July 2019 Information Line
When any market consolidates in a narrow range for as long as gold had, it is perfectly normal to see a strong move upward when resistance to higher prices is finally breached.
Well, that’s what just happened since our June issue of Information Line.
Gold, finally, blew through resistance at $1,350 per ounce and did not take a meaningful pause until it had moved north of $1,400.
Now, those of you who have been reading our newsletters and guest articles in financial newsletters know that breaching $1,400 – in our opinion – was critical to confirming the breakout above $1,350.
Since then, we have seen at least one retracement below $1,400, but the gold price rebounded heartily last week.
This is healthy and welcome.
When markets move up quickly, these periodic pullbacks are necessary to ensure sustained movement higher.
Here’s where it gets interesting, and we have written about this extensively in past alerts and newsletters. When gold fell back from $1,800 per ounce at the end of the last bull market, nothing slowed its fall all the way down to where we are right now… slightly higher than $1,400 per ounce.
So, as gold moves higher from here, there is no resistance to slow it down all the way back up to around $1,800 per ounce.
As a result, my message this month is short and sweet… buy gold and silver now.
I am a buyer of gold here for all the reasons stated above.
I am a buyer of silver here because silver really has not gotten moving yet… at least not to the extent of gold.
And, experience and history tell us that once silver does get moving – following gold’s lead higher – it tends to outpace gold’s gains to the upside.
To put that last statement in perspective, consider that gold’s 10-year gains from 2001 through 2011 were 650%.
Silver’s gains, over the same period, were nearly 1,000%... about 50% more than gold’s move!
So, unless you are adamant about buying gold and silver at higher prices, if you are in the market, I believe now is a good opportunity to be buying. And, as dips occur in this rising market, if you have a need, take advantage of them by adding to your positions.
Simply call ASI today at 800-831-0007 or email us. We are ready to help you Keep What’s Yours!
"If you’ve been thinking about owning gold and precious metals, Rich is the man to talk speak with. He’s my 'go to precious metals expert,' so if you are looking to invest in physical gold or other precious metals, I highly recommend a discussion with Rich." Jim Woods // Editor, Jim Woods Investing
"If you’ve been thinking about owning gold and precious metals, Rich is the man to talk speak with. He’s my 'go to precious metals expert,' so if you are looking to invest in physical gold or other precious metals, I highly recommend a discussion with Rich."
Jim Woods // Editor, Jim Woods Investing
Debt and the Dollar
By Rich Checkan
According to the web site www.usdebtclock.org, here are a few of the headline numbers regarding the state of debt in the I-O-USA…
- National Debt is nearing $22.5 Trillion
- Annual Deficit is over $1 Trillion
- Unfunded Liabilities are nearing $125 Trillion
- Student Loan Debt exceeds $1.6 Trillion
- Personal Debt Per Citizen is just shy of $60,000
- Personal Savings Per Family is just over $12,000
- Overall Liability Per Taxpayer is over $1 Million
These numbers are simply staggering.
Yet, despite the fact that they are already unmanageable, our politicians (and a growing majority of U.S. citizens) want the government to spend even more money we don’t have on green technology, basic subsistence for all, free college for all, etc…
With less than half the population paying taxes (the Federal Government’s chief source of revenue), it is simply not possible to reverse the staggering debt trend, let alone fund free everything for everyone. The math simply does not work.
Unless… we are able to get the rest of the world to buy our treasuries and continue to fund our debt-financed pursuit of a higher standard of living for all… as we have done now for decades.
The problem is the world’s appetite for financing our debt-based growth is waning. The rest of the world is wising up to the fact that our paper is not as attractive as it once was. They see the lack of restraint on the spending side of the equation, and they wonder – and rightly so – whether or not this is a good investment for the future.
The prudent answer… It is not.
Impact on the Dollar
It is only a matter of time before this impacts the value of the U.S. dollar. In fact, I can argue that impact is already being felt.
The U.S. dollar index – a measure of how relatively strong the U.S. dollar is against a basket of key currencies - stood at 103 in late 2016. It dipped below 90 early in 2018. It currently stands just below 97.
For those not familiar with this index, a higher number relates to a stronger U.S. dollar. Further, dipping below and staying below 95 suggests a bear market for the greenback.
Many believe we have entered into a period of U.S. dollar weakening that may continue for some time. I believe they may be right, and I further believe it would be even worse if the rest of the world’s major currencies weren’t in such an awful place as well. By comparison, the U.S. dollar is the best option of a plethora of horrid choices.
The dollar’s resilience over the past few years is much less a vote of confidence in the dollar versus a vote of no confidence in the other major currencies.
