Mike Maroney Interviews CPM Group's Jeff Christian - May 2018
Mike Maroney: Good afternoon! It's Tuesday, May 15th. My name is Mike Maroney and we are coming today from the Monex Precious Metals Studio. We're doing our video series, "Prepare & Diversify with Gold & Silver," with Jeffrey Christian, the Managing Director of the CPM Group. Jeffrey shares with us information each month that hopefully our clients and our prospects utilize to potentially position them in the markets, because he's given us phenomenal information over the last two years to share with our customers.
Jeffrey, how are you today? Wow, great...very interesting day in the markets as the retail sales numbers came out positive, but the markets kind of doing exactly what you thought it would. We saw the bump up last week and we're getting the selloff today as gold has broken below the 200-day moving average and key support at $1300. What's next Jeffrey?
Jeffrey Christian: I think that we're starting to enter into the Summer slow period. I think the selloff today was probably triggered by the strong retail sales and other...you had some strong economic indicators come out of the United States, you had some weak economic indicators coming out of China and Germany that pushed the dollar up in the morning and then it pushed stocks and precious metals and copper down. I think that investors were looking at this and saying, "Okay, yeah, maybe this puts a little bit more upward pressure on interest rates." I think that that was the occasion for today's selloff, but the broader cause for the selloff is that were moving into this quiet period that we tend to see in the Summer time and we think that we're moving into that and we're looking for the price to trade between $1280 on the low side for gold and $1340, $1370 on the high side. I don't think that's going to change for a couple of months.
Mike Maroney: Interesting enough, because if you look at what gold did today, we hit a low of $1288 and obviously, the retail sales numbers were strong, up 3/10 of 1%, but they were expected to come in up 4/10 of 1% and if you look at the previous month, it was up 6/10 of 1%. So, really if you think about it, we're actually seeing a drop in retail sales in comparison to the month previous and as far as the FED is concerned we also saw the yield on the 10-year break above its multi-year high at 3.03%. What's your take on that, and do you consider this to be just the beginning, as far as the 10-year yield is concerned, as far as a break out is concerned?
Jeffrey Christian: I do think that the 10-year yield will go up and I think that you know, we might see 3.25, 3.5 by the end of the year, which is not catastrophic to the economy. Our view is that the FED probably will adhere to its guidelines. It's had three interest rate hikes this year, which means two more in the second half of this year. There is increased speculation that they might increase the interest rates three times. We don't think they'll do that. We have been talking about the idea that the economy, while it's looking strong, is slowing down and is moving into a period where, you know, we... we’re 9, 10 years into an economic recovery and expansion now, this is a mature recovery. So, our expectation is that we will move to a period of slower growth and possibly a recession at some point over the next year or so and that is still our expectation. So, we're looking for slower growth, not only in the United States, but also in Europe and in China and we're sort of steady-as-she-goes as far as our expectations both the economy and the gold and silver prices go.
Mike Maroney: Now, Jeffrey, you've been spot on. If I'm not mistaken, the last time we spoke, you felt that potentially we could put in a short-term high in the first couple of weeks of May and then we would selloff and get down as low as $1285 in gold. Low and behold, we're down $30 today, so it's happening fairly quick, but one thing you did point out the last time we spoke was you felt that we were going to see some geopolitical issues as far as the mid-term election is concerned. Are you still looking at that as a possible catalyst to reignite gold to upside move?
Jeffrey Christian: Yes, I think the mid-term elections are going to be very important to investor attitudes towards the U.S. economy. I have spent two of the last three weeks in China and the Chinese are extremely concerned about the course of U.S. policy, not so much because of the sanctions, but because of the unpredictability of it all. You don't have to be Chinese to be confused by what's going on in Washington right now. Our expectation is two-fold in terms of the mid-term elections. First off, if the Democrats take the House, you're going to have an even more hostile Congress toward Trump. You probably will have talk about impeachment hearings, you'll have all sorts of investigations and all sorts of things that he's going to be doing. I think so far Congress have been pretty ineffectual as far as the last 16 years already. It will get just that much more ineffectual, but the other thing to pay attention to in July and August and September and October is that if the Republicans in Congress decide that they should try and keep their job they may try to become Democratic if you will and they may try to start criticizing Trump more in order to try to curry the favor of moderate Republicans in the election and so you don't necessarily have to see the Democrats regain the House and you don't necessarily wait till January when the new Congress is sworn in to see the advent of a more hostile, more stalemated government in Washington. It could come as early as August, September, October if the Republicans try to save their own jobs by criticizing him more.
Mike Maroney: Okay, so here we've had the classic pull back that you were expecting, gold trading somewhere in the $1280's, I'm not sure if you think that silver inevitably will break under that support line right around $16, but we may see silver somewhere in the $15's if we're fortunate enough, and basically, I think what I'm hearing is now may be a good time to buy and wait, instead of waiting to buy as far as the precious metals market.
Jeffrey Christian: I think the Summer months are the time to accumulate. In terms of silver, we're looking at $16 and then $15.70 below it. I think there is a possibility that we could see a spike down to $15.70 over the course of the Summer. I think that's a screaming buy level. From the longer-term perspective, $16, $16.25 are good levels to buy, because we think that a year from now you'll see much higher prices and then 3-years from now you'll see even higher prices. In terms of gold, yeah, we've been saying that we thought that the price could test $1280 over the course of the Summer and it looks like it's going to be testing that. I'm not sure that it breaks below $1280. So, I think that these are very good accumulation periods. For an investor who is looking 12-months down the road or 12-years down the road, I think that these are extremely attractive prices at which to accumulate holdings.
Mike Maroney: So, here we have geopolitical uncertainty. We have political uncertainty here in the U.S. We have debt issues throughout the world. Obviously, it's going to be very interesting what happens over in Europe. We have the Italian elections coming up. So, your projections as far as what sits out on the horizon is still long-term bullish. So, this selloff, this correction, could just be one of those incredible long-term opportunities as far as customers that are looking to get in precious metals as a good time to buy. Am I on the same page with you Jeffrey?
Jeffrey Christian: That's a very succinct summary of our views for investors, yes.
Mike Maroney: Jeff, it's always a pleasure speaking with you. You've been phenomenal as far as the information is concerned. Obviously, one of the most knowledgeable individuals in the precious metals market in the world today. Thank you for your time and look forward to speaking with you again next month.
Jeffrey Christian: It's always a pleasure. Thanks.
Mike Maroney: Okay. Take care Jeff.