A Year for Accumulation, Jeff Christian September 2019 Part 2
Sean Brazney: Hello, my name is Sean Brazney, Sales Director for Monex Deposit Company. I'm here with Jeffrey Christian, Managing Partner and Founder of CPM Group and the author of our Year for Accumulation Report. Thank you for being with us today Jeffrey.
Jeffrey Christian: It's good to be here, yes.
Sean Brazney: Jeffrey, in the beginning of the year, we were still in somewhat of a down trending to maybe sideways basing kind of market and at the time dealing with some low $1,200 gold, low $14 per ounce silver, and over the course of the first six months of this year, had investors heeded your advice and accumulated during that time frame, they would be in a really good position right now. So, I wanted to really thank you for the report, the data that's in the report, and for doing these videos with us.
Jeffrey Christian: We're happy and we're glad to work with Monex. We've worked with you guys for decades and we're glad to be doing it.
Sean Brazney: Gold and silver are often referred to as safe haven assets. You made in the report a clear distinction on how that may apply to one's portfolio. I'm wondering if you can share that with us now, because I think it's really important, especially for the first time buyer to hear.
Jeffrey Christian: Yeah, I think, that the term,safe haven investments is something that is often misunderstood and people will think that that means that gold and silver as safe haven investments are less volatile, in terms of their price movements, than stocks or bonds and that's not actually the case. What they are... what the safe haven assets means is gold and silver have very low correlations to stocks, bonds, and currencies. In terms of the statistical correlation between real gold and silver price changes and real interest rate changes, it's virtually zero. That's what you really want as a portfolio diversifier¬¬¬¬—it's very low against the dollar, it's very low against stocks, and that's what gold and silver do for an investment portfolio or for a person's individual wealth. What they do is because they're not correlated with stocks and bonds is that they smooth out the overall wealth. So, you don't have the high's and low's. You might have a sharp drop in stock prices or a sharp drop in bond prices and that could cause investors certain distress, but if you have a portion of your wealth in gold and silver, that will tend to often in the long-run balance out your wealth or your investment portfolio and make it more stable and less volatile. That's what really is meant by these things being safe havens.
Sean Brazney: Platinum did recently hit a high of $1,000 per ounce and has backed off exactly like you had said it would in the report, but you also mentioned some headwinds moving forward, which makes me think that there's some opportunities to accumulate coming up. Would you be willing to share your medium to long-term projections for platinum?
Jeffrey Christian: Yeah, we think that the platinum price is a very interesting long-term play right now. Those headwinds are short-term. There's a shift away from diesel to gasoline. So, there's a shift away from platinum catalysts to palladium catalysts in automobiles and that's the major use. You're also seeing... you have been seeing a shift away from platinum to palladium in diesel catalysts, although that's pretty much over now, but platinum has had some headwinds that have caused it to be less dynamic in prices than say palladium, which is at record prices. You have inventories that are hanging over that market. You have a surplus of newly refined platinum entering the market relative to fabrication demand and that's kept the platinum price relatively low, but if we take a 10-year view, we think the platinum price could rise very quite sharply, five to seven years from now. The reason we're saying that is we expect South African production to resume its decline. South African production fell from 2006-2013. It's been relatively flat ever since, but we think over the next five, six, seven years, you're going to see another 10-15% decline in South African production and South Africa is the largest producer. In addition to that, we think that you will see a reverse substitution, you're already starting to see it to a small extent, away from palladium back to platinum in auto catalysts. You're also seeing very strong demand for palladium and the specialty metals that are byproducts of platinum: rhodium, ruthenium, and iridium. The producers in South Africa, in so far as, they have the capacity to grow their production, may be inclined to increase their production of all of the PGMs, because the demand for the rhodium, ruthenium, iridium and palladium is great enough. So, we think that...we first proposed to the South African producers in the late 80's that they think of themselves as platinum group metals producers and not platinum producers and they fired us. But 30 years later now, their starting to say we need to think of ourselves as platinum group metals producers and not platinum producers. We look at the interplay between South African production and fabrication demand for all of these metals and we think that in five years from now you could see the platinum market start to rise very sharply. So, I don't see it as particularly a short-term investment, but as a long-term investment and as a nice portfolio diversifier. I think that platinum makes a lot of sense.
Sean Brazney: I wish we had all day to cover all these specifics, but each metal is covered in our Year for Accumulation Report— gold, silver, platinum, and palladium.
So, we're going to remind our viewers to give Monex a call today, talk to an account representative, and ask for your free Year for Accumulation Report. Thank you for your time, Jeffrey.