David Morgan: Expect Stagflation and Silver Outperformance in 2019


by Clint Siegner, Money Metals:

Coming up our good friend David Morgan of The Morgan Report joins me for a conversation on a range of topics, including his 2019 outlook for a number of different asset classes, most notably gold and silver. Don’t miss a fantastic preview of 2019 with the Silver Guru, David Morgan, coming up after this week’s market update.

Gold and silver markets are trading relatively quiet this week as the U.S. stock market continues to show surprising strength. It’s surprising at least to investors who expected markets to reflect growing political threats to the economy. 
As the partial government shutdown enters an unprecedented 28th day, economists are warning of a significant hit to first quarter GDP.

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It’s not that furloughed government workers contribute much to economic productivity. It’s that since they are now starting to miss paychecks, they will have less to spend into the economy. GDP measures the nominal size of the economy, not how productive or efficient or free or fair it is.

An expected downtick in GDP, however slight, will pressure the Federal Reserve to back off on rate hikes and ready its stimulus bazookas for deployment. So in the strange world of Fed-dominated markets, bad news for the economy is being interpreted as good news for stocks.

A rising stock market often – though not always – depresses demand for bullion.

This week gold prices once again traded just below the $1,300 resistance level. As of this Friday recording, gold has pulled back a bit and comes in at $1,284 an ounce to register a weekly decline of 0.3%.

Silver is off 1.1% for the week to trade at $15.47 per ounce. Platinum is down 1.2% now to trade at $804. And finally, palladium, which is pulling back a bit today like the other precious metals, is still spiking 5.0% higher this week to a record $1,388 per ounce price.

The palladium market is exhibiting highly unusual trading activity as something of a buying panic sets in over shortage fears. And, as our podcast guest David Jensen last week pointed out, the explosive price action in palladium could be a precursor to what lays ahead for platinum and silver – and possibly even gold.

The mining industry is having great difficulty growing production. Economically viable new deposits are few and far between. Some of the majors are deciding the best way to acquire new reserves is to buy up the competition.

On Monday, Newmont Mining acquired Goldcorp in a move to become the industry’s dominant player.

News Anchor: Newmont Mining is buying smaller rival Goldcorp for $10 billion, paying an 18% premium. The deal creates the world’s largest gold producer, just as easy-to-find gold reserves decline. Newmont shares fell on the news. Goldcorp skyrocketed. Reuters correspondent Liana Baker is covering the story.

Liana Baker: There’s just fewer and fewer places in the world to mine for very valuable gold, so by having a bigger company, they’ll have a better chance of getting access to the right deposits.

News Anchor: The deal is the second high-profile merger in the mining industry since Barrick Gold agreed to buy Randgold Resources in September last year.

Looking ahead to next week, political bickering over how to resolve the shutdown is likely to intensify as more unpaid government employees reach breaking points. Since the federal workforce is overwhelmingly Democrat, their anger could finally push Democrat leaders in Congress to break from their no-compromise position on a border wall.

Some Republicans want to be the ones to buckle first, as is their well-worn habit. But for now, Senate Majority Leader Mitch McConnell continues to stand with the President.

Unfortunately for Trump’s base, the GOP establishment has a poor track record when it comes to winning high-stakes fights against Democrats. Many establishment Republicans are reluctant to fight this battle at all and are quietly hoping Trump caves to Schumer and Pelosi.

The one thing Republican leaders in Congress are highly effective at doing is sidelining conservatives, libertarians, and nationalists within their ranks. GOP members of Congress who refuse to support bloated deep state spending bills can quickly find themselves ostracized.

Amidst the political chaos this week, House Minority Leader Kevin McCarthy found time to purge conservatives Jody Hice and Steve King from their committee positions. Hice had backed Freedom Caucus co-founder Jim Jordan for Minority Leader. King, meanwhile, was punished because he suggested in a New York Times interview that the terms like “racist” and “white supremacist” are being deployed by the left to attack Western civilization.

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