Thursday, May 31, 2018

When Interest Rates Go Up, Gold Doesn’t: It’s Totally Fallacious

The argument that when interest rates go up, gold goes down is a “totally fallacious” one, said Eric Sprott, billionaire precious metals investor and founder of Sprott Inc.

“I don't believe the argument, but it's an argument that's made … Interest rates go up, gold doesn't go up, it's totally fallacious. But you get it in the markets,” Sprott said during Sprott Money’s Weekly Wrap-Up on Friday.

What’s actually next in store for gold prices will be determined by how investors react to future financial conditions in the U.S. as the Federal Reserve proceeds to tighten its monetary policy, according to Sprott.

And a good sign for the yellow metal is that the economy might not be ready for higher interest rates, he noted.

“What is the market going to do as the Fed literally tightens? Other things are going to go down, car sales are going down. It's getting tougher for the average American,” Sprott said. “In one state they're raising [Obama care premiums] 64%, in another one, 98%. Who could afford this stuff? We say there's no inflation. I mean that’s a 60% rise, if you already spend 17% of your salary on healthcare, that would be an increase in your inflation index of 6% for the year.”

What worries Sprott is how the markets will react when these risks materialize. And the likely scenario for the billionaire investor is the Fed pausing its tightening cycle, which will benefit gold.

“I found it very, very instructive that the UK passed on raising rates … And the Fed may, in fact, have to pause here somewhere along the line because [the economy is] not nearly as strong as we're all thinking it is,” Sprott said.

The American central bank might at the end of the day say: “Well, you know, if the numbers aren't looking that good, we're not raising,” according to Sprott. “And it could be that that's ultimately what happens with the Fed. And, of course, that would take away one of the arguments for gold not going up.”

According to the CME Fed Watch Tool, there could still be three more rate hikes coming this year.

On Monday, Cleveland Fed President Loretta Mester also expressed her support for gradual rate increases.

“In my view, the medium-run outlook supports the continued gradual removal of policy accommodation; it seems the best strategy for balancing the risks to both of our policy goals and avoiding a build-up of financial stability risks,” Mester said in prepared remarks for a speech in Paris. “We want to give inflation time to move back to goal ... this argues against a steep path.”

Earlier this month, the Fed kept interest rates unchanged within a range between 1.50% and 1.75%, while also making cautious comments regarding inflation pressures.

- Source, Kitco News

Monday, May 28, 2018

Pension Funds Are Losing Money, A Disaster in the Making

"The pension crisis is not going away. Of course, you start raising rates and it puts an even greater stress on pensions. You know, pensions own bonds-we're in a bear market in bonds! They're losing money. 

In fact, there's a chart you can see every day that shows the net gain of stocks and bonds together. And so far this year, I think it's probably zero-if not negative-the combined total of stock market gains and bond market losses. So these pension funds that were underfunded… now they're not even making any money!"

- Source, Eric Sprott

Sunday, May 20, 2018

When The Currency Starts Going You Want To Be Long Gold & Silver

“I’m a bear on the economy. We have a jobs number today that’s classified as weak. We have soft data that’s weak. We have hard data that’s weak. Logic says Flyover America is having a tough time. So, those all would argue for lower rates. 

You have a Fed that, of course, could change their mind quickly if the market continues to weaken here. The only thing arguing for higher rates, of course, is just the sheer inability of the U.S. government to fund itself, because of the excessive demands from a cash perspective.”

- Source, Silver Doctors

Wednesday, May 16, 2018

It’s Not Difficult To Understand Why Gold Could Break-Out And Rally $1000 From Here

“We don’t have the economic strength that everyone is suggesting that we have. Even 2% growth is pretty paltry here … A lot of it is because of government spending money that they don’t have. Which helps GDP, by the way. 

But sooner or later, if you’re spending money you don’t have, you’re not going to be able to spend it the next time, because you truly don’t have it. And the bond market’s going to make you pay for the money, and then you’ll come to your senses and stop spending. 

So I think… we’re all going to find out that the rising market was built on false premises.”

- Source, Sprott

Saturday, May 12, 2018

Eric Sprott: “I Can See There’s A Bit Of A Tightness Showing Up In All Of The Metals”

Eric says if the longs decide they would rather have their metal, things could erupt because the shorts have sold metal that doesn’t even exist. Here’s an update…

Eric Sprott interviewed by Craig Hemke on The Weekly Wrap-Up

It’s been another week of rising inflation and interest rates, but the commodities markets look good, with silver in particular poised for a breakout.

This week, Eric tells you:
  • What a possible short squeeze means for you
  • Why you should be watching the bond market right now
  • And why India might be the next big buyer of gold
“It’s not just the net short position that is important. It’s: What if a Long says to a guy who’s short, ‘I’d like my silver?’ ‘I’d like my metal?’ We have over a billion ounces of short metal in silver. What if the Long simply says, ‘I can see there’s a bit of tightness showing up here in these various metals… maybe I’ll take delivery, thank you very much.’ Of course, as we know, the seller of the silver and/or gold doesn’t have the metals. So, yeah, there’s a very distinct possibility that this could erupt as people are getting more distressed… There are lots of smart guys that worry about the system crashing.”

- Source, Sprott Money

Tuesday, May 8, 2018

Gold’s 2% Spike Was Too Much For The Cartel To Allow So They Smashed Gold Back Down

Eric says it’s very frustrating day in and day out to witness the blatant manipulation, but in the long run, owning gold & silver will pay off. Here’s why…

Eric Sprott interviewed by Craig Hemke on The Weekly Wrap Up

It’s Friday the 13th, and after an almost perfect week, things are looking bumpy again. Eric stops by to calm our frazzled nerves on this, the unluckiest day.

In this chat you’ll hear:
  • Why you shouldn’t rely on fiat currencies
  • Eric’s thoughts on price suppression in the precious metals space
  • His top picks for mining companies to look into
“We are seeing people throughout the world buying more physical gold… The logic for that is getting stronger all the time. We have a stock market that’s getting very jittery here, we have a bond market that’s in a bear market, we have inflation rising, we have craziness going on in various currencies… How many people does it take watching their currencies being that volatile before you say, ‘Give me something little more secure?’

- Source, Sprott Money