion of the UScredit market and urged people to buy gold when it wasonly $550 an ounce.

He's regularly been making more great calls right here on ourpodcast over the years and it's great to have him on with us for the first timein 2020.

Greg, thanks as always for your time and welcome back. How areyou?

Greg Weldon: I'm great Michael, thanks for the invite as always.

Mike Gleason: Well Greg, there's so much to talkabout here, but the Covid-19 virus is dominating headlines, so let's start withthat. The equity market shrugged off fears for the most part until the last fewdays. People are seeing photos of empty store shelves in Italy, and news ofmore quarantines outside of China.

We are also starting to see the impact on supply chainsconnected to China. What do you expect the overall impact of the virus will beon markets? Do you think the markets are overreacting or under-reacting at thispoint… and I should mention we're talking here right around the market close onWednesday afternoon because maybe things will change a lot between now and whenthis airs on Friday… but give us your thoughts here Greg.

Greg Weldon: You know, Mike, all humility aside. I was shocked… weeksago I traveled to Vancouver to speak at the World Outlook Conference onFebruary 7th and I was a little skittish about traveling. Vancouver is a citywhere you've got a lot of Chinese back and forth, and I stocked up on a wholebunch of frozen food and dry foods before I left thinking by the time I getback, you could be looking at a different story.

Shocked that the markets took so long to respond to this story;this was clearly different from the beginning than MERS, SARS, all these otherfancy names you want to throw at these things, simply because when you'retalking about 14 to 21 day period of incubation, when you're talking about theslowness that... even though people want to give China credit for reactingquickly, they didn't.

This started in the middle of December for crying out loud. So,understanding that we've been lulled to sleep by these stories and with some ofthe statistics that are in fact a reality, which is that the flu kills tens ofthousands of people every year anyway, so why should we get all excited aboutsomething that's killed a couple of hundred?

The fact of the matter was this is airborne, easily transmitted,14 to 21 day period. You saw this coming if you have any kind of foresight; andso, to me we were on top of this, we were pouncing on the short side of globalstock indexes, really caught this move big, along the bond market too, longgold.

We'll talk about gold in a second, but from here, I think themarkets have finally woken up to... This is going to have a dramatic impact onthe economy. It's not about the pandemic itself and it's a pandemic already; ithas been for a while, it means basically multiple countries. That's thedefinition. So, this thing has been a pandemic and when it hit Korea, that wasthe wakeup call.

So, Italy now too, it's going to hit the U.S., to think thatthis thing is not going to be a story in the next 10 days in the United Statesis shortsighted and naive, all right? So, this has a lot more leg yet to go. Idon't think it's end of days type of stuff, let's not get overblown on theactual virus.

It's not like 50 million people are going to die, it's not thebubonic plague. Having said that, quarantines of millions of people have onlyone impact on the economy and that is negative, clearly. We have not at alladjusted for that, the economies in Asia and in the U.S. and in Europe, werealready slowing down.

German real GDP had already gone negative in the fourth quarter.So, this only exacerbates and throws a spotlight on what was already happening.It intensifies it, brings the whole dynamic forward in time; and to me, youkind of look at what's going on the U.S. bond market, clearly with the 10-yearyield at record lows and 25 basis points below the effective Fed funds rate,which by the way is rising.

As soon as the Fed said we're dropping 20 billion of dailyliquidity add, you spiked the effective Fed funds rate, which is the cash ratethat trades in New York. So that aside, the yield curve inversion, I mean thishas recession written all over it. Japan, already in a recession, Germany, realeconomy already in a recession. So, how deep does it go? I think stock marketshave a lot more downside and I think something critical has happened to gold inthe last 36 hours and that is, it's gone from a boon to the upside because nowyou're looking at stimulating various currencies.

But this was a story that was already manifesting, Thailand,Singapore, New Zealand, these countries are cutting rates and targeting theircurrencies because the economies are slowing, and this is really pre-virus. Atthis point, it's not about the monetary dynamic as much for gold; and that's anegative. You have huge speculative long positions in gold. That's a negative,more than at the 2011 peak. So I think you have a situation here, it looks alot like early stage of the 2008-2009 crash when everything went down. Andthat's the risk to gold here, that it could go down in line with stock markets,which in my mind still have some significant downside before they have fullydiscounted the degree to which we already can project the economy declining,let alone if you start to get millions of people quarantined in the U.S.

