by Mike Gleason, Money Metals:
Coming up we’ll hear an eye-opening interview with Craig Hemke of the TF Metals Report. Hear from the man who accurately predicted a year ago that 2019 would be the best year for gold and silver since 2010. And we’ll hear his new call for 2020. Craig also takes serious issue with some of the gold naysayers and perma-bears and calls them out for being blinded by their agendas. So, don’t miss my conversation with Craig Hemke, coming up after this week’s market update.
A wild week for markets as the U.S. and Iran come to the brink of war before both sides apparently decided it would be wiser to pull back.
After Iranian missiles hit a U.S. military base Tuesday night, gold prices surged above $1,600 an ounce. As gold headed toward a 7-year high, even the mainstream media had to take note. Jim Cramer and his fellow stock market pumpers on CNBC took time to lament the fear-driven buying of gold.
CNBC Anchor: All right. Jim, what’s caught your attention this morning beyond Citi in terms of the key to this market? Obviously, we see, broadly speaking, a down market.
Jim Cramer: It’s gold, gold, gold, gold. When I see this endless buying of gold, it makes me think, for the first time, maybe people are just saying, “I am really fearful.” It’s not just Treasures. The gold buying has been endlessly, over and over and over. There are only a few growth gold companies. The main one is Agnico Eagle. People want to buy, that’s the one to buy. But it’s relentless and it feels like gold wants to go to $1,700, $1,800. That would be very negative for the market.
CNBC Anchor: Uh, yeah.
Fear buying of gold and other safe havens ended up being short lived. After U.S. officials reported there had been no casualties and Iran stood down, fears of World War III suddenly turned into hopes for a quick end to hostilities. Wall Street celebrated as metals markets sharply reversed mid-week.
As of this Friday recording, gold is now relatively flat overall for the week to trade at $1,560 per ounce. The silver market shows a slight weekly gain of 0.2% to bring spot prices to $18.16 an ounce. Platinum is off 0.4% last Friday’s close to come in at $982.
And finally, palladium pushed through the $2,000 level for the first time ever. It currently trades at $2,129 on the heels of a 6.5% advance this week.
Well, while we can all take comfort in the tamping down of tensions between the U.S. and Iran, it would be naïve to believe that the threat of further conflict in the region is over.
It appears that Iran was in fact responsible for shooting down a Ukrainian passenger jet. If it instead had been an American Airlines jet loaded with U.S. citizens, we’d likely be seeing much more of a reaction from President Donald Trump and perhaps our military forces as well.
Iran or Iranian-backed terrorists could be planning other forms of retaliation as I speak. The assassination of Iran’s top general has stoked extreme new levels of anti-American resentment. It won’t abate anytime soon, especially as the Trump administration is vowing to impose tougher economic sanctions to punish Iran.
America is also struggling to keep Iraq from forging closer relations with Iran. Iraqis increasingly want U.S. forces out of their country.
Democracy in the Middle East never quite works out the way the foreign policy central planners in Washington envision. After so many years since 9/11, after so many trillions of dollars invested and ultimately wasted in Iraq and Afghanistan, President Trump at this point is looking for an honorable way to cut our losses.
But his neo-conservative advisors still cling to grand notions of re-making the region in our own image. And the pull of the Israeli lobby and military-industrial complex is perhaps the most powerful force in Washington. D.C. — as all Presidents come to learn.
Of course, precious metals markets will need more than occasional geopolitical flare ups to drive a long-term bull market advance. The fundamentals are turning in favor of higher gold and silver prices. From fiscally reckless trillion-dollar deficits in Washington, to a Federal Reserve obsessed with generating higher rates of inflation, to mining supplies of gold and silver looking tight, the ingredients for a big bull market are in place.
However, safe haven demand from investors has yet to pick up in a big way. We saw some of it this week, but it will likely be fleeting until the general public sees good reason to pull assets out of the stock market.
As stocks hit record highs last year, gold and silver coin sales at the U.S. Mint plunged to multi-decade lows.
The U.S. Mint sold just 152,000 ounces worth of gold American Eagles in 2019. That marks the lowest total on record going back to 1986. Meanwhile, sales of silver American Eagle coins came in at their lowest level since 2007. Now granted, a robust secondary market as a result of hordes of retail investor selling supplied the market with a cheaper alternative to the newly minted coins, and that explains part of those low numbers for 2019 U.S. minted product.
Australia’s Perth Mint, however, saw an increase in coin demand from its more internationally based buyers. Many sought physical bullion as a refuge from negative interest rates in their home countries.
As U.S. investors realize that they too face the prospect of negative real interest rates on savings and bubble valuations in equity markets, they too will increasingly find a compelling value proposition in gold and silver.
Well now, for some predictions on what 2020 will look like for the metals and the other markets, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to welcome in Craig Hemke of the TF Metals Report. Craig is a well-known name in the metals industry and runs one of the most highly respected websites in our space and provides some of the best analysis you will find anywhere on banking schemes, global macroeconomics, and evidence of manipulation in the gold and silver markets.
