Don't Expect an Uneventful Summer for Gold & Silver / Commodities / Gold & Silver 2020
Bullion premiums have been drifting lower in recent weeksafter spiking earlier this spring. That in part reflects a waning of fear amonginvestors… and a hope for markets and the economy returning to normal as wehead into the summer.
But make no mistake, these are NOT normal times.
Not with some parts of the economy still locked down. Notwith the Federal Reserve embarked on an unlimited Quantitative Easing programthat will dwarf all others that came before it. And not with the fabric ofAmerican society being ripped apart by radicals who are bent on erasing historyand fomenting a race war.
Police officers in large cities across the country arebracing for a summer of continuing violence, property destruction, and unrestat the same time as many are looking for new jobs.
Militant anti-cop hatred in the streets and a lack ofsupport from mayors and prosecutors will leave many cities with hollowed outpolice departments that are unable to protect the public from crimes.
With these dangers simmering, volatility spikes couldreturn to markets in the weeks ahead.
Summer – which officially begins on Saturday – is usuallyuneventful in the precious metals markets. Trading volumes tend to diminish,and demand for jewelry and bullion products tends to soften ahead of theseasonally stronger fall period.
But in a year that has been like no other in so many ways,we wouldn’t necessarily count on this summer being a typical one for gold andsilver markets.
Investors will have to brace for a number of broad risks.
For one, the U.S.dollar could take a big hit as the government continues to add to anunprecedented budget deficit, the Fed piles on more trillions to its balancesheet, and the U.S. relationship with China turns increasingly adversarial.
Senior Chinese officials warned this week that the U.S.dollar’s privileged status as world’s reserve currency is in jeopardy. Although China has not yet acted to dump thebulk of its dollar holdings, it is continuing to forge various new tradingpartnerships with other countries that could gradually dethrone King Dollar.
Meanwhile, Jerome Powell and company at the Fed seem tobe doing everything they can to undermine the purchasing power of the U.S.currency. They are openly calling forhigher rates of inflation as they pump up the central bank’s balance sheet to$7 trillion and counting.
The Fed’s QE and repo market injections are likely toslow somewhat compared to the record pace seen earlier this spring. Since the stock market has been closelytracking the directional moves of the Fed’s balance sheet, central bankers mayneed to give it another boost if they want to keep Wall Street’s rally going.
They have already stretched and skirted the legal limitsof their powers by purchasing corporate bonds and subsidizing small businessloans. Perhaps they will soon begin buying up stocks, real estate, and otherassets as well.
If the COVID-19 virus continues to spread and prevent theeconomy from firing on all cylinders, we can expect more stimulus programs fromboth the Fed and Congress.
Heading into an election, politicians will be trying tobuy as many votes as they can with handouts and promises of delivering evenmore handouts if they are elected.
Politicians today resent the historic role of gold and silver in themonetary system, which once served as a restraint on their ability to spend.But the more our currency moves away from the strict limits imposed by soundmoney, the more important it is for savers to move some of their wealth out ofU.S. dollars and into precious metals.
Amid this dangerous social, economic, political,geopolitical, and monetary environment, physical gold and silver are likely toshine in the months ahead.
By Mike Gleason
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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