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Perspective
By Rich Checkan
The market is changing.
But before we get to that, I encourage you to read this entire newsletter. Then, I suggest that you sign up for Nomi Prins’ “Prinsights” newsletter. She will be Adrian Day’s and my guest on our “On the Move” webinar at 7 PM (EST) on Wednesday, September 25th. And the week prior to that, Nomi will have an entire week dedicated to gold. You won’t want to miss either.
Now, back to our regularly scheduled programming…
The market is changing.
For the past few years, the narrative has been the same. Central banks and retail investors in Asia have been buying.
Western investors, for the most part, have been nowhere to be seen… unless they are selling gold and silver to meet margin calls or to pay down household debt.
Through it all, gold and silver prices have been slowly but surely plodding higher. After consolidating at all-time highs for the past five years, gold has been making new highs… dragging silver higher in the process.
But the market’s narrative is changing. Western investors are starting to buy the dips.
Are you one of them?
Why Now?
Chairman Jerome Powell and the Federal Reserve might be partially responsible.
Investors have been waiting for… hoping for… begging for interest rate cuts from the Federal Reserve. All markets – equities, precious metals, bonds – have been overreacting to every little clue they can get as to the Federal Reserve’s next move.
When they sense Chairman Powell will stay “higher for longer,” stocks and precious metals wilt. When they sense the “data” will move the Federal Open Market Committee to start cutting rates, they lurch forward, higher.
A couple of weeks ago, at the annual meeting in Jackson Hole, Wyoming, Chairman Powell was not cryptic or opaque at all. He quite simply and plainly said it was time for the Federal Reserve to change course with regard to interest rates.
Cuts are coming… unless something in the labor market changes drastically. Cuts are coming… unless inflation starts creeping higher once again.
Investors are no longer wondering if they will see interest rate cuts coming in 2024. Now, they are simply trying to determine how many rate cuts and when they will occur.
Almost everyone is convinced interest rate cuts are coming. That is why Western investors are beginning… ever so slowly… to enter this market. That is why Western investors are starting to buy the dips.
Waves or Ripples?
Do not get the wrong impression.
Yes… we are seeing Western investors enter the precious metals market.
No… it is not in any way overwhelming.
These are not waves of investors. They are ripples for sure. But ripples are like tsunamis compared to what we have seen over the past four or five years.
We talk to mint representatives, refiners, wholesalers, and other retailers. They all tell the same story. Until recently, they have been seeing as many or more dealer buybacks than they have dealer sales.
The dealers have been buying. The clients have been selling.
One mint representative quipped, “If you added flowers to the mint production floor, it would be indistinguishable from a funeral.”
In this environment, it is not surprising that many dealers are running limited duration promotions seemingly every day. They are not doing that because they have more business than they can handle. They are doing it because their sales are anemic.
But again… that is starting to change.
When clients sold precious metals back to us six months ago, we would more often than not need to sell them in turn to a wholesaler. Even at discounted sales premiums, clients would not buy.
Now, it is rare if our clients do not consume every ounce sold back to us.
Six months ago, when we saw a dip in the price of gold and silver, clients would wait to see what happened next.
Today, every dip brings meaningful buying activity… unsolicited.
When we reached out to clients six months ago to offer precious metals to our clients, it was common to hear that they had enough, were happy with their positions, or did not need any more.
Now, those very same clients who were all full up, are starting call to buy… unsolicited.
Again, this is not a wave. It is a ripple.
Is It Time to Buy?
Yes.
It has been time to buy for quite some time.
Go back three or four years. Look at what we said back then. And look at the prices of both gold and silver back then.
We said to buy… to start accumulating. We said gold was going higher after consolidating at all-time highs.
Those who listened are pleasantly surprised. Gold has been steadily making new all-time highs. Silver has been making new short-term highs.
And without much fanfare, the prices of three or four years ago are distant memories.
And now, Western investors are just starting… ever so slowly… to enter this market.
