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Metal Market Report December 2019 - Week 3 Edition

December 2019 - Week 3 Edition

When Stocks Fall Fast, Gold Usually Rises Just as Fast

I told you a few weeks ago that many millionaire investors are afraid of this stock market. I cited a survey of 3,400 millionaire investors (those with at least $1 million in investable assets) by UBS, a Swiss investment bank, which found that more than half of them think that there will be a “significant market sell-off” by the end of 2020. They had already moved an average 25% of their portfolio into cash.

Now, we have confirmation that this movement into cash is far more widespread than just the millionaire class of investor. In the weekend edition of December 7-8, 2019, The Wall Street Journal showed evidence that the bulk of investors have pulled out over $220 billion in stock market mutual funds and exchanged-traded funds (ETFs) through the first 11 months of 2019, a record high exit for any full year.

All that money is flowing into cash more than bonds or gold. During the past three years, assets in money market funds (cash on the sidelines) have grown by about $1 trillion, according to the Lipper division of Thomson Reuters, as cited by the Journal’s December 8 article. Money market fund balances are now at their highest level since the 2008-9 Great Recession. Although many big institutions are still in the stock market, the public is afraid of the market and is ready to invest in something else with their pile of cash.

Many big institutions are confident that President Trump will escape impeachment conviction and will be re-elected, but at the same time they warn that the stock market could decline 25% or more if a socialist candidate like Bernie Sanders or Elizabeth Warren were elected. In such a case, gold is life insurance for the rest of one’s portfolio. In past stock market crashes gold has gone up rapidly as stocks have fallen.

Here are some examples of gold’s increase during stock market crashes of the last 50 years:

  • From January 11, 1973 to December 6, 1974, during the Nixon impeachment, resignation and aftermath, the Dow declined 45.1%, while gold gained 178%, rising from $65 to $181, and rare coin prices rose.
  • From September 21, 1976 to April 21, 1980, during the “Carter Malaise,” the Dow declined 25.2% while gold gained 322%, from $120 to $506, and rare coin prices rose.
  • From August 25, 1987 to October 19, 1987, the Dow declined 36.1% in less than two months ending on Black Monday, but gold gained 5% from $458 and $481, and rare coins were soaring.
  • From January 14, 2000 to October 9, 2002, after the “Dot.com” meltdown and 9-11 attack, the Dow declined 37.8%, while gold rose 12.7%, from $283.30 to $319.35
  • From October 9, 2007 to March 6, 2009, during the Great Recession, the Dow declined 53.8%, while gold rose 27.2%, from $736 to $936, and rare coin prices rose.
  • From July 5, 2011 to September 6, 2011, during America’s debt crisis, the Dow lost 11.4% while gold rose $400 (+26.8%), from $1,495 to a record $1,895 per ounce

It’s important to realize that when markets start falling, the money “on the sidelines” starts moving into gold, and some of those selling stocks move into gold as well. Then, experience shows that a reasonable percentage (about 20%, or one in five) of those bullion customers move on to become interested in rare coin purchases over the following years. That has led to rare coin bull markets in the years following stock market crashes beginning in 1973, 1976, 1987 and 2007.  Now is the time to add more gold investments to your portfolio! Call us today!

Gold Is Up 15% in 2019

Gold is rising on a weaker dollar after the seeming “closure” of several long-running crisis events last week: (1) Articles of impeachment were voted out of the Judiciary committee in the House; (2) The Federal Reserve indicated there will be no change in interest rates during the coming election year, (3) China and the U.S. entered “Phase One” of a trade deal to avoid “tit-for-tat” tariff hikes that were set to go into effect Sunday night, and (4) the Brexit vote of 2016 was finally resolved with an overwhelming Tory victory in British elections. We’ll see what new (or revived old) crises the New Year will bring.

Richard Jewell and Carter Page – When Apologies Come Too Late

I saw a pair of new movies over the weekend – “Ford vs. Ferrari” and “Richard Jewell.” Both movies are recommended as great slices of American history with exceptional acting and direction, but I want to comment on “Richard Jewell,” as it touches on current events. I was in Atlanta’s Centennial Park a week before the 1996 bombing, as a guest of the Treasury and Mint.  The parallel I see in this film is the early blame of an innocent victim like Richard Jewell, like what we see in the Washington, D.C. FBI’s actions with some early Trump associates like Carter Page. The Inspector General’s conclusions concerning the FISA applications, published last week and available online, is clear in laying blame:

“We concluded that the failures described above and in this report represent serious performance failures by the supervisory and non-supervisory agents with responsibility over FISA applications…. We identified at least 17 significant errors or omissions in the Carter Page FISA applications.”

How does someone win their reputation back after it has been dragged through the mud for three years? In 1996, Attorney General Janet Reno eventually apologized to Richard Jewell, and former FBI director James Comey is now saying he was wrong in some aspects of his handling of the Carter Page FISA application. On “Fox News with Chris Wallace,” Comey admitted there was “real sloppiness” with the bureau’s efforts to obtain warrants to secretly monitor Page.  Comey admitted, the IG was “right, I was wrong. I was overconfident.”

 

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