Happy New Year to you, Craig. Thanks for coming on and welcome, how are you?
Craig Hemke: Mike, it’s always a pleasure. New Year’s started off with a bang, man. I hope it’s not indicative of how crazy this entire year is going to be. We’ll see.
Mike Gleason: Yeah, certainly this week sparking action itself. Lots going on both geopolitically and in the markets, and we’ll get to a lot of that. Well, Craig, here we are entering another new year. The conflict with Iran and the potential for an escalation there spurred some safe haven buying in recent days, but the rally in metals started last month. I’d like to open by getting your thoughts on what you believe will be driving metals prices this year. Yes, we expect the forces of evil to continue doing their best to manage prices, and we’ll get to that topic of price manipulation in a moment, but talk about what you’re seeing in the metals here recently and discuss some of the themes you anticipate people will be talking about this year when it comes to the metals.
Craig Hemke: Well, I think it’s critical that people try to have a longer memory than 48 hours. As we record this today, I’m seeing all kinds of garbage. I saw garbage from some group that is always a perma-bear, always talking about how gold has topped out and going down, has a clear agenda, just like some of the short sellers that are always anonymously pound the mining stocks with fake research reports and stuff like that. And I’m seeing these things today about how, “Oh yeah, gold, look at that. Look how terrible that candle looks on the daily chart, and how come hold’s not going up when all this war stuff,” and it’s like, do you not understand? I mean, gold went up prior to the war starting. Beginning last Thursday, gold closed on the Comex, last Thursday, January the 1st at about $15.30. So, the whole move from $1,530 to $1,580 was war premium, if you will, really short-term war premium. Then the spike to $1,610 was when we seemed to be on the verge of what could even have been a nuclear war in the Middle East.
The fact that it’s pulled back to $1,550 shouldn’t surprise anybody. I mean, we hadn’t even worked out all the war premium yet. Despite what is some pretty cheery economic news this week, service sector PMIs, the ADP jobs report, that kind of thing, so jeez-Louise, I sure hope people keep their perspective. You are correct in pointing out, Mike, that the metals rallied strongly into the year and it had nothing to do with war. That wasn’t on anybody’s mind prior to about six o’clock in the evening on January the 2nd. Gold rallied 3% from December the 20th through that date. Silver rallied 8.5% from December 9th at $16.60 up to $18.40 on January the 2nd. The HUI, the gold bugs index … which everybody’s freaking out because the shares went down yesterday. The HUI is up 15% still since the middle of October. For a while it was up 20, and why is this happening? Because the Fed, whether they want to call it QE or not, began this direct monetization of the debt program in October.
Everything’s going up. Stock market, you name it, and that is going to continue this year. It’s only going to get worse. A lot of people missed last Friday, the 3rd, the minutes for the December Fed meeting were released. First of all, everybody was on vacation still on Friday, January the 3rd, and second of all, those are always released on a Wednesday, three weeks after the Fed meeting. So, no one’s looking for them on a Friday afternoon at two o’clock, but here they came. And buried within the minutes, anybody can pull these up, is admission that what’s very likely to happen in the months ahead is the Fed will start monetizing not just T-bills, but notes, longer term duration notes, two years, three years, five years, seven years, ten years. There’s no other option. They cannot afford the stock market to go down. They cannot afford the money supply to contract, and thus they will constantly be printing all through this year more and more dollars, and everything is going to go up for the reasons that were driving them last year. Please don’t get caught up in what happened and how the chart looks based on these extraordinarily rare events that we saw back on Tuesday.
Mike Gleason: There’s been a bit of a pattern in recent years where the metals start perking up in December and perform well in the first half of the year. Any thoughts about what’s behind that and are you looking for that pattern to repeat this year, Craig?
Craig Hemke: Yeah. We were talking about it on my site all the way through December. It was logical to expect, first in November, you expected the metals to trade lower because the December contract is always the most heavily traded all year long. And the December contracts, both gold and silver, had massive open interest and they were both going off the board at the end of November, which meant all the speculators that were long were going to have to sell, and if they don’t completely roll over their positions into February, then that effect is a selling pressure. The price went down.
I told people all through November, I thought, $1,440, that’d about do it. We’re already so extremely oversold. I couldn’t see a waterfall down. I think we saw $1,445. I thought we’d rally into the end of the year because as you said, Mike, that’s typically been the pattern, especially since the bear market lows were put in back in 2015. The shares performed well, especially in the back half of December, because they’re subject to so much tax loss selling, particularly in Canada, and that usually concludes around 18th, 20th. People want to get that done before they go on Christmas holiday. And so once again, we got that behind us and up with the metals. Let me just point this out to you, Mike, because this is a lot like last year. You remember last year, the stock market crashed. Remember that in December of 2018?