Perhaps they know how well precious metals prices do six to twelve months after the first interest rate cut following a U.S. rate tightening cycle. Maybe they are aware that historically, once the Federal Reserve starts cutting rates, gold prices, silver prices, and gold and silver mining stocks tend to outperform equity markets.
It could just be that Western investors…
• Looked at the 100-year gold versus U.S. dollar chart.
• Are aware of what gold does when geopolitical crises erupt globally.
• Have heard all the reasons central banks have been buying gold.
• Know how well gold performs when society destabilizes.
• Have figured out what a U.S. dollar will be worth when debt soars further.
• Understand that regardless of what happens in November, unless Congress has the stomach to cut spending and balance budgets, it will take more U.S. dollars to buy every ounce of gold in the future versus what they paid for it today.
By far, buying gold and silver at today’s prices is the best thing you can do today, tomorrow, and for the foreseeable future to Keep What’s Yours!
Buy on our website directly… www.assetstrategies.com. Call us at 800-831-0007. Or send us an email.
Buy the dips… early and often.
—Rich Checkan
Feature
For Your Gold… Only the Best Will Do
Since 1982, Asset Strategies International has been working with the world’s major mints, largest refiners, and the very best distributors. These relationships allow us to offer the world’s highest quality precious metals products, at the very best prices, so you can have complete peace of mind.
One of our strongest relationships is with The Perth Mint, in Perth, Western Australia. The Perth Mint was established in 1899, and it is celebrating its 125th Anniversary this year.
We have been fortunate to work with them for over three decades now. In fact, we were instrumental in the development of their renowned Perth Mint Certificate Program (PMCP), and we are their top dealer for this unique, government guaranteed precious metals storage program. Since inception in 1997, the PMCP has provided gold, silver, and platinum to tens of thousands of customers. The Mint stores over AUD $6.4 billion in client metals or roughly U.S. $4.3 billion.
And thanks to our relationships with some of the best Individual Retirement Account (IRA) Trustees/Administrators, we have been able to offer the PMCP in IRA’s since 2001.
If quality, value, and peace of mind are what you seek, buying Perth Mint precious metals through Asset Strategies International is as good as it gets.
Enjoy this brief two-minute video with a little more information about our trusted friends down under…
Click to view.
Editor's Note: Frank Holmes is the CEO of U.S. Global Investors —a company that produces quality analysis concerning gold, precious metals, natural resources, and emerging markets—in conjunction with his work as a fund manager. Frank is a long-time friend of ours, and we've chosen to share his article originally published September 3, 2024. For more articles like this from Frank and other leading experts, you can subscribe to the U.S. Global Investors newsletter here.
Hard Stuff
The Contrarian Opportunity In Gold Stocks Today
By Frank Holmes
As I write this, gold is trading just under $2,500 an ounce after surging past the psychologically important level for the first time ever in mid-August. For seasoned gold mining investors, this should be a moment of validation. After all, the yellow metal has long been seen as the ultimate hedge against economic uncertainty.
And yet, despite the bull run, gold stocks—those companies that mine, process and sell the metal—are trading at historically low valuations relative to the market.
This apparent disconnect offers contrarian investors an extraordinary opportunity.
Rising Yields And The Gold Selloff Explained
But first, why is this happening? The primary culprit for this disparity, I believe, lies in the impact of interest rates and central banks’ gold-buying spree. The real, inflation-adjusted 10-year Treasury yield rose from a low of around -1.2% in August 2021 to nearly 2.5% in October 2023, and for many investors, particularly those in Western countries, rising yields are a signal to sell non-interest-bearing gold.
That’s exactly what happened. From the end of 2020 to May 2024, exchange-traded funds (ETFs) backed by physical gold shed approximately 30 million ounces, over a quarter of their total holdings, as yield-seeking investors pared back their positions.
What some investors may have overlooked, I’m afraid, is the long-term potential of the very assets they were letting go of. Gold stocks, unlike the physical metal, offer not just a hedge but also a means of participating in the upside of gold prices. Put another way, when gold prices have gone up, gold stocks have historically tended to rise even more.