Mike Gleason: Kind of leads me right into my nextquestion here, if by chance the virus outbreak is the pin which pops thebubbles, we've seen developing in the equity markets, we wonder what investorsmight expect in precious metals. In 2008 as you alluded to, we saw commoditiesand metals get whacked hard just before that crisis broke into the headlinesand in the immediate aftermath. But metals recovered quickly and wound upmaking new highs as investors moved from selling just about everything theycould to searching for safe havens. Perhaps we will see a similar reaction whenthe next crisis strikes, but there are some differences between now and 2008.Metals are relatively cheap, especially silver, and at least in our view, thebiggest bubbles are in bonds and the U.S. dollar. If those bubbles pop,everything will be different this time around, to say the least. What is yourtake on how well markets are positioned for a crisis and what investors mightexpect to see next time panic strikes Wall Street?

Greg Weldon: Well, I think you handicapped it pretty well there,frankly. There are a lot of differences clearly, but there's vulnerabilitieshere just in the simple fact that everyone's long gold right now. You have abig speculative, long position; the Commitment of Traders report is very clearon this. We did a special on this last week. The way I can now start to kind ofsee this playing out, Mike, is you have further downside in equities when thisthing hits the U.S. It's going to be a free for all and that's going to benegative for gold, you're going to wipe out the stale longs, the people who gotin at the top, either on, let's not forget you had a big juice in the marketand a whole bunch of new longs in the market when you had this littleIranian-Iraqi missile U.S. bombing crisis. That didn't turn into a crisis.

Those people that had some opportunities to bail out morerecently, now at a profit, but you've had these huge long positions. So, if youget a situation again that this thing hits the U.S., stock markets go for a bigdump. Gold goes with it. You clear out the length, you get to the point whereyou start to see light at the end of the tunnel on this virus.

Maybe let's say, late April, maybe early May. You've had the bigplunge in stocks, you've had the response in gold to the downside. You've wipedout a good part of the speculative length, then you start to assess the damagein the economies; then you start to talk about the monetary applications to tryand boost the economies. That's going to be a major buying opportunity in theprecious metals. I agree with you, silver is more insulated. You don't have asmuch of a long position, that's why we have chosen it in this most recent roundto get long. We got stopped out here today actually, but I can see a scenariowhere you set up at some point in the mid to later second quarter with atremendous buying opportunity at what could be significantly lower pricelevels.

Mike Gleason: The gold to silver ratio isover 90 to one again, what will it take to get silver going? It's just so rangebound and I think a lot of it personally has to do with the fact that it hasboth monetary demand driving it and then also industrial demand and it seemslike it gets put in conflict with itself and maybe that's part of the reasonit's had a hard time getting much going. Give us more thoughts on poor man'sgold here, Greg. What's it going to take to get silver to break out of thisyears’ long trading range?

Greg Weldon: Gosh, the way you say it, it's funny. I don't know why Ijust thought of this, but I almost don't want to call it silver. You want tocall it Sybil, if you remember that great novel, it was a movie back in the 60sor 70s, Sybil. Multi personalities, I mean, silver has multiple personalities;it has the industrial supply demand as a commodity, like copper dynamic, versusit's monetary (demand)... poor man's goal, like you said. They are in constantconflict and you will see that silver really accelerated in the last time thatthis gold/silver ratio was at a 27 year high, almost 94 (to 1) for crying outloud. We chose silver because it all of a sudden, the Fed, that's when silvertook off is when the Fed came back into play.