The world has embraced debt. The world needs a reset on debt.
What to Do
Regardless of whether the U.S. debt is reset through some sort of Debt Jubilee (as Porter Stansberry has been advocating) or if the world slowly weens itself off of U.S. Treasuries, the impact on the dollar will not be positive.
Expect it to happen either rapidly or very slowly over time, but by all means, expect the U.S. dollar to weaken under the weight of massive debt and weakening appetite to finance that debt.
And, in that scenario, I am a firm believer in holding real assets such as real estate and precious metals. These assets store purchasing power well over time.
U.S. dollars - or any fiat currency for that matter – do not. It’s that simple.
Strongly consider buying gold and silver now. The next precious metals bull market (which may very well have just started) could be one for the history books.
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“As an investor and student of the market for more than 30 years, I know how unusual it is to find a company that is as honest as Asset Strategies International, especially in these times of market deceit and brazen self-interest. I appreciate your courtesy and your efficiency. Thank you again for helping me acquire the protection of gold.”
Editor’s Note: Eric Roseman and Thomas Fischer of ENR Asset Management are good and long-time friends of ASI and our clients. Those of you who have been with us for a while are very familiar with both Eric and Thomas and no doubt have an appreciation for their vast experience with international equity and currency markets. In the following article, they make the case for a depreciating dollar and surging foreign equity markets… a good combination for U.S. dollar based investors savvy enough to take advantage of the trend unfolding. Whether you lean toward their conservative All Weather Portfolio or toward their more growth-oriented Global Contrarian Portfolio, they can help you navigate these markets to maximize the opportunity. Take a look at the article below, then send us an email for more information on their services. Then, look for another article in the future where we will announce details for Thomas’ visit to the ASI office in September. At that time, Thomas will be available for face-to-face or telephone visits to interested ASI clients. More to follow…
Time to Diversify Overseas
By Thomas Fischer
The Congressional Budget Office (CBO) has just published its 2019 Long-Term Budget Outlook.
By the end of this year, federal debt held by the public is projected to equal 78 percent of gross domestic product (GDP)—its highest level since shortly after World War II. If current laws generally remained unchanged, growing budget deficits would boost federal debt drastically over the next 30 years, the Congressional Budget Office projects. Debt would reach 92 percent of GDP by the end of the next decade and 144 percent by 2049.
Consequences of High and Rising Federal Debt If federal debt as a percentage of GDP continues to rise at the pace that CBO projects it would under current law, the economy would be affected in two significant ways:
- That debt path would dampen economic output over time, and
- Rising interest costs associated with that debt would increase interest payments to foreign debt holders and thus reduce the income of U.S. households by increasing amounts.
That debt path would also pose significant risks to the fiscal and economic outlook, although those risks are not currently apparent in financial markets.
The last remark from CBO indicates that the financial markets have not yet reacted to the threat of increased debt and lower economic growth. We could be on the cusp of a huge investment opportunity for US investors as the focus shifts from US equities to European/German equity markets. If the USD also, as a consequence of the dire economic outlook, continues its current weakening US investors with non-USD investments could be in for a win win situation.
The German DAX Index, along with most other markets around the world, has severely lagged New York since March 2009. In dollar terms, the iShares Germany ETF (NYSE-EWG), which closely resembles the blue-chip DAX Index, has gained just 5.43% per annum over the past ten years compared to 16.50% per annum for the SPDR S&P 500 ETF (NYSE-SPY). That’s a huge difference. It’s almost the same story for other bourses overseas, especially as the dollar has remained strong since late 2011. The bottom line: the majority of international markets have performed poorly in dollar terms over the past three, five and ten years while Wall Street has skyrocketed. The last time foreign markets trounced the S&P 500 Index was back in the early 1990s until 1995 when the U.S. bull market took-off. Major and emerging markets earned big returns from 1988 to 1994 and earlier in the mid-1980s. That period of outperformance will return.
German equities have been beaten up for more than a year. The seemingly endless travails of Deutsche Bank AG (DAX-DBK) and the latest blow to chemicals group Bayer AG (DAX-BAYN) highlight the cracks in some of the country’s best-known corporate names. But Swiss bank UBS believes it may finally be time to give Germany a break. Since the start of 2018, German stocks have been comfortably the worst performing in Europe, lagging major markets in the rest of the region by about 9%, UBS notes. That means stocks from this supposed euro-zone economic powerhouse, which led the rest of the continent in the immediate aftermath of the financial crisis, have trailed even behind those of the Brexit-hobbled UK.
