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Thoughts On Gold and Other Metals Prices from Jeffrey Christian

Jeffrey Christian
September 25, 2020
Video Transcript

Sean Brazney: Hello. My name is Sean Brazney, Sales Director for Monex Deposit Company. I am here today with Jeffrey Christian. He is a Managing Partner and Founder of CPM Group. He is also the author of, A New Decade for Precious Metals Investing report. Thank you very much for being with us today, Jeffrey.

Jeffrey Christian: It’s always a pleasure to be with you.

Sean Brazney: I’d like to talk about gold and its relationship to the 10-year bond and the dollar right now. They all seem to be right at a certain area at least for the dollar and gold. When you think about the dollar, back in March, spiked up there $1.0299 at a multi-month… multi-year high and has come down a full basis point… 10 basis points down to about $.92, solid hold at that $.9212, to $.9340s, $.9350s area. It seems to be somewhat over sold with some potential for a little bit of a rally in the dollar. Reason that I’m bringing it up is of course looking for that value trade for gold investors to be able to buy the dip. What do you think will be the catalyst that will help us with a dollar rally?

Jeffrey Christian: I think that the catalyst for a dollar rally are a couple fold. One is you… at some point, we’ll have some clarity of what a future government in the United States is going to look like. It may not be the next two months, it may not be the next four months, but I think that you have to have some clarification as to… the composition of a governments going to be. Who’s going to be President and more importantly who is going to control the Senate? I think is a key. I think the House probably stays democratic. The Senate is up for up for grabs and the Presidency is up for grabs. I don’t think that I want to make a bet as to which way either of them go, at this point, there’s so much uncertainty there, but I think clarity of what a future government is going to look like in the U.S. almost regardless of which side wins would actually help the dollar. The other thing that’s going on, which we’re certainly not looking at on this side of the Atlantic, is that we’re still moving towards Brexit. The British are now trying to break their treaty with the EU. They want to re-write the terms of the exit. The EU is saying this is wholly in appropriate. It is in fact wholly inappropriate and you could have some real problems in Europe with Brexit and its implications for England and Ireland, but also for Continental Europe. Also, the idea that you’re starting to see increase once more in the COVID-19 virus in Europe, which could lead to another lockdown. We’re already seeing some countries and cities impose renewed restrictions on people’s movement and behavior in those countries. So, I think if you see a deterioration in European activity, both economically, and because of Brexit, politically, and socially because of COVID, that could help support the dollar.

Sean Brazney: Thank you for bringing all that up, you do mention some of this in the report. I’ve talked to investors and many of them actually think that Brexit was over and I really appreciate you bringing that to the forefront again.

In relation to the 10-year treasury note, again in the report in some of the risk bubbles on the chart in there, you really talk about one of the factors supporting gold is being real negative rates in that 10-year note to get inflation adjusted. It has been on a down trending market really since we’ve seen the gold at a low and then the 10-year up at a high, 6.7% or 6.8% somewhere up in there. It’s been down trending, but we’re so close to zero on that 10-year note, is there any catalyst there that you might think will bring a rally in the 10-year note and also help us get a dip in gold?

Jeffrey Christian: The thing that… we see interest rates staying low for an extended period of time, including the 10-year treasuries and we don’t necessarily see the treasury rising. The main… when we start saying what could cause treasuries to rise? Well, long-term economic recovery is one thing, but more probable scenario would be investors strike against the treasury. Simply saying, you guys are borrowing too much for too long and you don’t have the physical program that gives us any confidence that we can get paid back. So, we want higher interest rates. So, you could have an investor strike on treasuries. We’ve never really had that, even in 2011 when they downgraded the treasury, you hardly had a negative effect on investor demand globally for U.S. treasuries. So, that could cause interest rates to rise. When we look at what could cause the U.S. 10-year treasuries to rise, that’s probably our most likely scenario. That wouldn’t be good for gold. I mean, if investors start saying no, we don’t like the treasury and we’re really losing faith in the United States government and treasury after all these centuries. That probably would actually help stimulate demand for gold and drive the price higher. So, I don’t look for interest rates to necessarily give us any downward draft in the gold price to buy on those dips. So, to answer the next logical question. The dips that we’re looking for are a lot higher than the kinds of dips that we’d like to see for investors to jump into the market.

Sean Brazney: Thank you for that. I’m zeroing in on platinum and palladium briefly, if I have time for palladium, but platinum… I’ve been talking about platinum for many months and every time it got down to a base near $800, I’ve been very bullish and setup another base near $900 and I’ve been very bullish. In the report, you talk about investors really looking for suitable investments and there seems to be a lot of value there and potential for some of this money to come into platinum and finally get us up and over that $1,000 number and maybe maintain it for a little while. Is there some hope that I finally get a break out of my platinum?

Jeffrey Christian: I think so, but I think it’s going to be a real slog to get over that $1,000. Once we get over that $1,000, I think then a lot of investors change their attitudes, but you know $1,000 has been the cap really for about five years now for all intents and purposes and there’s going to be a real struggle to get the price up to a $1,000 again and over $1,000 on a sustained basis. I think it will happen. It may well be the first half of 2021 before it happens and probably the major catalyst is going to be much stronger revival in demand for new automobiles than a lot of people have been expecting. We’re starting to see that a little bit in China. It’s a little bit premature in the United States. Most of the vehicles being bought right now are used cars it seems, but we do think that auto demand will come back stronger, but it may be not this year, but early next year before we see that. Once that happens, I think you have potential for platinum to push over $1,000 on a sustained basis and once it does that then investor attitudes change.

Sean Brazney: In regards to palladium, I’m just online I’m hearing potential rumors about tight supply in the palladium market again. I always rely on you for clearing up some of these rumors, especially in supply and demand numbers. Are we seeing a tightness there, because I haven’t seen it on the spot price? I don’t see the premiums above spot that we were seeing before with that tightness. What’s your take on the palladium market?

Jeffrey Christian: There seems to be some spot and locational tightness for fabricators looking for low oxygen sponge, but the palladium market overall seems relatively well supplied. With that said, I do think there is some scope for another spike up similar to what we saw in the first quarter of this year, but I think any spike up is probably a short lived phenomena as it was in the first quarter of this year and then the price comes back off.

Sean Brazney: Well, Jeffrey thank you very much for your time and your input. The information coming from, A New Decade for Precious Metals Investing is out and new. You also mentioned that there have been some drastic changes in our world over the last several months and you have made some revisions to the CPM Statistics and some of those revisions are also in this report. So, please call Monex today, talk to one of our account representatives and ask for A New Decade for Precious Metals Investing report.

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