A Year for Accumulation, Jeff Christian June 2019 Part 1
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. Thank you very much for your time Jeffrey. I know the precious metals market has been a little active and I know you have probably been super busy as usual and we greatly appreciate your time today.
Jeffrey Christian: Yes, it's always a pleasure to be with you guys. We like Monex. It's a great company to be working with. We are busy and it's a very interesting time to be in the gold and silver market.
Sean Brazney: My first question for you Jeffrey is... in the last few weeks gold was trading down near that $1,270's level. We talked in the past about you thinking we had some pretty good Central Bank demand on any kind of a deep low that would happen in gold. Do you think that that Central Bank demand will continue moving forward?
Jeffrey Christian: The Central Banks are buying gold. You know, we don't have specific numbers from May or year-to-date in June, but with the price coming down like that and with the dollar coming off a little bit, we're pretty sure that we've seen some continued investment... Central Bank purchases of gold. There's every sign that they're buying. They have a long-term policy perspective, most Central Banks to accumulate gold, especially when the price is low, $1,270, $1280 was perceived as a low price, it looks like they were buying. We think that if you see further price weakness as the summer doldrums continue or resume, that you'll probably see Central Banks continuing to buy.
Sean Brazney: We also saw gold make an aggressive move to the upside after President Trump had threatened tariffs on Mexico. We also saw the dollar react fairly strongly to the downside. Do you think the move up in gold was a good sign of investor demand?
Jeffrey Christian: It was and one of the things that we saw was that people took the advantage of the lower prices to buy some gold, not just Central Banks, but also investors. You saw a big build in investor interest in gold during that period of time, but then when Trump started to announce the tariffs or threaten the tariffs against Mexico that was a really scaring factor for both global economics, U.S. economics, but also financial markets. That was reflected in a decline in the dollar, U.S. equity markets, and gold responded. You know, gold doesn't respond by itself. When the gold price rose up to $1,350 from $1,270, $1,280, what you were looking at was investors buying gold in a market where the sell sign was relatively thin. So, that was a pretty good sign. You know, we backed away from that a little bit now. The Trump Administration seems to have blinked at least for now. So, we're not surprised to see the price come off, but it's a sign that people haven't necessarily abandoned gold, it's just that they didn't see the reasons to buy gold three weeks ago, but then Mr. Trump gave them really good reasons two weeks ago.
Sean Brazney: Mexico was a shock. Is there another country out on the horizon that you see that could be on the list that we should be trying to keep our eyes on?
Jeffrey Christian: Well, I think the thing that you have to pay attention to and we wrote about it and I think we had one guy out in the desert in California who took umbrage with our view, we find out that the tariffs against Turkey and China and Venezuela and all these other countries and then Mexico later, really had very little to do with the trade imbalances that have persistently plagued our financial relations with these countries and they had a lot to do with trying to find foreign adversaries to distract the political environment within the United States. If you go back to the Mexico tariffs, let's be honest, on that previous evening, Mueller had given his speech and basically said look the Constitution outlines how you go, the Justice Department can't file charges against the President, but the Constitution says that Congress can act against him. If you looked at the world that night, every news show was preparing to find somebody to talk about impeachment on Sunday morning. On the following morning, Trump threatened tariffs with Mexico and every news reader and every tv show started looking for somebody to talk about Mexican tariffs instead. So, he effectively distracted the political situation and I think you have to pay attention to that. Mexico will be back. China will be back. He's threatened Australia. He's threatened Europe. He's threatened just about everybody and he'll continue to threaten people, because he needs to have political distractions. So, I think that the tariffs issue and our relationships with the rest of the world will continue to be brought forward by the U.S. government and will continue to provide shocks to both the global economy, the U.S. economy, and to financial markets. That will be beneficial for gold prices.
Sean Brazney: Jeffrey, your time and your information is as valuable as ever. We greatly appreciate everything that you've shared with us today. Please give Monex a call today. Talk to our account representatives and ask for your free Year For Accumulation Report done by Jeffrey Christian and the CPM Group.