Precious Metals Going Into 2021
Sean Brazney: Hello my name is Sean Brazney, Sales Director for Monex Deposit Company. I’m here with Jeffrey Christian, Managing Partner and Founder of CPM Group and one of the many amazing analysts within the CPM Group of analysts. Jeffrey is the Author of our A New Decade for Precious Metals Investing Report and he’s joined us today. Thank you very much for your time and being with us today, Jeffrey.
Jeffrey Christian: It’s always a pleasure to be with Monex and to be with you personally Sean.
Sean Brazney: When we consider the stock market, trading at all-time record setting highs and then you look at main street, the economy, and you see just devastation ripple through out the economy from COVID and these lockdowns. It’s hard to fathom the stock market trading like it is at all-time highs. What’s the disconnect there? How do we explain to Main Street that based on that stock market that it still is really a prudent decision to make sure you’re owning gold right now?
Jeffrey Christian: Yeah, we had an embarrassing faux pas earlier this year where one of our clients asked a group of CPM Group analysts that and when he said something about the stock market and the economy one of our analysts laughed and I had to explain. The stock market has very little to do with the real economy anymore and what you’re seeing is the divergence between a recession in the real economy, Main Street and Industry, and the results of a tremendous amount of financialization in the stock market. So, a lot of the money that the Fed has pumped into the economy actually is still being held in banks and is going into the stock market. In addition to that, because of the uncertainty in the economy, companies and high net worth individual investors are not necessarily investing in new productive capacity. We saw productivity figures and hours worked released today, this morning, by the Bureau of Labor Statistics, and they show that companies are not hiring people, they’re laying off people. So, as companies have money, they’re not spending it on rehiring people. We still have 10 million people who are unemployed today, who weren’t unemployed in February. What they’re doing is they’re buying their stock back. So, the stock market is reflecting the monetary liquidity that has been pumped into the market and it’s, you know, you’re not seeing real inflation and real recovery in the real economy. You’re seeing financial asset inflation, because that’s where the money is going from all of the large or a lot of the largest. So, you’ve got a severe dislocation… or disconnect as you say, between the real economy and the stock market. It’s been going on for decades, but it’s much more obvious in this time of crisis.
Sean Brazney: As we look into 2021 and coming through this first year of A New Decade for Precious Metals Investing, by the way for our viewers and listeners don’t forget the A New Decade for Precious Metals Investing report the CPM report that comes out on gold, silver, platinum, and palladium. Jeffery, you’ve made some great calls for gold as investor demand has been hot for gold. We continue to talk about buy the dips, which we recently saw a little bit of a pullback that $1,770 area, which really looked like a retest of the monthly chart, the breakout of that monthly, and looks like the prime buying opportunity off that dip. I want to remind our viewers and listeners to remember that we have those reports available. Looking into 2021, Jeffrey, what do you think that the main story will be? You think it’s all stimulus, stimulus, stimulus, as we look forward into the new year?
Jeffrey Christian: I think the stimulus is a key part. You could assume that the stimulus will continue. Yeah, let me just say, we came up with that name A New Decade for Precious Metals Investing at the beginning of 2020 or late 2019, expressly because our message to your clients was it’s not that you should be buying gold and silver as financial diversifications and protection in 2020 you should be planning to stock up on precious metals for the coming decade, because these longer-term issues that we talked about earlier are going to cause us to have economic stress for a long time, it’s not just 2020. Our view of 2021 is it’s a continuation of 2020. Just because the calendar changes it doesn’t solve anything. All of those problems are still there. The pandemic is going to get worse. The recession is going to continue and it could actually ratchet down into more trouble, and you still have all of the political dysfunctionality. We’re assuming that Biden becomes President and the Republicans retain control of the Senate and you’ll still have a stalemated government in the United States. That’s not necessarily going to depress the dollar for a variety of reasons. First off, the world needs dollars, 75% of private wealth in the world is in dollars, 62% government wealth is in dollars, and the world can’t afford to sell down the dollar. So, I don’t think that we’re going to see dollar weakness partly because the dollar has this hegemonic position in the global financial system, but also because Europe is now facing Brexit. Possibly Brexit without a deal in place and Europe itself will suffer from a number of consequences, including the pandemic, and the fact that Brexit is going to cause a lot of stress, and you’re going to see a lot of economic problems.
So, we look at 2021, we see the dollar continuing to be volatile, not necessarily falling but continue to be volatile. We see monetary accommodation as much as if not more than we saw in 2020. We see the recession continuing, slowly starting to see an improvement over the course of 2021, and we see political dysfunctionality. All of that should create an aurora of uncertainty continuing, maybe less than it was in 2020, but all of it should create this environment where most investors around the world are going to say, “I think I should own more gold and silver.” I mean, in 2020 just to put it in perspective, investors worldwide bought more gold, more than twice as much gold in 2020 as they did in 2019.
Sean Brazney: Very long-term minded and a reminder that if you haven’t already started, you should be looking at precious metals, especially gold, and thinking about a long-term core position, and adding to that core position over the next decade.
Jeffrey, thank you for being with us today. Your insight and information is always extremely valuable to us and our listeners and our viewers. We look forward to the sun setting on this last chapter of 2020 and a new relationship moving forward into 2021 with CPM Group. We really appreciate your time.
Jeffrey Christian: Happy Holidays to you guys! Enjoy yourselves and stay away from people who are coughing.
Sean Brazney: Will do. Thank you Jeffrey.