Mike Maroney Interviews CPM Group's Jeff Christian - April 2018
Mike Maroney: Good afternoon! This is Mike Maroney coming from the Monex Precious Metals Studio. Today, we are going to do another one of our Prepare and Diversify with Gold and Silver videos with the Managing Director of the CPM Group, Jeffrey Christian, who is probably one of the most knowledgeable men in the precious metals business. One, it's a great honor to have you here today Jeffrey. We've seen a lot of volatility in the marketplace overall. A lot of people have questioned the fact that with the volatility in the stock market and everything else that's going on, they're wondering why we haven't seen a bigger move in precious metals. Do you have an easy answer for that question?
Jeffrey Christian: Well, I think what we're seeing is the beginning of a much more volatile period and you do have a situation right now where there are any number of investors who have been very cautious in their approaches to gold and especially to silver, but I think that that's changing. We're actually seeing some signs in the last month or so of some changes in that. So, I think that what you're seeing right now is that gold and silver is sort of preparing for an upward move. It's not clear when it will occur exactly, but we do believe it will occur and it will play catch up with the broader financial markets.
Mike Maroney: Well, obviously, we have financial, we have economic, we have political uncertainty and the precious metals have been trading in somewhat of a sideways channel, but a lot of people maybe look at this as a negative. But, it's really quite positive, because it gives people an opportunity to accumulate at a low price and get more metal before things really start to get interesting. Wouldn't you say?
Jeffrey Christian: It's been our message to investor clients for several months now, which is...this is the extended period of time of relatively low volatility in gold and silver prices. We're seeing prices showing a tremendous amount of support. I think it is very positive that the gold prices held up above $1,300, $1,306. It's very positive that the silver price has been holding up really above $16 and we think that this is the time when you should be accumulating gold and silver on a long-term investment perspective, because we do think that the prices will rise and rise sharply at some point and when they start moving you probably will have a harder time and you'll pay a higher price if you wait. So, this is the time to...as you say...prepare and diversify, build it in your stock against the coming financial storms.
Mike Maroney: Now, we've had some volatility over in the PGMS. As a matter of fact, last week we had an opportunity to see palladium dip below $900 for a short period of time. What is your view currently on the PGMS, and do you like platinum and palladium, and do you see palladium having a chance maybe to retest the ties in 2018?
Jeffrey Christian: We are long-term of positive for platinum and palladium in that we think that at some point, several years from now, the prices could rise sharply. I wouldn't be surprised to see palladium make another run again in 2018 simply because there are a lot of investors who still are very much interested in it, a carryover from where we were in 2017. I think that platinum has some downsides here. Platinum and palladium are smaller markets they're much more specialized, they're much more volatile than gold and silver, and that gives you... that gives an investor some opportunities for profit, if they want to take the risks of being in more volatile markets than gold and silver which are moving more cautiously at this point, but we're probably much more bullish on gold and silver than we are on platinum and palladium.
Mike Maroney: How interesting...we had a chance to chat before today's video and we were talking a little bit about the gold/silver ratio being back above 80 and a lot of people were jumping up and saying it's creating one of the most tremendous opportunities in history. Your view was a little bit different. Your view was basically that silver was just weaker than gold. Would you like to expand on that a little bit?
Jeffrey Christian: Well, one of the things we've seen over the last year and a half or so has been that investors have been focusing more attention on gold than they have been on silver. We've seen weakness in silver investment demand in some quarters, at least up until March or so, and you continue to see some weakness in silver. People... investors are paying more attention to gold and that's why the gold price is stronger than silver. I don't necessarily trade or advise people to trade based on the gold/silver ratio, but with a gold/silver ratio of 80 to 1, what you're seeing is that investors are much more interested in gold right now than they are in silver. Silver usually plays catch up, which means that that ratio will fall back at some point. So, I think that the gold/silver ratio around 80 to 1 is just a reinforcement of the idea that silver prices are undervalued relative to gold and other assets and probably represent good value investments at this point.
Mike Maroney: Well, it's interesting, because I think a lot of people look at gold as a little bit more of a safe haven, because of silver's dual persona as both being an industrial and a monetary asset. So, what I think I heard you say then is that gold has been the main focus, but what you found in the past is when the metals start to heat up, if silver is lagged behind, it could really catch up quickly.
Jeffrey Christian: That's exactly what happens. I mean, silver prices are more volatile than gold prices, which means that in a weaker market they tend to fall further and that ratio goes higher, and then silver prices are more volatile, so in a rising market they tend to rise further and faster than gold and the ratio goes sharply lower. We don't see any reason to expect it to be different the next time around than it has been over the last 200 years.
Mike Maroney: So, if you were looking for safety and obviously profit potential, gold looks good, but silver long-term may have a little bit more bang for the buck?
Jeffrey Christian: Absolutely! I mean, as a personal...in terms of my own personal investments and in terms of the advice that we're giving to investors, we're telling them that from a long-term perspective you should have some of your money in physical gold and you should have some of your money in physical silver. In addition to that, you should have some money that you're more investment or trading oriented on. There you probably want to have gold and silver, but you should maybe have more of a higher percentage of that trading portfolio in silver than in gold simply because you'll probably see a greater price appreciation percentage terms.
Mike Maroney: Yeah, it has a very high standard deviation also. Now, one last thing before I let you go Jeff. The Fed is going to raise rates. We know this almost for a fact. Yesterday, Powell came out even with the jobs number being very weak and really sounded like a hawk. Do you feel that the Fed will continue on its path, get two or three more rate hikes in, and what do you think that will do to the price of precious metals in the short-term?
Jeffrey Christian: Yeah, I don't think the Fed has a choice, but to raise rates, partly because the market is pulling the rates up. There's less demand for U.S. Treasuries at a time of increased treasury sales of bonds and notes, because they need to finance a growing deficit. I think that the Fed has to follow the market to some extent. In addition to that, you are seeing some inflationary pressures. So, we saw the producer price index come out this morning and there was some real strength across the economy in terms of inflationary pressures that have produce or wholesale level. So, I think that there are pressures that are going to cause the Fed to continue to raise rates. At some point, that's probably going to be very good for gold and silver, because it's going to be even worse for the stock market and it's also going to be worse for the housing market.
We continue to look at the economy. We see a relatively strong economy, but with growing signs of weaknesses and one of things that we are very much worried about is... housing sales. Housing sales have been strong and they've been positive, but they're mildly positive. It's not a very vibrant housing market. It's not a vibrant housing market in the United States, Canada, Europe, or in China and that's very worrisome from an economic perspective, because housing is a prime mover in the economy. If the housing market weakens, because interest rates are rising, and you know mortgage rates are almost up a third from where they were a year ago already, and as interest rates rise that's going to further threaten the housing recovery, and if that happens you could see the economy move down, and if that happens you're going to see the stock market move down, and in that kind of environment we would expect investors to be buying gold and silver.
Mike Maroney: So, brief overview. Stocks, obviously, volatile, very high, still could go through more of a corrective move to the downside. Real estate slowing down, looking pretty toppy. Gold and silver trading somewhat in a sideways channel, looks to be a great time for accumulation, because your long-term views are still the same. You're very long-term bullish. Am I correct on that?
Jeffrey Christian: You got it right.
Mike Maroney: Well, Jeff, it's always a pleasure speaking with you. I look forward to speaking with you again next month and have a great weekend and enjoy the spring back there in New York City.