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Why Should Investors Continue Looking at Precious Metals Throughout the Decade?

Jeffrey Christian
May 25, 2020
Video Transcript

Hello. This is Jeffrey Christian from CPM Group coming to you from Monex. With the pandemic and the lockdown that we’ve seen across the country, it’s a slightly different format. We are not being interviewed by Monex, but it’s a unilateral discussion. The presentation today is meant to coincide with the release of our May 2020 report for Monex, which you can get as a Monex client.

I want to talk about some other issues. Every year, Monex and CPM Group choose a title or a theme for that year’s reports and in late 2019, when we were talking about it, Monex and CPM Group made the decision that the theme for 2020’s reports should be, “A New Decade for Precious Metals Investing”. We made that decision, because from the perspective of late 2019, we were looking at the world, we were looking at the economic and political problems that the world and individuals in the world were facing, and the financial consequences for individuals of those problems. We said, “It’s not 2020 that investors have to worry about, it’s the next decade, and probably actually more than the next decade.” These problems that are coming along, we thought in late 2019, are going to be with us throughout the next decade and it’s going to be something that investors really need to pay attention to in terms of buying and holding gold and silver and to some extent some platinum and palladium. In my bitterly sarcastic way, I had actually taken to go around singing, “It’s beginning to look a lot like the 1930’s, everywhere you go”, based on the old Christmas song, “It’s beginning to look a lot like Christmas.” Frankly, I never felt so bad about being so right about the world.

In the first five months of 2020, we have seen some of these long-term problems come home and become short-term problems. We’ve had a pandemic, which people were warning us about for years, but governments, and individuals, and corporations were largely ignoring those warnings. We’ve had that pandemic breakout and basically shutdown economic activity on a global basis. The Congressional Budget Office is suggesting that in the second quarter of this year, U.S. economy could contract as much as 40%. Other independent projections are anywhere from 20%-40%. We’re in a really bad situation. On a short-term basis, both because of the pandemic and also because of the lockdown globally in reaction to that. In addition to that, these are long-term issues that are not going way, we’re not going to solve this anytime soon, and it’s going to further compound and complicate those economic and political concerns that we had in late 2019 and even before that.

So, we’re looking at a decade where you really ought to have gold and silver as a major part of your wealth. We talked in the past about the idea that you should think of gold and silver as being part of your wealth and part of your investment portfolio. Your investment portfolio is only a portion of your wealth. Your wealth includes your house and other things that don’t necessarily constitute direct investments. In addition to that, you have to realize that for most of us, almost all of our wealth is denominated in our domestic currency. In the case of the United States, the U.S. dollar. While the dollar is looking strong right now, over the next decade, it’s facing some major headwinds economically and politically. In fact, the whole world is facing those headwinds and the fact is that the dollar represents about 75% of private wealth and about 62% of government wealth on a global basis. So, we’re looking at a lot of issues that will probably cause gold and silver to rise, not only this year yet, but also over the coming decade, and a lot of this is discussed in the May report. We’re looking at gold and we’re saying this thing could get to $1,800 easily over the next few months. It might not stay there initially, but in the long run gold prices are probably heading higher. We wouldn’t be surprised to see the annual average price over $2,000 in the next few years and just for reference that compares to about $1,640 annual average price in 2012, which was the previous record price for gold. We have written about the idea of the stealth market in gold and we’ve seen a stealth bull market in gold. Prices are already at the record levels that they were in 2011-2012.

Silver probably also is going to rise very sharply. We have a lot of hope for platinum in the long run, but that may be an investment that you don’t see major increases in the price for two or three years yet, and then palladium, we wouldn’t necessarily suggest anyone sell their palladium, but I’m not sure that I would be a fresh buyer at prices close to $2,000.

That’s it for this month. We hope to continue doing these things and experiment with different formats for these videos for Monex in the months ahead. Stay safe. Keep your hands clean and take care. Thank you.

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