On a day where the Dow has plunged over 1,500 points and the Nasdaq collapsed over 1,000 points, wild trading is happening in markets across the globe, including the metals markets. Take a look…
The Big Picture: What’s Changed?
April 3 (King World News) – James Turk: “The week is not over yet and anything is possible after tomorrow’s US unemployment report, Eric. We’ve seen many times before the unusual volatility hitting market prices after these reports are released, not unlike the big swings in prices that we’ve seen today.
At times like these I like to step back to consider the big picture while asking myself one question. What’s changed?
The obvious answer is the US tariffs announcement. Tariffs are in the Constitution. It’s how the federal government is supposed to collect the revenue it needs to cover its normal operating expenses.
Tariffs are a tax and like all taxes are a burden on the economy. It’s money sucked out of consumer pockets by the federal government, and will no doubt impact the economy just like any other tax rise would. But there is another important point.
The tariffs have been well announced in advance to be a key policy of the new administration. So we’ve seen the news articles about the huge weights of physical metal that have recently been shipped into the US, much of which was said to prepare for the tariffs. Also, there have been unusual spreads between spot and futures prices over the past couple of months, supposedly in anticipation of the expected tariffs.
A Desperate Attempt To End The Gold Rush
Now that the tariffs have been announced, the legacy media has been quick to report that gold and silver have received tariff exemptions, which they claim will end the rush to get physical gold and silver into US. But will it?
I don’t think so. Time will tell of course, but I expect gold and silver will climb back up off the canvas, dust themselves off, and eventually climb higher. The reason?
They are useful because they get purchasing power out of the banking system, and do it without counterparty risk because physical precious metals are tangible assets. In addition, both precious metals remain undervalued by my historical comparisons.
Their supposedly “high prices” simple reflect the decline in the dollar’s purchasing power from inflation and other dollar debasement. In other words, the purchasing power of $3100 gold today is not unlike that of $310 gold 25 years ago.
Finally, there is one key point or overriding importance, Eric. Gold and silver haven’t mattered since the 1970s, but that is changing. The precious metals matter again, and will become increasingly important as the tariffs rattle the economy, particularly given that economic activity today rests upon a shaky and tenuous mountain of debt and financial derivatives.
Most Fascinating Thing About Today’s Trading
King World News note: The most fascinating thing about the action today is that the HUI Gold Mining Index went from trading down over 5% to positive on the day with Agnico Eagle leading the way hitting new all-time highs in the US. For anyone out there that still believes mining stocks will trade lower with the stock market, history simply does not support that, with the sole exception being the liquidity crisis in 2008. During all other bear markets in stocks one of the primary beneficiaries were mining stocks.
Also, use the current weakness in the silver market to continue accumulating physical silver since it is the cheapest hard asset on the planet. Gold remains expensive vs many other assets, including silver, so if you are accumulating physical – buy silver. And remember, the Chinese and the Russians as well as other BRICS countries are now stockpiling physical silver so there will be a floor at some point during this decline. After the floor, silver will eventually surge decisively above $35 on the way to new all-time highs above $50 on the way over $100.
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Alasdair Macleod’s audio interview was just released discussing the upside action in gold, silver and the mining stocks and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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