21 Jun Why Is Gold & Silver Not Moving Higher
The recent drop in precious metal prices has many investors worried about their future investment performance. In the current economic climate we find ourselves in, that is a fair question. Let us first look at the reason we had this pull back on Thursday. The Federal Reserve in the US announced that they are seeing rising pressures on inflation and therefore showing two expected rate hikes as soon as 2023. Let this just sink in folks. Why would markets react so drastically to these announcements that will only come in 18 months? This triggered a surge in the US dollar and a rise in the 10 year treasury bond yield that led to money flowing out of gold and silver. The Fed announced on 6/06/21 that it was going to start cutting back on their massive bond buying spree of $120 Billion over the last year or so. In street language it means they are going to pump less money into the economy. What they are actually doing , is trying to camouflage the demon of rising inflation. The prospect of rising inflation, as we all know too well, means higher interest rates. This is not good news for the US as this will drastically affect their interest repayments. The Fed recently stated that they can handle the booming economy, which is rubbish as only the stock markets are booming, not the man in the street. They also stated that they are not sure if they can handle a 25 basis point rate hike on their rising interest repayments. This is the whole crux of the matter. Interest Repayments! The US interest payment is currently $600 Billion per year. To put this in perspective, Jimmy Carter’s whole budget for the year was $500 billion.
Basil 111. One of the most significant announcements effecting gold and silver, comes into effect on June 28, 2021. Basil is a bookkeeping standard that determines what businesses can publish in their financial statements. Basil 111 now states that you can enter gold in your business balance sheet as a zero risk asset. This is huge as all big institutions will now buy gold to add to their balance sheets. It is good to know that mortgages on properties can only be added at 20% of their value. According to Tom Cloud’s Follow The Money from January 6, 2021, the demand for physical silver has skyrocketed. The supply channels have become severely compromised. The estimated demand for silver by 2030 will be around $600 million ounces, which is more than the total estimated manual silver production of the world by 2030.
One of the precious metals that we have to keep a serious eye on is platinum. Platinum is 50 times more rare than gold and the major world suppliers like Russia and South Africa are experiencing far lower platinum deposits than previously estimated. You can check the 1 oz Platinum Bar prices here.
Silver. There are four main driving forces that is going to propel silver to record highs in the near future. This apart from Basil 111 that will push gold a lot higher. We know if gold goes up, silver will follow. 2-3 times more physical buying, massive silver ETF demand, surging institutional demand and record industrial demand. Steve St Angelo, who does the reseacrh for the SRSrocco report, has just published his latest research video on YouTube. It is really worth a watch. Four Pronged Silver Attack
Lastly, there are two factors influencing the price of precious metals. The exchange rate and the spot metal price. Of these two, the exchange rate is the most important one as it influences 60% of the price movements. It stands to reason therefore that the current strong rand makes it an ideal opportunity to buy gold and silver at the moment.
Although silver bars and coins are still readily available in South Africa, I can already see the delivery time lengthen to 3 weeks as opposed to the normal one week. You can place your orders by email or you can call me at 072 636 1022.
Today’s prices can be seen here.