Blanchard Index

Exclusive Precious Metals Outlook and Recommendations

Index updated August 1, 2017


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The Blanchard Economic Report

Gold Is Running Neck and Neck with Stocks This Year

Who said gold doesn’t rally alongside the stock market. The yellow metal is in a neck-to-neck race with the S&P 500 at the late summer mark. Despite a historical tendency to lag during stock market strength, the precious metals sector is holding its own.

Year-to-date returns through July 28

Gold is up 9.3%

Silver is up 3.43%

S&P 500 up 10.42%

The solid gains in the gold market reflect investor demand from a number of viewpoints. Investors are piling money into the gold market amid growing late-cycle worries regarding the economy and the bull market in stocks.  Let’s take a look a deeper look.

The Stock Market Outlook: Frothy and Vulnerable

History shows that the S&P 500 is long overdue for a decline of 5% or more since it has not experienced such a sell-off in the past 17 months, versus the average of six months between declines of this magnitude since WWII, according to CFRA Research.

It is not a matter of “if” but “when” the stock market correction begins. There are a number of potential triggers on the horizon, including the seasonally weak period from August-October to the looming debt ceiling debate that will hit Washington in mid-September.

The Growth Picture: The latest data shows the economy growing weaker than economists expected in the second quarter. Total GDP came in at a 2.6% rate in Q2, below estimates of a 3.0% growth pace. The labor market remains healthy and increasingly tight. However, soft inflation data continues to indicate slack demand in the underlying economy.

The Federal Reserve: As expected, the central bank held steady at its July meeting, keeping rates at their historically low 1.00-1.25% level. That compares to a more “normal” level in the 3.5% region. The Fed’s inability to hike interest rates to more normal levels leaves, the economy extremely vulnerable once the cycle turns to recession.

The typical response to a recession is lower interest rates. With the Fed funds rate hovering at the 1.00% level, there is not much room to decrease rates once a downturn or even worse if a crisis hits. The Fed is dangerously low on bullets and the inability to normalize monetary policy means the central bank could be increasingly ineffectual in supporting the economy in the future.

For now, the market expects one more interest rate hike in 2017 – at the December meeting. But, upcoming economic data and political actions in Washington D.C. could impact that decision.

Rare Coin Update: Recent price performance has revealed that despite modest softness in rare coin values in 2017, key dates and rarities have maintained more value on the pullback. For coin investors, this underscores the importance of building a well-thought out portfolio focused on quality and rarity. The key consideration in coin investing is scarcity – and current price performance reveals that delivers better value over time. Read more here.

The Bottom Line: Current stretched levels in equity markets offers investors a valuable opportunity to book actual profits there and diversify their portfolio into tangible assets. Gold is rising alongside stocks for many reasons. Global investors are turning to the safety and security that gold can provide in an increasingly uncertain world.

Predicted Price Trading Bands, Next 90 Days

Gold  $1,240-$1,350

Silver $15.60-$17.60

Our Recommendations

The high-end rare coin market continues to increase in value as inflationary expectations build.

For investors able to hold at least 10 years, ultra-rare acquisitions offer the safest store of wealth and strongest growth potential.

Buying Rare Coins

The high-end rare coin market continues to grow.
For investors able to hold at least 10 years, ultra-rare acquisitions offer the safest store of wealth and strongest growth potential.

Buying Precious Metals

The December 2016 low in precious metals marked out a major bottom. The trend is up. Any modest price pullbacks would offer an excellent buying opportunity as higher levels are forecast ahead. An accumulation strategy is probably the best bet for clients wishing to add to holdings.

Trading Precious Metals

Silver continues to offer a better value than gold

Ratio: 67 oz. silver = 1 oz. gold

This ratio has averaged 55 to 1 over the past five years

You may want to consider converting some gold holdings to silver

Popular silver products: 10 oz & 100 oz. silver bars, Silver American Eagles in monster boxes

Current price levels and any minor price retreats offers investors an excellent entry point for both gold and silver investments. Give your portfolio manager a call today at 1-866-827-4314 to discuss current market conditions and potential shifts you may want to consider to your investment picture.

Call for personal acquisition assistance: 1.800.880.4653

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