Right now, I believe these stocks are offering an unprecedented combination of low valuations and high potential returns.
A Contrarian Take On Gold Stocks
As contrarians, we understand that the best time to invest is often when sentiment is at its lowest. And sentiment around gold equities is pretty low right now.
But history tells us that this could be the perfect time to buy. As you may be able to tell in the chart above, we’re seeing a reversal of the gold ETF selloff. Since mid-May, investors have added about 2.3 million ounces of gold, according to Bloomberg data; holdings now stand at their highest level since February of this year.
This could be just the beginning. If real interest fall substantially, the tide could turn in favor of gold and gold equities.
$3,000 Gold By Mid-2025?
Historically, gold’s biggest gains have occurred when the Federal Reserve cuts interest rates amid economic uncertainty. Although there’s no obvious crisis on the horizon, markets are pricing in a 25-basis point cut at each of the next two Fed meetings in September and November, with a larger cut expected in December.
If the Fed follows through, we could see gold prices not only maintain their current levels but soar to new heights. UBS is calling for $2,700 gold by mid-2025; Citigroup, Goldman Sachs and Bank of America all see the metal hitting $3,000.
Stock Market Trends After The First Fed Rate Cut
That’s not to say you should dump all your equities in favor of gold, especially as the Fed is on the verge of easing. Charles Schwab recently showed what stocks did in the past when rates fell, and investors may want to take note.
The stock market traded up 12 out of 14 times—or 86% of the time—a year after the Fed made its initial cut in a new easing cycle. Schwab points out that the two back-to-back negative periods were predicated on extraordinary circumstances: the dotcom bubble in 2001 and the housing crisis in 2007. Past performance is no guarantee of future results, but it’s worth considering.
This is excellent news for general investors, including the record number of “401(k) millionaires”—investors who have $1 million or more in their retirement accounts. According to Fidelity, there are now almost half a million such millionaires… and growing!
As always, I encourage you to do your own research, consider your risk tolerance and consult with your financial advisor. But from where I stand, the opportunity in gold equities is one that should not be overlooked.
Editor's Note: Nomi Prins is a best-selling author, financial journalist, and former global investment banker. Register for the next On the Move” webinar at 7 PM (EST) on Wednesday, September 25th when she will join us live .Prinsights Pulse is a new, free publication that’s curated by Nomi Prins. Designed for everyone from executives at large institutions to individuals seeking to enhance their financial understanding, this powerful newsletter provides essential insights into economic trends that affect us all. This article was originally published on September 4, 2024. Click here to discover more of Nomi's insights.
The Inside Story
What This Job Market Really Means
By Nomi Prins
The ‘“Something is rotten in the state of Denmark.” – William Shakespeare, Hamlet
When you think about the most powerful buildings in Washington D.C. area, certain iconic ones come to mind.
The White House, the Pentagon, and the Supreme Court, to name a few.
But the truth is that for Wall Street and the world of finance, one of the most influential is a nondescript building tucked right next to Union Station, where trains routinely deliver tourists and powerful elite in and out of the nation’s capital…
The Bureau of Labor Statistics.
What you should know is that this Friday, when the Bureau of Labor Statistics (BLS) releases its employment figures for the month of August, nearly every desk in the financial community will be tuned in.
That’s because, since January, the U.S. unemployment rate has been ticking up from 3.7% to 4.3% for the month of July. That’s an increase of 16%.
In addition, the latest data from the BLS shows that employers added 818,000 fewer jobs over a 12-month period that ended in 2024 than were originally reported. That means that only 2.1 million jobs were created over the past year, compared to the 2.9 million reported.
To put that into context, that’s the worst revision since 2009.
However, as those figures worsened less than a year ago, Federal Reserve Chairman Jerome Powell suggested that further rate hikes could be on the table – because the labor market was too ‘hot’.
