By Clint Siegner, Originally Published at Money Metals Exchange
A year ago at this time, it was hard for investors to find available inventory for the most popular silver products – as well as some gold coins. Premiums for the silver American Eagle reached nearly $6.00 per coin. Mints and refiners couldn’t keep up with demand, and long lead times became par for the course across the silver product line.
Today, retail buying of physical silver has slowed considerably. There is lots of inventory in dealer vaults and the number of bullion investors looking to sell is on the rise.
Demand slowed even though nothing has changed the underlying fundamentals of metals markets. The world financial system is even more rickety today than it was in 2007, just before the last crisis. Bullion premiums are at the low end of their range. And prices finally appear to have bottomed and turned up. Yet bullion investors are largely sitting on sidelines.
Let’s take a look at why…
For starters, uncertainty rules the day, and not just in the precious metals. Retail investors aren’t buying the economic recovery story and the record high prices in the stock markets either. Year to date they have pulled roughly $100 billion from U.S. equity exchange traded funds (ETFs). Much of that was diverted into bond funds.
If that statistic makes you wonder just how stock prices manage to keep moving higher, the answer lies in corporate share buy-backs and bank prop trading desks playing with unlimited quantities of near-zero-interest-rate Fed cash.
Uncertainty Has Led to Paralysis
Then there are the questions surrounding this year’s presidential election. Investors aren’t merely uncertain. They are profoundly nervous when it comes to whether “The Donald” or Hillary will win and what that victory might mean. Regardless of which candidate wins, it appears at least half of the country will be very unhappy and gloomy about the national prospects.
The price action in metals may also be giving investors pause. Gold and silver were among the best performing assets for the first 6 months of the year. That means they’re moving from the perception of being cheap to expensive for some buyers. Others still wonder if the recent breakout in prices is the real deal – or whether it’s simply another short-term uptick in a continuing bear-market cycle.
Fatigue could be the biggest factor weighing on demand in the bullion markets.
Buying interest for coins, rounds, and bars was literally off the charts for much of the past decade. A wave of tuned-in people responded to repeated warning signals by aggressively building their stash.
For years now, one extraordinary event has followed another – Quantitative Easing, geopolitical turmoil, institutional fraud, you name it. However, the lifecycle of news events keeps growing shorter as fatigue takes its toll. Investors are finding it harder to stay engaged on big stories. Brexit, as a recent example, may well signal the end of the European Union and the euro, but its significance among investors faded within days.
This is compounded by the fact that markets are heavily managed to avoid immediate turmoil and postpone the consequences. Central bankers intervene everywhere, always ready to start buying whenever the headlines cry for investors to sell.
It is both tiring and frustrating to continue reacting to headlines, particularly when interventionists and high frequency trading algorithms stand ready to punish anyone who takes evasive maneuvers.
Investors Sitting in Cash for Protection Are Fooling Themselves
It isn’t hard to understand why investors are seeking the sidelines. They are worn out and confused about what to do. So they hope to sit out of the game for now by holding cash or parking funds in a bond ETF.
The problem is that bankers and their comrades in Washington DC built the unstable financial arena everyone plays in, and they run the game. Contrary to conventional wisdom, the sidelines are no place for respite.
They are an illusion. You can hold cash or bonds with 5,000-year-low yields, but whether you realize it or not, you remain in the game, ready to be run over by currency debasement… or something far worse.
Anyone who wants to sit out needs to walk out of the arena. The only way to do that is to buy and hold physical bullion along with other non-paper assets. Then sit and watch what happens in the rigged paper game without worrying about the outcome.
Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.
The Rule of Alternation
Is The Precious Metals Correction Over?
Guest Post From Liberty Gold and Silver: Liberty Staff
In Elliott Wave terms, a bullish up move contains five waves; 1, 3, and 5 are upside and 2 and 4 are corrective waves. As we analyze the waves that began in January of this year, we can see that wave 2 was a sideways consolidation to work off the initial thrust up off the January lows and wave 4, using the rule of alternation, was a very sharp and quick pullback relieving the overbought condition of the July/August wave 3 up tick. We believe that wave 5 up to new recovery highs may have begun Thursday, August 25. Without getting too technical, this was a much needed pullback to set the table for the next bullish rally. Quite likely, the sharp pull back was exacerbated by the dog days of August as volume is light going into another school year and the last week of summer vacation.
We are watching things very closely between now and September 15th as our Gann friends, who use cosmic cycles in their work, are expecting big volatility because of solar and lunar eclipses as well as the eighty-four year Uranus cycle, which is identical to the same time frame and formation it was in September 1932. As an historical note, 1932 marked the low of the Dow Jones Industrial Average, the beginning of the bull run which continues to today and, of utmost importance, it marked the lows of almost every commodity traded. Stocks like Kennecott Copper ran from single digits in 1932, in the $3 – $4 range, and began a five year bull run in commodities that took stocks up into the $60s and $70s by 1937. We believe that this past January marked the lows in precious metals and we are early in a multi- year run that could see the same sorts of results to many junior miners.
We would use this pull back to continue to accumulate physical gold and silver on which you take delivery and store in a secure area or private bank or storage facility. Continue to accumulate junior miners for those of you who have a more speculative approach, always using stops, and remember, stock selection is of the utmost importance. We continue to believe that platinum and silver will outperform versus gold during the next rally upwards. One of our favorite ETFs is the pure funds ISE junior silver ETF ( SILJ), which we still consider an accumulate position.
To learn more about the rewards of precious metals investing, including how to fund your existing IRA with gold or silver, call Liberty Gold and Silver seven days a week at 888.751.3330. To learn about the most generous affiliate marketing program in the precious metals industry, please visit the Liberty Gold and Silver Affiliate Marketing Program. We’re happy to spend as much time as you need to discuss the details with you.
Written For: Liberty Gold and Silver News Blog
|“Some analysts argue that the US economy is strong enough to handle some rate-hiking by the Fed. Others argue that with the economy growing slowly the Fed should err on the side of caution and continue to postpone its next rate hike. Still others argue that the economy is so weak that the Fed not only shouldn’t hike its targeted interest rate, it should be seriously considering a rate CUT and other stimulus measures. All of these arguments are based on a false premise.
The false premise is that the economy is boosted by forcing interest rates to be lower than they would otherwise be. It should be obvious — although apparently it isn’t — that an economy can’t be helped by falsifying the most important of all price signals.”
“The right question is: How much more of the Fed’s interest-rate manipulation can the US economy tolerate?” [emphasis mine]
With thanks to Money Metals Exchange, Liberty Gold and Silver, and Steve Saville.
The Deviant Investor