Fed Rate Cut in 2019 Points to Lower Dollar
After a blistering rally off the late 2011 lows, the U.S. dollar is poised to finally weaken ahead of an imminent interest rate cut currently in the process of being discounted by financial markets. With May payrolls up just 75,000, markets have begun to discount a possible July Fed rate cut. The dollar has also started to soften this week, down more than 1.5% and the biggest weekly decline in months. The last time EURUSD broke its 200-day moving average, it rose from 1.08 to 1.25 equaling a USD weakening of 15%.
ENR Asset Management offers a range of non-USD managed investment strategies from only USD 100,000. If you would like to hear more about our products and services, feel free to contact Thomas Fischer.
“If gold is your chaos hedge, then Michael Checkan is King Midas. He's been a personal friend, and his company, Asset Strategies International, Inc has been dealing in gold (silver, platinum and palladium too) for over 35 years. You want them in your corner when it comes time to buy.” —Doug Casey
“If gold is your chaos hedge, then Michael Checkan is King Midas. He's been a personal friend, and his company, Asset Strategies International, Inc has been dealing in gold (silver, platinum and palladium too) for over 35 years. You want them in your corner when it comes time to buy.”
The Inside Story
Gold and Silver's Divergence Prompts Historic GSR
By Madeleine Coe
Have you heard of the Gold/Silver Ratio (GSR)?
It's the number of ounces of silver required to buy one ounce of gold. The GSR can be used as an indicator to look out for changes in the gold and silver markets. Investors often use this ratio to help them accumulate more gold or silver, selling one to buy the other. Gold and silver trade mostly in sync with each other without dramatic variations, but the current market conditions are considered pretty extreme by those who have been monitoring the GSR.
Historically, whenever the GSR reaches or exceeds 80, it has corrected back to somewhere between 35 and 50 as both silver and gold prices move higher, with silver outpacing gold to the upside.
Right now, the GSR is around 89. We haven’t seen numbers like this since the early 90’s. This historic high is a result of the recent explosion in the price of gold. Experts believe that gold’s breakout above $1,350, confirmed by the current price level above $1,400 is strong evidence that we are likely in the beginning stages of a gold bull market.
If the past is any indication, silver spot prices will outpace the rise of gold in this bull market, but they haven’t really begun to move yet. That means that major trading opportunities are being created for precious metals investors to act on today.
At first glance, silver’s underwhelming performance compared to gold may seem concerning. Silver received a short boost this week, but overall this metal has drifted into overbought territory and requires a stronger driver to continue pushing the trend to the upside. It’s unlikely that silver spot prices will soon go significantly higher or lower; they will simply continue to bounce around between the $15.00-15.50 an ounce.
While silver is stuck in a narrow range between several key indicators, gold has entered a consolidation period and is building strong support for a powerful stride to the upside. As a result, the GSR is now nearing levels we haven’t seen in over 25 years as gold continues to dominate the space. The February 1993 GSR high around 93.25 is the near-term target. If the GSR is able to breach and close above that level, that would enable precious metals speculators to set their sights on the all-time high at 100.28.
What is the takeaway?
If you’ve been sitting on silver, you’ve likely noticed it is taking the backseat to its counterpart gold.
However, recent levels of gold and silver prices are matching levels that have historically signaled a rise in silver prices. Gold and silver should continue to diverge. That makes this your invitation to stock up on silver this summer. If silver follows the trend it has in the past, your silver holdings could get quite the boost in the coming months.
Silver prices are primed for growth, which means that there is still opportunity for the savvy investor to take advantage of the GSR. Buy silver, or swap gold for silver, but by all means, we suggest you consider doing something here.
“Over the course of many years, ASI has developed a reputation as a leader in alternative assets. These include everything from foreign currencies to gold, silver, platinum, and palladium as well as rare tangible assets like rare U.S. and ancient coins. These are investment opportunities that fly below the radar of most investors. Yet, as ASI’s rigorous research confirms, they offer the benefits of higher returns and lower risk. The assets that ASI offers belong in every investor’s portfolio.” —Nicholas Vardy // ETF Strategist, The Oxford Club
“Over the course of many years, ASI has developed a reputation as a leader in alternative assets. These include everything from foreign currencies to gold, silver, platinum, and palladium as well as rare tangible assets like rare U.S. and ancient coins. These are investment opportunities that fly below the radar of most investors. Yet, as ASI’s rigorous research confirms, they offer the benefits of higher returns and lower risk. The assets that ASI offers belong in every investor’s portfolio.”
—Nicholas Vardy // ETF Strategist, The Oxford Club