Michael Pento: Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’ (Podcast)
BY MONEY METALS
THEDAILYCOIN.ORG
MARCH 3, 2018
Coming up we’ll hear a tremendous interview with Michael Pento of Pento Portfolio Strategies. Michael shares his very troubling outlook for the 10-year Treasury note, the tipping point that will cause the destruction of confidence in the dollar and what this all means for gold prices. Don’t miss a must hear interview with Michael Pento coming up after this week’s market update.
Well, the new Federal Reserve chairman spoke this week, and markets got spooked. Fed chair Jerome Powell testified before Congress, where he touted the economy’s strength.
Good news for the economy was interpreted as bad news for stocks and other risk assets. The Dow Jones Industrials plunged more than 700 points on the week through Thursday on concerns about tariffs and more rate hikes. Powell indicated to lawmakers that the Fed will continue with the rate hiking campaign even as he downplayed any concerns about inflation.
“Sen. Richard Shelby: A lot of people believe that you will continue to raise interest rates at incremental levels in the future. Is that because of your concern about the specter of inflation?
Jerome Powell: By continuing to gradually raise interest rates over time, we’re trying to balance those two things and achieve inflation moving up to target, but also make sure that the economy doesn’t overheat. Now, there’s not a lot of evidence that … there’s no evidence that the economy’s currently overheating, but that’s really the path that we’ve been on, and my expectation is that that will continue to be the appropriate path.
The official outlook for tame inflation and the promise of higher interest rates helped put downward pressure on precious metals markets. Gold prices are down 0.9% for the week to trade at $1,318 an ounce as of this Friday recording. Silver, meanwhile, is off 0.6% to come in at $16.48.
Getting hit hardest in the metals space this week are the platinum group metals. Platinum prices are lower by 3.2% to $968, while palladium has plunged an eye-popping 5.8% on the week to trade at $991 per ounce.
The disappointing price action in hard assets leaves many investors wondering whether the inflation trade still has legs. It depends largely on whether the Fed gets out in front of inflation with its planned rate increases.
The Federal funds rate currently sits at 1.5%. Inflation, at least officially, is running at around 2%. That number has the potential to increase as the effects of stimulus and a weaker dollar work their way through the economy.
For the first time in years, wage increases are occurring. Also for the first time in years, agricultural commodities are starting to get hot. Higher grain prices could translate into rising food costs in the months ahead. We’ll see if the summer driving season brings higher prices at the pump and an upside breakout in crude oil prices.
Until then, investors will await the Fed’s next move. Policymakers will meet on March 20th and 21st. A rate hike is pretty much priced in. The question is how hawkish or dovish of a statement will accompany the rate hike.
A hawkish posture would be a potential headwind that could keep gold and silver markets confined within trading ranges for the immediate future. The opportunity for gold and silver bulls is that at some point the value proposition will be compelling enough to entice buyers and stimulate investment demand.
In the case of silver, it’s hard to find any asset that is currently cheaper. Silver is cheap relative to stocks, relative to bonds, and even relative to gold and most other commodities.
The gold to silver ratio presently checks in at about 80:1. That’s near the top of a multi-decade range. Historically, the ratio doesn’t trade above 80 for long before reversing. And when it does, it usually translates into huge price gains for silver in both relative and absolute terms.
Given that silver trades at well less than half of its high from 2011… and that it trades at a small fraction of its 1980 high in inflation adjusted terms… you don’t have to believe in a huge upsurge in inflation going forward to believe in silver as a compelling value opportunity right now.
Value investing isn’t a get rich quick philosophy. It isn’t about chasing after what’s hot. It’s about establishing a position in a beaten down asset that you intend to hold for the long term.
The bottoming out process can be frustratingly drawn out and boring. But long-term investors should be grateful for more opportunities to accumulate on the cheap. Those who are patient and disciplined accumulators will in time be rewarded.
Well now, without further delay, let’s get right to this week’s exclusive interview.
The Rest…HERE
