Tony’s market update – Anyone Watching Silver?

Logroño Spain

I have been walking for nine days through the north of Spain, it’s hot, it’s dry, and it’s relaxed. I don’t understand much Spanish, but I doubt if any of the conversations in the numerous cafes I’ve visited are about how crazy world economics are these days.

Simple lives of family and social contact are the norm, meet for pinchos (tapas) at 13:00 and beer or wine at 20:00. Parks and squares come alive, no overindulgence, no rush – we could learn a thing or two.

I am away, but I am still following the markets, and Silver is looking really solid. It is finally starting to move after six years in the doldrums. What does this mean? Silver easily broke through US$18.00 on Tuesday (up 28% this year). It was last at these levels in 2017, on its way down to $14.00 from $50.00 in 2011. Does this mean that it is going back to that number? Possibly, although I would expect some profit taking before moving higher. The pressure is on – US$20 trillion in negative yielding debt makes commodities that make no yield look attractive to professionals and us normals alike. The widening gap between public and private interest rates is also of a concern. Governments globally are coordinating efforts to lower interest rates to stimulate demand and the media release stories such as NZ likely to enter a new property boom. What rubbish! Wages are not keeping up with rising prices, confidence is waning and spending is shrinking.

We are so busy at NZGM that internet traffic temporarily crashed our servers yesterday. When we are this busy it implies a clear lack of confidence in the economy and banking.

If our reserve bank governor gets his way banks will need to hold more assets on their balance sheets and to maintain profits, mortgage, credit cards, and business loans, rates must rise, further dampening demand and asset prices.

I suggest we try to be like the Spanish, and enjoy the small things, while making sure or own balance sheets are in order.

IN GOLD (and SILVER) WE TRUST Tony Coleman