Yet, the trending increase in the U.S. unemployment rate shows that the Fed either “missed” or intentionally ignored a weakening labor market – all in its zeal to substantiate tighter monetary policy to combat inflation that started in March 2022.
The truth behind the job numbers shows that something is rotten – not in Denmark, but on Main Street.
Now, concerns it might have missed the rot are slowly emerging from the Fed.
Fed Governor Bowman admitted last month that consumers are pulling back, and she even underscored the BLS revision mess up, saying the, “report suggests that job gains have been consistently overstated in the establishment survey since March of last year…”
The jobs trend points to a Fed interest rate cut this month, because as Powell noted at Jackson Hole, there are ‘risks’ out there.
Let me explain.
Signs of Overall US Jobs Slowdown
First, let’s recall that when Powell became chairman of the Federal Reserve, the U.S. unemployment rate was 4.1%. It dropped to 3.5% in 2019 without any increase in inflation, and he characterized none of that as ‘hot’ at the time.
The cynic might say he promoted the ‘hot’ labor market narrative, which was mostly due to post-Covid shut-down hiring, as a reason to raise rates in order to fight inflation. The idea was that the Fed could have saved face after it labeled rising inflation as ‘transitory’ in 2021.
That’s aside from the fact that, as we’ve reported, there’s little reason to believe the Fed has had any impact on real asset inflation. Overall, declines in inflation rates have coincided with supply and economic cycles.
The truth is that the Fed can’t truly control the price of oil, gold, food, or rent – just as it can’t stop wars or fix supply chain issues. Monetary policy might be a blunt tool, but even if it is data dependent, the Fed is still coming up short – and late.
The BLS publishes its monthly projections for the U.S. labor force participation and growth rates over the next decade.
Their recent report, released in August, shows that both population and labor force growth rates are projected to slow down from 2023 to 2033. That’s down even further from the decade before.
Over this time, the BLS expects the U.S. labor force to grow by 0.4% per year, and the population to grow by 0.6% per year.
That means that the population is growing more quickly than the labor force.
The problem is that as the labor force expands more slowly than the population does, the labor force participation rate drops, too. Ultimately, this means fewer people are in the labor force as a portion of the population.
Compounding this forecasted labor slowdown is the U.S. economic slowdown. Economic or GDP growth has been slower over the past two decades compared to the 1980s and 1990s decades. That's one reason for the decline in labor force growth.
According to the BLS, this downward trend will continue, and GDP growth will drop to 1.9% per year over the next decade.
The Growth Areas That Are Hiring
While the U.S. unemployment rate keeps rising overall, certain sectors have been steadily hiring in a manner commensurate with long-term, demand-driven growth.
According to the U.S. Energy and Employment Report released by the U.S. Department of Energy last week, the number of jobs added in the clean energy sector in 2023 grew more than twice as fast as the country's overall job growth.
Those jobs in the clean energy sector included wind, solar, nuclear and battery storage. The sector added 142,000 jobs, expanding the workforce by 4.2% in 2023, faster than the 3.9% increase in 2022.
This flashing trend wasn’t just in clean energy – but in energy as a whole. The total number of energy jobs increased by 250,000 last year, with 56% of those being in clean energy and the rest in other traditional energy fields, including infrastructure and construction jobs.
Those construction jobs in clean energy have gained traction on the back of policy initiatives and private-sector investments.
Growth in those jobs "is expected to continue for decades to build out the clean energy infrastructure that we need," Betony Jones, Department of Energy’s head of energy jobs, told reporters last week.
As we’ve reported, the need for upgraded and modernized technologically that is energy efficient is critical for the U.S.
The investments are already creating jobs, but they are also building the economic and national security foundations – both elements that are relatively resilient to interest rate and inflation variables.
To tap into this energy transition, consider an allocation in the Vanguard Utilities – VPU ETF (VPU). The VPU ETF consists primarily of the utility companies involved in the transforming elements of the energy sector as a whole.
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