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Precious Metals For More Than Just Inflation Part 1

February 24, 2022
Video Transcript

Sean Brazney: Hello! My name is Sean Brazney, Sales Director for Monex Deposit Company. I’m here with Jeffrey Christian, he is Managing Partner and Founder of CPM Group, also the author of our annual report and our newest report for 2022 titled, Precious Metals For More Than Just Inflation. Thanks for being with us here today Jeffrey.

Jeffrey Christian: Yeah, It’s good to be here.

Sean Brazney: Honestly, the title of this year’s report… we were all kind of crazy about needing to talk about inflation. Well, I talk to investors and why they want to buy gold. I hear a lot about— well an inflation hedge, I need it for inflation. So, we were kind of really strong about needing to focus on inflation and my wise sage, Mr. Christian over at CPM Group, just says, “Well, let me share with you the data,” and it’s been great information. So, thank you for getting us back on solid ground. In fact, that’s one of the main things I wanted to talk about today is… not just for inflation and you have some data and some information for us as to why.

Jeffrey Christian: Yeah, well there’s several things, several points to make, and first off, I don’t want to belittle inflation. Inflation has been a problem over the last eleven months or so, but if you look at the data, inflation in January 2021 was about 1.2% year-over-year and that’s because January 2020 was kind of a weak period of time. Over the course of 2021, we saw people measuring inflation year-over-year saying, “Wow, inflation prices are very high now in March, April, May, June of 2021 compared to where they were in the same period in 2020. That’s because in that period of 2020, we were in a lockdown and it was the early days of the pandemic, but in that period in 2021, we were coming out of the lockdown and demand was surging, and the vaccines were being rolled out, and there was a tremendous amount of optimism and reconstruction going on. So, you had inflationary pressures there, but we look at the year-over-year data, but we also look at the monthly data. The monthly data is important, because it tells you what’s going on in the most recent month compared to the previous months. Now, arithmetically, as we go through 2022, we’ll be measuring those people who look at year-over-year data will be seeing changes in price levels compared to 2021, which was a very inflationary period. So, we may not see… I don’t think we’ll see prices fall, but they may not be rising 6%, 7% the way they are now, measured year-over-year, because they have already risen sharply. So, you may see much lower inflation figures year-over-year over the course of 2022. If you look at it on a monthly basis, you can see that was already starting to happen in the third quarter of last year. We had a spike up in October and it started to come back down November, December, January.

Now, I don’t want to belittle the idea of inflation, but I want to sort of warn investors a couple things. First off, I want to warn them. Second thing, I want to point out something very important. On a warning side, I want to say you may see lower inflation figures in the 2nd, 3rd, and 4th quarters of this year and they may exert some downward pressure on investor sentiments on inflation, and inflation and demand for gold. I think that’s misplaced and I’ll get to that in a second, but you may anticipate that. Now, the title, More Than Inflation, if you look at 2020, go from 2000 to 2021, we had the gold price go from $270 to $2,058 and now it’s back down. I say that having to use the air quotes, because it’s down to $1,865. We saw a record annual gold price last year, even though the spot price fell from August of 2020 to 2021. We saw a record annual average gold price last year. We’ll probably see a marginally higher gold price this year, maybe a little bit lower or maybe a little bit higher. Gold prices are going to stay high. If you look at that 20-year period, the most recent 20-year period, $270 to $2,000 or $1,865, inflation was not a problem during that 20-year period of time until last year, and inflation wasn’t a problem for 20-years before that— from 1982 until 2021 inflation was not a problem and inflation concerns were not driving investment demand for gold and gold prices. Gold prices rose enormously over the last 20-years, because investors were concerned about other factors, factors other than inflation. They were concerned about a top-heavy stock market or a plummeting stock market. They were concerned about recessions. They were concerned about diversifying their portfolio, low interest rates—let me move some of my money into gold and silver, portfolio diversification, currency hedge, because the currency markets were extremely volatile. It wasn’t that the dollar plunged and collapsed, it fell and then it rose sharply. Other currencies rose and then they fell sharply. You had currency market volatility and you had political instability growing throughout that period of time. I mean, we saw oil prices go from $10 in 2000 to $140 in $2008 to $20 to $95 today. So, you’ve seen a tremendous amount of other factors causing investors to say, “Boy, the world’s a lot more volatile and a lot more uncertain.” I started to talk about political issues. You have domestic political issues in the US, Canada, Europe, China, Russia. You have international problems, long-term things that have been growing for 20-30 years plus the short-term things like the Russians standing on the border of the Ukraine. So, you have all kinds of reasons to say, “I think I want to own more gold and silver—have more of my wealth stored in gold and silver rather than US dollars.” Even if you don’t see inflation, even if you see inflation level off in annual inflation rates as reported by the Bureau of Labor Statistics come down, there are all kinds of other really good reasons to own gold and to buy gold, just as there have been over the last 20, 30, 40 years when gold prices have done very well.

Sean Brazney: Yeah, really isolating a trend there. I like that you go all the way back 40-years and to the headlines would have been talking about the worst inflation in over 40-years and when you get the reports that you’ve done for us, investors can see that trend and compare what it was like back in 1980 and 1982 and where prices were back then compared to what’s going on today. It really isolates one key point and that is a trend and that trend has continued to go to the upside. I know there’s parts of that trend that go up and down, but over that long period of time it looks like a very strong trend to the upside.

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