When the Fed eased off the whole liquidity dynamic, when the Fedbacktracked a little bit and then started to cut rates. I mean that was whenyou had the move in silver because it became a bigger monetary picture and thatthat monetary picture would potentially provide relief to the negativeindustrial based metal angle. I see it the same way here, where silver could bevery vulnerable here and despite the fact the gold/silver ratio is high, it could gohigher and despite the fact that silver doesn't have the speculative lengthgold does, it could just get whacked because it will respond the same way thestock market will to the potential hit to the economy. When you clear that dustand you get to what our central banks going to do about this, that's whensilver will shine again and I think it's kind of this cat and mouse game that'salways taking place. It's one of the more frustrating, yet fascinating thingsto watch in the precious metals complex is this cat and mouse game with silverbetween its multiple personalities

Mike Gleason: Kind of hitting on the Fed there,there's been some rumors over the past few days that we may see the Fed comeout and not only cut rates in response to the virus and the economic slowdownhere, but some have said it may not just be the normal 25 basis point cut, butmaybe they go 50 or 100 basis point reduction in the Fed funds rate. Do yougive any credence to that? Talk about your expectations on Fed policy and thenalso what that might mean for inflation.

Greg Weldon: Wasn't it just a couple of years ago some of the WhiteHouse people were suggesting 50 and all of a sudden now there was thisexpectation for maybe 50? Not happening man. With only 150 basis points ofammunition here; the Fed is not going to waste one third of that in one fellswoop, I don't think. I'm not saying it can't happen; I'm saying it's a verylow probability outcome to me. They will want to milk it because that's the waythey have to do it with the level of ammunition they have here. The argumentthat would support that, that makes the most sense is, one we've made multipletimes is the fed is the central banker to the world now, given that the BOJ isparalyzed, given that the ECB is paralyzed. So that would bode for the peoplethat believe they could cut 50, that would be their argument.

It's not the argument most of them make, but it's the one theyshould make to have credibility. I just don't think the Fed’s going to do that,I think the Powell Fed is very deliberate, very steady as she goes. Again, itcould happen depending on how severe the situation is, if you have 200 millionpeople in lockdown in the U.S., yeah, that could absolutely happen, man. Youcould start to get really crazy then. Depending on how bad it gets, you have toadjust your opinion as we go here and the situation is so fluid. I mean itchanges every day, this is one of the things that just struck me as odd too.And the human psychology is amazing when you think about it. If you look backto two weeks ago when there was a day that we had 2,000 cases in Chinayesterday, well we only have 1,400 today and the markets went nuts to theupside.

The next day it's like 2,500 new cases and the market's crappedout. This is kind of how it's going to continue to be for a while until you getsigns of light that the thing has spread as far as it's going to spread andkilled as many people as it's going to kill. That day will come, that day isnot close. So trying to judge what the depths of the hit to the economy are,we're not going to know that for a while. So I think that mandates that the Fedtakes a much more cautious approach unless it's a real worst case scenario, inwhich case they'll do whatever they have to do.

Mike Gleason: Yeah. More volatility ahead in themarkets is what I'm hearing you say there, and totally agree until we see thisplay out. Well, speaking of volatility, palladium and especially rhodium havebeen incredible performers. My goodness, rhodium has nearly quadrupled in thepast year and it's now well above its high of $10,000 last seen about twodecades ago. Talk about these two markets, Greg, if you have any comments,what's going on there?

Greg Weldon: Well I mean on a day like today where you see platinum hasjust gotten wasted this week and palladium, was actually rally today, likepretty good rally, $2,660 I guess it's at now. I don't have any real insightsinto that, to be honest with you. These markets are in a place, in a universeof their own; they are among the most rare elements in the universe. So, thisis what can happen at any time with some of these markets, and that includesgold and silver, frankly. I think it's something of a precursor to what couldcome in these markets, even though you can't make a direct relationship betweenthose two things. What's driving palladium and rhodium? We know it's asupply/demand dynamic, but this is a market that’s not very deep, it’s prettythin. And gosh, I don't know. I mean, Mike, I can't really give you any kind ofbrilliant comments on what's going on in those two metals. I just can't.

Mike Gleason: Definitely makes you scratch yourhead. I guess one thing you can say about it that once a commodity reaches anew high, who knows how high it goes. We’re in unchartered territory at thispoint and obviously it can get a lot higher. We’ve never seen prices like thisbefore so there are no resistance zones because we’ve never been here before.

