Mike Maroney Interviews CPM Group's Jeff Christian on June 2018
Mike Maroney: Good afternoon! It's Tuesday, June 12th. My name is Mike Maroney and I am coming to you today from the Monex Precious Metals Studio. We have our guest, Jeffrey Christian, the Managing Partner of CPM Group. We do a monthly video series where we get to talk and ask questions of Jeff. It's really all based on a program we're putting together, Prepare & Diversify with Gold & Silver, in 2018.
Jeffrey we've got a lot of action going on right now. We've seen a nice bump up in the price of silver, but we do have the Fed making their announcement tomorrow and five out of the last six times we've seen the price of silver pullback. What's your expectations of... will the Fed announce a rate increase and if they do, how do you see it affecting the price of the precious metals.
Jeffrey Christian: Yeah, our expectation is that the Fed will increase its rate tomorrow 25 basis points, which is sort of what I've been saying and what everybody has been assuming. We think that when that happens you will see silver and gold prices fall somewhat briefly. You know, silver which has gotten up to close to around $17, it might come back off to about $16.50 or so. But, we think the pullback initially will be relatively brief, because we're, you know, we're seeing strong demand for silver over the last few days and the price has gone up. I think silver is partly playing catchup with gold. Investors are still interested in silver and their getting more interested. Also, you have July as an active futures and options contract month on the COMEX and there's finally some jockeying going on with the silver options expiration and also the movement toward first delivery date towards the end of June for the July contract. So, we think that the silver price could come off in reaction to the Fed and then it could turn around and go back up for a while and then possibly in July and August come back off a little bit more.
Mike Maroney: Well, it's very interesting, because we were fortunate to have made recommendations for people to buy silver when it was down in the $16.20, $16.30 area. Yesterday and today, we've seen some profit taking. If it does pullback, you feel there's a good opportunity there and potentially maybe in the next few weeks we could break above $17? And if that happens, do you have a short-term target in mind, if we're fortunate enough to take out that $17 resistance?
Jeffrey Christian: Yeah, our target is about $17.50 right now for late June early July. If you're a short-term investor, as a lot of our clients are, our suggestion is that if you see the price get close to $17.50, depending upon what's going on in the background environment at the time, we would probably suggest that you take your short-term profits, stand aside, and take some vacation time, and look to reposition on the wrong side later in the year, perhaps in August, when we would expect the price to pullback some, back into that $16.20 or possibly even a lower level with the view that the price will probably rise later.
Mike Maroney: Great. Now, the gold markets languished a little bit, a matter of fact, we've been having a difficult time holding above that $1,300 price. I think the 100-day moving average is all the way up around $1,324 and the 200-day moving average is around $1,306, $1,307. Do you see gold potentially breaking out or do you think gold is more in a corrective phase, because we're dealing with the August contract instead of the July like we are in silver?
Jeffrey Christian: Yeah, because we're looking at August as the active gold contract, I think that gold probably treads water between $1,280 on the low side and $1,320 on the high side. If we do start moving toward that $1,320, $1,324 level where the movement averages and other factors fit in, I think there will be some initial profit taking and resistance selling. So, our expectation is that it sort of moves sideways within that range for the next couple months. Once we get into late July and August, that can change. Once we get into September and October, when people start to look at the mid-term elections, depending on what's going on in the economy, then we think that gold could probably start to make a more forceful move and when it breaks above that $1,320, $1,324 level we would expect it to go much higher.
Mike Maroney: Now, I know you're bullish or a little more bullish as far as the fourth quarter of 2018 and a lot of that is probably predicated on what's happening with the dollar. So, tomorrow we have the Fed, but on Thursday, we have the European Central Bank making an announcement, and then Friday, we have the Japanese Central Bank. What's your view of the overall situation as far as all three of these Central Banks are concerned?
Jeffrey Christian: Well, yeah, as I've said, we expect the Feds to raise interest rates 25 basis points this week. We think the ECB will hold things steady and they probably will not...they'll announce that they are not making any major changes to their buyback program or their interest rates at this point. We think that the Bank in Japan will probably be steady as she goes too. So, you put those three things together and you have a little bit more upside strength on the dollar at least on a short-term basis and a little bit more weakness on the Yuan and Euro.
Mike Maroney: I see. So, what you're looking at then is, inevitably, we see the dollar maybe bump up and take out the recent high around 95. I'm not sure what your inevitable target is. Potentially, we get a nice bump in silver, if you have an opportunity to buy some, take some profits. Look for dips sometime in July and August, but you're still pretty bullish as far as the fourth quarter of 2018 and the first quarter of 2019, am I correct?
Jeffrey Christian: Yes, I think that were sort of... you know, we've been sort of stuck in the trading range with gold and silver to some extent over the... much of the last five months or so. We think that continues for a while, but we do think that will break out on the upside and our expectation is probably fourth quarter or first quarter 2019 when we start seeing a more forceful upward movement in both gold and silver.
Mike Maroney: So, if you get an opportunity to buy low, it's more... buy and wait, instead of wait to buy?
Jeffrey Christian: We always have to temper our comments, because we have long-term investors and we have short-term investors and then we have those investors who are both. From a long-term perspective, today's price looks good. Could you get a little bit lower if you wait a few weeks or a few months? Yes, I think you can. From short-term thinking, it's buy and wait, sell and buy, wait, and do that again. I think there are some trading opportunities in range, but you have to be aware that at some point these ranges will break down and the prices are going to move out, and when that happens our expectations you might see a little bit of weakness for a second fall sell off, but our expectation is that when you see a real serious break out of these narrow ranges we've been in, it will be to the upside.
Mike Maroney: Well, fantastic! Well, Jeffrey, I know that you're busy. You're making speeches at a lot of different conferences. I want to thank you today for spending a little bit of time with us and look forward to speaking with you again next month.
Jeffrey Christian: I'll talk to you in July.
Mike Maroney: Fantastic! Have a great day.