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Jeffrey Christian Discusses Interest Rate and Dollar Value Trends

Jeffrey Christian
August 29, 2020
Video Transcript

Sean Brazney: Hello. My name is Sean Brazney, Sales Director for Monex Deposit Company. I am here with Jeffrey Christian, Managing Director of CPM Group Commodity Research Firm. Thank you very much for being with us today, Jeffrey.

Jeffrey Christian: It’s always a pleasure.

Sean Brazney: Now, that the 10-year yield has been in the down trending market for a while, as gold arguably could be said to be in an uptrend since 2015 at that $1046 - $1047 low we found. When investors on the long-term side look to maybe take some profit on that position or part of the position down, based on that 10-year. Is there some chance for a rally in that yield or do you think the trend will still be down for a while?

Jeffrey Christian: I think the trend is going to be flat and down for a while, because for the interest rates to rise sharply… prices have to fall further. You’d really have to have investors become even more concerned about their exposure to the U.S. Treasury and they’d have to find something other than treasuries that they would be more comfortable in. That’s really the strength of the treasury right now, is that it is seen as the least risky investment. So, there are a lot of investors who feel compelled to be in those treasury notes and they’re going continue to be there. It would take like an investor strike to really say, “No, I need a higher interest rate before I continue to invest in treasury notes” and that’s probably not going to happen in the foreseeable future.

Sean Brazney: Another reason to stay along gold.

Jeffrey Christian: Exactly!

Sean Brazney: Buy the dips. When we look at another indicator for opportunities to try to buy low or we look to the dollar and going back to March that dollar was up there at $1.0299 and has dropped more than 10 basis points. I think we found $.9212 at the low today. That low area looks like it matches 2018, 2016 low. It seems to be near support level. I’m hearing some chatter, when I’m out there talking to investors, that they think that dollar trade is crowded, and on the short side, and there may be opportunities for a rally on the dollar, or a potential short squeeze on the dollar, can you add any truth to that for us?

Jeffrey Christian: I’m not quite sure that you’re seeing massive sharp positions in the dollar. I mean, in the physical dollar market, investors are long. You have an enormous amount of dollars that people are holding. The shorts are really on the futures and options markets and in the forwards to a lesser extent and those are somewhat hedges to the physical long positions. That said, you could see some tightness, or we try not to use the word squeeze, we talk about congestion, as those shorts roll forward in the futures market every so often. You know, when you get to an active delivery month. You could see some shorting there, but I think that a lot of people who are looking for a massive short squeeze and rally in the dollar, probably are overly optimistic for that to happen.

Sean Brazney: Looking at platinum, I’ll finish off with platinum as still out of the four metals a lot closer to its 10-year lows than of course multi-year highs or record setting highs and had a great base down there at $800. I think it’s built a little bit of a better base a little closer to $900 now. I know it’s been trading between $1000 - $800 somewhat consistently, but on the longer-term chart that monthly it looks like it’s breaking out of a long-term down trending line. Is this an opportunity you think maybe where platinum gets up and out of a hole, so to speak, and takes advantage of some of that money that’s sloshing around out there?

Jeffrey Christian: Well, we think that there’s a little bit of tightness in the platinum market right now, that may dissipate into September and October in advance of the election, it’s not clear. Our expectation is that the platinum price will rise and it will rise significantly. It’s going to have a tough time breaking over $1,000, but we wouldn’t be surprised to see the price on a quarterly average basis running around $1,135 in the not too distant future or $1,035 rather in the not too distant future. So, that’s a pretty good short-term return. In the longer-term, we do think it will be a little better. Part of it is going to have to do with how fast the auto industry recovers, and quite frankly, auto sales have been recovering faster in many countries than the auto industry had expected. So, you’re seeing a pickup in demand and that probably is going to contribute to stronger platinum prices.

Sean Brazney: Thank you for that Jeffrey. Of course, you’re the author of our, “New Decade for Precious Metals Investing,” as well as, your firm has put together our, CPM Group Reports on Gold, Silver, Platinum and Palladium with some great commodity research.

Call Monex today! Talk to an account representative and ask them for the, “New Decade for Precious Metals Investing report,” as well as the CPM Group Reports on Gold, Silver, Platinum and Palladium.

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