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Is it time to buy Platinum and Silver?

Jeffrey Christian and Sean Brazney
July 19, 2022
Video Transcript

Sean Brazney: This is Sean Brazney, Sales Director from Monex Deposit Company. I’m here with Jeffrey Christian, Managing Partner and Founder of CPM Group, one of the many analysts over there at CPM Group, and as always it’s a pleasure to have you with us today Jeffrey.

Jeffrey Christian: It’s always a pleasure to be with Monex. We’ve known you guys since the 70’s and we’ve loved you all along.

Sean Brazney: It’s nice to still be around after all those years, as well, it’s great!
You know, of course, you are the author of our most recent report, which is Precious Metals For More Than Just Inflation. If you bought gold only on the premise of inflation, you might be looking at inflation running to the upside and you’re seeing precious metals’ prices kind of coming off a little bit to the downside. It brings me back to a question that we’re getting quite often from customers, is… what am I missing? I’m hoping that you can help us fill-in that blank again. I know we’ve talked about it a few times.

Jeffrey Christian: I would answer that from two different perspectives. First, gold and inflation and we’ve always pointed out that the relationship between gold and inflation is not point for point. Statistically, since gold prices were freed in 1968, relation between changes in gold prices and changes in inflation is about 9%, expect gold to move in lockstep with inflation. That’s the inflation and gold.

Now, let’s talk about gold and investment. Gold does a lot of things for investors. Gold prices rise when investors buy more gold, because they’re concerned about some problem or sets of problems that they’re facing. Gold started rising in 2020. It got to a record high in 2020. It stayed high into 2021 and even today at $1,807, or wherever it is as we’re talking, it’s still very high, and on a quarterly and an annual average basis it’s very high. Gold over that period of time was not rising because of inflation, inflation didn’t start really getting to be problematic until March or April of last year. Gold was rising because of other economic and political concerns at that time. That’s one of the values of gold, because gold reacts to interest rates, and recession, and political chaos, and wars, and everything else, it doesn’t remove lockstep with inflation. So, you look at gold as a way to preserve your wealth, and protect your wealth, and maybe make more wealth under a number of circumstances and you can have times, like we have right now, where higher inflation suggests to the broader financial markets higher interest rates, which suggests to the broader market stronger dollar, lower real economic activity, lower stock market, lower growth, and in that kind of environment we’re not surprised that gold prices have backed off. So, it’s not that gold is not responding to inflation. It’s that gold is responding to this host of economic, and political, and financial conditions of which high inflation is only one.

Sean Brazney: Yeah, brings me to another point is the dollar. The U.S. dollar right now looks to be trading into some high value territory, especially on a technical basis, based on a lot of things that are going on out there. In fact, we haven’t seen this level of the dollar, going all the way back to 2002, when gold was trading in the $300 range. Not to over simplify this topic, but when you think about a high value dollar and you look out over the spectrum of the commodities market and you think about precious metals like silver and platinum that are at some lows that we haven’t seen in silver a little bit over two years and I think platinum was down here around October 2021. It looks like a really good opportunity to take some of those high value dollars and look for some value in something like silver and platinum, would you agree?

Jeffrey Christian: I think that is true. The dollar has been holding up very well. You know, there are a lot of people who have been saying that the dollar was going to collapse, and that the dollar was going to fall in value, and we’ve been saying that we didn’t think that would happen, because we look at the dollar and its exchange rate is a reciprocal of other economies and the United States with all of our problems, and we have a lot of problems. We’re in better shape than Europe, and Japan, and the UK, which are the other host countries or governments that produce liquid currency markets. So, the dollar and gold traditionally are the two places where investors park their wealth in times of economic uncertainty and change and sometimes, they park their wealth in gold and the dollar, sometimes it’s just gold, sometimes it’s just the dollar. So, right now they’re focusing on the dollar, because the stress that you’re seeing right now is not perceived as really personal threats to safety, but rather financial threats, and probably cyclical financial threats at that. So, there’s been a lot of money that’s moved into the dollar in recent weeks, and the last couple months, and that’s helped push the dollar up, and some of that money is actually come out of gold. So, from a simple perspective of reflexivity and markets, one would say, “okay let me take profits in my asset that’s risen, the dollar, and redeploy some of them into gold, which is down,” and that actually makes a tremendous amount of sense to us, because gold is suffering from some cyclical trends and also some seasonal weakness. Our expectation is that gold prices will rise beyond July and August and maybe September that we’ll see higher gold prices. So, the idea of taking profits in the dollar now that it’s risen sharply over the last few weeks and part converting those dollar investments into gold makes a lot of sense.

Sean Brazney: Now, from a technical perspective, I’m going to throw this on the table, we’re looking at around $1.12 on a longer-term trend line on the dollar looks like where it’s heading. Would you be willing to share, maybe where you think the dollar might be going right now short-term?

Jeffrey Christian: The dollar falling sharply on a currency exchange rate basis. Simply because again the United States, for all of our problems, we’re in much better shape than Europe, and Japan, and the UK. So, I think the dollar doesn’t necessarily fall sharply, but if I can look at it a different way, in the first quarter of this year of eleven different asset classes that we look at, silver was the best performer quarter, gold was the second and gold was about a 6.7% increase from the beginning of the first quarter to the end of the first quarter, and the third best performer was CASH, the U.S. dollar in cash form, which had a .6% return, everything else, stocks, and bonds, and real estate were negative return declines in the first quarter. Now, you go into the second quarter and gold was actually the 3rd best performer. So, what you saw was gold did very well in the first quarter, the dollar didn’t do so well, some investors, shorter-term investors, were taking money out of gold, putting it into the dollar in the second quarter. Now, we’re into the third quarter and you got to say okay some of those same investors will probably say, “Okay, gold is $200 lower than it was, I think it’s time to redeploy some of my capital back into gold, because it’s down at levels that you can argue are probably at support levels.” I mean, we saw gold fall to $1,650-$1,680 last year twice and both times within a matter of weeks or a couple of months, gold went from $1,650, to $1,680, to $1,900 or higher. So, investors are looking at gold at $1,700… $1,710. Today, got down to $1,695 on an intraday low and saying, “Okay, is this like 2021? Can I honestly reasonably expect gold to be back up toward $1,900 within a couple months?” And the answer is yes!

Sean Brazney: I agree with you fully on that. Jeffrey your time is always incredibly valued. Thank you for being with us today. I want to remind our viewers that this data is available in the reports that CPM Group produces for us in our, Precious Metals For More Than Just Inflation report. Call an Account Rep today and get your free report. Thank you.

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