27 Apr Post Covid-19 Financial World
Not since the financial and economical havoc of the 1930’s depression have we seen the world in more distress than right now. Sleepless nights are common for most people around the world and to make matters worse, there is no end or solution in sight just yet. Businesses, jobs and pension funds have all been decimated and on top of all that, we do not even know what the damage is going to be once this pandemic is over. What is clear though is that the world as we knew it have changed fore ever. To try and make sense of it all there are some important issues we should take notice of. When it comes to investment more and more investors are starting to look at alternative investments like Krugerrand, silver Krugerrand, silver coins, gold bars and silver bars.
Oil – The importance of oil to us South Africans mostly means how much it will cost to fill our tanks. With all the talk about green energy, we tend to forget how dependent we still are on oil. In 2019 the energy consumption breakdown was as follows: Coal 27%, Oil 34%, Natural gas 24%, Hydro 7% and nuclear 4% and other renewables 4%. We can clearly see how dependent the world still is on oil, natural gas and coal ( coal must be transported to the power plants ) The fact of the matter is that oil still runs the world economy and will do so for quite a number of years. The current economic slump caused a huge drop in demand for oil. So much so that on Monday 20 th April 2020, West Texas and Western Canadian Oil went negative in price. This means that the oil producing companies actually paid retailers to take the oil off their hands as storage space was becoming a real problem. This has never happened in the history of the world ever before. The 3-year average days of supply for US gasoline is about 25 days. Currently it is at 46.5 days. Jet fuel has risen from 25.2 to 51.5 days. The Shale oil industry in the US is going to collapse because the low oil price is way under their break even and their debt is astronomical. Continental Resources are already folding. Investors are going to loose big money here.
Stock Meltdown – To get a better idea of what is happening to private house holds in the US we can look at the graph to the left courtesy SRSrocco report. 72% of US household assets are in stocks and bonds and only 28% in mostly gold and silver. It therefore stands to reason that the impact on households are going to be very pronounced. Defaults and bankruptcies are going to be the order of the day. It is also worth mentioning that these kind of financial upheavals do not get sorted out quickly. It will take years to recover.
Silver – Many South Africans, especially the older generation, have seen with great alarm how their pension and retirement funds are disappearing in front of their eyes. Big insurance companies will like always say ” no problem, these are long term investments and will eventually regain all the losses” In May 2000 the S&P 500 index was at 2,259 and dropped to a low of 967 in April 2009. It only reached 2,286 again in May 2015. It took 15 years to regain the levels of May 2000. The highest the S&P 500 index ever was, was 3,398 on 1/02/2020 to a low of 2,182 on 1/3/2020. That was a 35.8% drop. Are we going to have to wait for another 15 years for the recovery? Let’s look at the performance of gold and silver over the same period. On 3/2/20 a 100 g gold bar was R92,661.00 and a 1 kg silver bar was R12,327.00. Today a 100 g gold bar is R129,197.00 and a 1 kg silver bar is R13,391.00. There are no more clear examples than this as to the value of precious metals like gold and silver bars or Krugerrand’s as part of your investment portfolio. I have long been n keen follower of the SRSrocco report by Steve St Angelo. In his latest video he explains in depth how the market meltdown will negatively impact silver supply and have a huge positive impact on the silver price. You can see the video here.
Silver at $150.00 – It is well known that silver will always out perform gold when there is a run in the precious metals. After the 2009 crash gold bars went up by 157% and silver bars went up by 380%. I often get asked where the silver price will go to. In an attempt to give an opinion other than my own I have included a link to a video by Mike Meloney who gives a detailed explanation on why it is a no brainer that the silver price will go to $150 soon. You can see the video here!
In closing I would like to warn against the coming squeeze we will see on retail gold bars and silver bars, Krugerrand’s and silver coins. All over the world retailers are experiencing shortages on the supply side. The refineries just cannot keep up with the precious metals demand. The result of this shortage is that retailers will start pushing up the premiums on precious metals spot prices for these products. We are already seeing delays of a month or two on delivery times and many refineries are not even taking orders anymore until they have caught up with production. For the past 6 weeks you could not buy Krugerrand’s as there was no stock. Silver Krugerrand’s which comes from overseas are also in very short supply.
I am currently taking orders and payment with a view to placing and paying orders the moment the refineries open next week Monday. This will enable me to get stock for my customers before all the other retailers place their orders. I believe there is a real chance they will only take a certain number of orders initially before closing the order book to catch up with demand. Call me at 072 636 1022 or email me if you want to be part of this initial bulk order.