22 Mar Stock Market Meltdown 2020
The world’s stock markets are having one of the worst meltdowns in history. Investors world wide are seeing their 401 K disappearing day after day. The S&P 500 index in the USA has now lost 30% of its value from the all time highs on 01/02/2020. The carnage might not be over just yet as the economic impact on businesses will only show later when the earnings season start in mid April 2020. These are very sad times for most people except for a small minority who took precautions by investing in physical gold bars, silver bars and Krugerrand. Gold and silver has fallen back marginally due to investors selling physical precious metals to cover their margin calls on the sinking stock markets. This is a temporary situation and the precious metal prices will start bouncing back with a vengeance real soon. I have been writing about this stock market crash for the last year. Governments around the world are all working on fiscal rescue packages to try and save the world’s economy. This might provide some temporary relief but it will only exacerbate the world’s debt problem further. GDP to DEBT ratio’s are going to take a big hit all over. The one thing we all have to pray for now is a Covid-19 vaccine. This will stem the downward slide of the markets. The general consensus is that the Covid – 19 contagion will peak in middle June 2020 internationally and a couple of months later in South Africa. I do not agree with many top economic forecasters that the world economies will bounce back very quickly. I do believe that the scale of destruction is not yet properly understood by most economists. One of the economic forecasters at J P Morgan stated that the US economy could shrink another 14% next quarter. If this is true the Dow Jones will have to drop another 15-20%. Can you imagine that!
In a previous article I mentioned the gold/silver ratio as an indicator to decide which precious metal to invest in. Either gold or silver. The ideal ratio should be around 55. Currently it is sitting at 120 which is an all time new record. This means that silver is hugely undervalued relative to gold and is an indication that investors will start switching out of gold and into silver. From the graph on the left courtesy SRSrocco report, one can clearly see that this swing is starting to happen. Investors are piling into silver bars and silver coins as never before. Overseas silver retailers are already starting to have shortages and 2-3 months delays are common. We are not there yet in South Africa but the refineries are starting to feel the pinch in supplying the market. I have also noticed that a 1 oz silver bar is cheaper than a one ounce silver coin. I have never seen this before. The possibility that retail gold and silver traders will stop taking orders are becoming very real and reminds me of back in 2011 when we experienced a huge short squeeze on the silver price and prices shot up to around $50 an ounce in March, 2011. Around December of 1980 silver went up to $118.
Of the 5 options to invest money in, stocks, bonds, property, cash and commodities, it is crystal clear that precious metals are the way to go to protect your wealth for the next couple of years. Gold and especially silver will by far give the best returns going forward. After the 2008 crash gold went up 157% and silver went up 380%. Investors have a last change to get into physical silver that will very likely go from the current $12.50 to around $50 or $60. This will be an increase of 400%. You choose!
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