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Market Myths & Will Gold Continue to Outperform Silver?

Jeffrey Christian and Sean Brazney
March 17, 2022
Video Transcript

Sean Brazney: Hello! My name is Sean Brazney, Sales Director for Monex Deposit Company. I’m here again with Jeffrey Christian, Managing Partner and Founder of CPM Group, one of the many analysts over there at CPM Group. Thank you very much for joining us again today Jeffrey.

Jeffrey Christian: Always a pleasure to be with Monex.

Sean Brazney: Yeah, again, we’re in our… report this year for Precious Metals For More Than Just Inflation and getting a chance to talk to you about some of the recent activity we’ve seen in the marketplace. One of the things that I read in one of our reports at the very beginning of the year, which some viewers and readers might look at and kind of scratch their head at, and you mentioned that gold…you expected gold to outperform silver. Remember, we’ve seen this war launch and sure enough… that’s held true. Gold hit a record setting high number yesterday and silver traded to a high of about $27.50, which really, it’s been trading between $22 and $28 for a good portion of about a year and a half and not quite off to higher highs yet, but it is holding true that gold seems to be outperforming silver. I’d like to just update our viewers and our listeners as to what got you to make that call and do you think that will continue?

Jeffrey Christian: You know, silver has actually performed well, the last last couple days it has been playing a kind of catch-up, but prior to the actual Russian invasion, gold has been outperforming silver and our expectation is that it will continue to. And in order to explain that, let me try to succinctly say… you know, I put out a tweet Monday, I believe saying, that investors need to be able to discriminate between longer-term cyclical and secular shifts and short-term event driven spikes up and down in prices, and both are present in the gold and silver markets right now. Our view that gold will outperform silver is predicated on those longer-term cyclical and secular shifts. More investors in more parts of the world focus on gold as inflation hedge and a currency hedge and all of those factors are in there right now. Some people, especially in North America and in parts of Asia, will focus on silver too, but gold is more universally seen as a currency inflation hedge. So, what we were saying and what we continue to expect is that gold will outperform silver, because more people are flocking to gold than they are to silver right now, just on a global basis.

Sean Brazney: Yeah and I like to bring this up, because so many of the investors I’ve talked to kind of gravitate towards some of those myths in the marketplace that gold goes up, dollar goes down. Yesterday, we saw gold tapping a historic high, the dollar way up over $.99. Then today, we’ve seen lumps of $80, $90 correction in gold and the dollar is also down over a full basis point. That could also be true with the attachment to gold and silver—they think If gold is going to go up, then silver has got to go up with it. Although we can see that tide, kind of as the tide that rises all boats, but it’s great to have your reports and remind our viewers that is why we try to provide all this information for you so that you can get away from some of those myths in the marketplace.

Another topic being the trade deficit, we don’t really talk about it a lot, might be kind of a snoozer, but that trade deficit jumped by another $26 billion just in the last three months going from December to today. I thought it was an important point to bring up, because it… doesn’t that still show we’re pretty much still a nation of consuming in debt and not necessarily a savings kind of a scenario?

Jeffrey Christian: On certain economic levels, the trade deficit is very worrisome and problematic. On a long-term basis, it’s better to be an investor than a consumer, but the United States is a country and the individuals that makeup that country are consumers rather than investors, and one of the things that you’ve seen is we’ve been consuming foreign made goods, more and more. Now, that hasn’t really had a negative effect on the dollar, because there’s an offset there. But you know from a long-term economic perspective, we ought to be saying to ourselves we should invest more in our own country, as opposed to buying manufactured products consumed elsewhere. But, what happens that keeps the dollar higher, and the dollar is 30% higher than it was in 2011 for all those guys out there saying that the dollar is in fact collapsing, it’s 30% higher than it was a decade ago, so it’s not collapsing, and the trade deficit hasn’t really had a negative impact, because the US has so many strengths relative to other parts of the world, that foreign investors want to invest in our companies, in our equities, in our real estate, in our land, and in the United States. We just have a greater productivity, we have greater natural resources, we have a stronger rule of law. So, as we have these massive trade deficits, $26 billion in the most recent month, those dollars come back as investments. So, foreigners are doing the investment in America that Americans aren’t doing and that’s keeping our economy humming, and stronger, and growing, and it’s a self-feeding type of thing. So, the trade deficit, as you’ve said, it hasn’t really… people don’t see a $26 billion jump in the trade deficit and get worried, because there’s this offset. Sooner or later, we have to deal with it, but it’s later rather than sooner.

Sean Brazney: Getting to some of the recent volatility we’ve seen going on just over the last couple of days… and… like I said with gold making $80, $90 jump only to give that back and silver was up about a $1.50 or so and has given up about $1.20 or so of that back today. You’d think the war is over, but when you really think about oil, oil down $15 today over some of its volatility, this pull back from a technical perspective it looks like it may be re-testing some of its recent breakout. Do you see this as a short-term buying opportunity?

Jeffrey Christian: Short-term investors should look at the sell off today as a short-term buying opportunity. If you’re a longer-term investor you may want to wait. Yeah, oil prices have come down $12 or so from their peak earlier in the week, but there at $120, that’s 50% higher than they were when they were at $80 at the beginning of the year. So, oil prices, gold prices, silver prices, are all still very high from a longer-term perspective, but from a short-term perspective, this is a buying opportunity. You know, until either the war is over or there is a clearly identifiable path toward a resolution that the public can see, one should be long oil, gold, silver, because the war is going on, and it’s not over, and it’s probably going to get pretty nasty in the next couple of weeks, according to intelligence sources in the United States and Europe.

Sean Brazney: Along with those reports that we’re reading, we’re reminding our viewers and our listeners, that again, that’s what we hoped to provide for you in these reports, reports from CPM Group that we rely on so heavily.

When you get a chance, call Monex today, talk to an account representative, and get the most recent report Precious Metals For More Than Just Inflation.

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