Well, lastly Greg, as we close here, any final thoughts you wantto share with our listeners today about anything else that's going on thatyou're going to be watching in the coming weeks that investors ought to bethinking about?

Greg Weldon: Well, to me it's just kind of managing positions here andwe're short equities and we are long bonds and that is the way to be right nowand I think currencies are going to be tough to play. I think the metals are infor some correction, I think you have some energy play to the downside. One ofthe spots that we really picked up on too, this year that has been a boon tous, is solar. So that's interesting, it's kind of taken off already and some ofthe stocks that we recommend in solar are like four-fold up already. It's beenunbelievable, that is the function too, a kind of bigger picture trend inenergy. Here I'll give you a new trade idea that we're looking at. We haven'tquite implemented it yet, but we're awfully close.

Long gasoline, short crude oil. Why? Because when you havedisinvestment going on in energy in general, that means refinery capacity,which doesn't expand much to begin with, even more of a story in thatinfrastructure capacity is going to be hit here and that’s going to get hitquicker, faster and deeper than the advances in green energy.

So, when you get university endowment saying we're going todisinvest from all our energy companies and you see ExxonMobil break a 50-yearupturn line, that's some serious stuff. Then you see solar breakout and solarhas been flirting with breakouts for years now. This one's for real, so I thinkthere's a lot of big picture themes that you can see within some of thechanges, again, that are all kind of linked back to the same thing where you'regetting upheaval in a lot of places. Energy is one of them. I don't know howmany of your people are even into the energy markets, but this is somethingthat's affecting all markets and you can see it tangibly already in energy,particularly when you look at solar and when you look at stuff like ExxonMobil.

Mike Gleason: Energy is obviously a huge driver ofthe global economy and solar, you talk about solar, lots of need for silver insolar. So we'll be watching that. Well, great stuff as usual Greg. Thanks, asalways, and before we sign off, please tell people about Weldon Financial andhow they can follow you more closely and anything else that they need to knowabout you, your firm, or your offerings.

Greg Weldon: Sure, we run three different tangents of the business. Wehave Weldon Live, which is more of an institutional, a higher priced productthat is every day covering all the sectors… fixed income, foreign exchange,stock indexes, globally precious metals, industrial metals, energy, ags,opportunities on all of these things all the time. I really feel it benefitsanyone to be active in all of these markets today. It's not just what stock doI buy anymore and especially going forward, that's going to be a losingproposition more and more. People call it, I call it, the research that paysfor itself because we give you trading recommendations over 21 years. Everyyear, you follow recommendations, you more than pay for the research. I meanalready this year in 2020 in two months, you would have paid for five years’worth of research, minimum, following our recommendations. So, it's not reallya cost, it's an investment.

Then we have Gold-Guru.com and that is precious metalsintensive. It's just a quick video of me every day. And then we do a weeklychart pack, breaks it all down. And it is very inexpensive. So, we offer thatto any of your listeners who want to go in and check that out. We do moneymanagement too, where I'm a CTA, we run managed accounts programs that aretransparent and not commingled. And it's just me here, Mike, it's Greg Weldon.It's not like Goldman Sachs. So the best thing we can do is be transparent andbe above board and be beyond reproach. So, those are the threebusinesses, Gold-Guru.com or WeldonOnline.com for theWeldon Live or for our money management programs.

Mike Gleason: Well, excellent stuff. Thanks again,Greg. Always enjoy speaking with you, hope you have a wonderful weekend andcan't wait to catch up with you again before long, should be an interesting year.Until then, take care my friend.

Greg Weldon: Thank you too, and if I might just throw in one more timetoo, if people just, for free, you can go to my YouTube channel, which isGregory Weldon and thank you Mike, you too. I'm sure we'll be speaking againsoon.

Mike Gleason: Excellent. Yeah, thanks Greg. Wellthat will do it for this week. Thanks again to Greg Weldon of Weldon Financial.For more information simply to go to either WeldonOnline.com whereyou can sign up for a free trial if you haven't already had one of those, andthen be sure to check out Gold Investor Bootcamp and now the newsite, Gold-Guru.com. Be sure to check all those out.

By Mike Gleason

MoneyMetals.com

Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2020 Mike Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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