A Year for Accumulation, Jeff Christian June 2019 Part 2
Sean Brazney: Hello! My name is Sean Brazney. I'm here with Jeffrey Christian, Managing Director of CPM Group and Author of our Year for Accumulation Report. We're watching the dollar in this long uptrend that it's been in. It seems to have taken a little bit of a breather here lately. Is there something that you see moving forward with the dollar that you can give us some hints on?
Jeffrey Christian: Well, we have a reputation of being... people say that we're more bullish on the dollar than others and we always no. It's not that we're more bullish on the dollar, we're just less bearish on the dollar than we are with every other currency, because the currency markets are reciprocals. So, for you to be bearish on the dollar you have to be bullish on the Euro, or the Canadian dollar, or the Australian dollar, and that's a lot harder to do. The U.S. economy has a lot going for it. It's stronger right now. It has more capacity to grow and a higher productivity rates on a historic basis. We have a tremendous amount of economic power that says people want to invest in the United States. You also see people investing in the U.S. equity market, which is about 46% of global equity markets and has been the best performing markets and you see people investing heavily in U.S. companies, private companies, and real estate. All of that takes dollars and that puts upward pressure on the dollar. Over the last few weeks, what you saw was with the Trump ongoing trade war with China followed by the Mexican tariff threats, what you saw was a lot of foreign investors pulling back from investing in the United States. As soon as that happened, the dollar weakened and the U.S. market weakened. Now, we're pulling back from that and I think it could go forward.
Our outlook for the dollar is wholly dependent on what happens with the Trump Administration. If it maintains its powder and allows the U.S. economy and the U.S. stock market to move forward, the dollar will probably regain its footing and move somewhat higher once more, but if we continue to have these political shocks to the economic system, the dollar is going to remain under downward pressure. So, our view is it kind of moves sideways in a more volatile fashion, simply because investors are really getting worried about having investments in the United States.
Sean Brazney: You had mentioned the summer doldrums. We've actually had some pretty good volatility for the summer here at least lately and we're not even to our season that we're kind of used to kicking off a little closer to the fall. Is there anything that you can give us, as far as, some hints into the future as we come out of the summer months and head into the fall for the metals?
Jeffrey Christian: Sure. I'll make several points. First off, we still think that you'll see summer doldrums and we wouldn't be surprised to see the gold price come off a little bit more, especially if the administration stays quiet. I think $1,270 is... that we could see $1,270 again, it's quite possible. I'm not sure that we will see it, but I do think that we're in the summer period where you could see some lower gold prices for a time. With that said, seasonality is always trumped by actual events in the market and if you're in a situation as we are right now where you have volatile political, economic, and financial conditions, those will override the seasonal weakness that you can see. We saw this for example in August 2007. In August of 2007, the housing market and the mortgage market started to have its problems. Everybody had gone into July and August of 2007 thinking that we'd go into the summer doldrum and instead what we saw was the beginning of the big upward move in gold prices. Gold prices were probably around $700 in August of 2007. They were $1,000 by March of 2008 when Bear Stearns went bust. So, I think that what we're looking for is... yeah there is the potential for that summer doldrum and yes, we will be looking for investors to come back into the market in August and September, and jewelers to come back into the market in September and October, but we understand that things could change and we might not see that period of summer doldrums. We might not have to... we might have to cancel some trips to the beach in order to spend some time at our computer screens, because the markets are a lot more volatile and active than we would have thought they would be in August otherwise.
Sean Brazney: Please give Monex a call today. Talk to our account representatives and ask for your free Year for Accumulation Report done by Jeffrey Christian in the CPM Group.