Pushing For Austerity

McAlvany Weekly Commentary

This week, we see a small bump up in gold and a stronger move up in silver. Let’s take a look at where prices stand as of October 30: The price of gold is up about 1.5% or $68 from last week. However, gold did hit a mid-week high at $2,790. It is inching up to the $2,800 mark. The price of silver is up about 6% or around $2 from a week earlier. At one point intra-week, it was up to a high of $34.80. So silver keeps testing the $35 level. Platinum is down about 1% to around $1,004, after an intra-week bump up to nearly $1,050. That’s a 4% swing through the week. Palladium is up 8% from where it was last week, hovering around $1,125. In a volatile trading week, the white metal rallied up 17% at one point intra-week. The S&P 500 is flat at around 5,800, parked at this level pending the US elections. The price of copper is also flat from a week earlier. Runaway US Debt In order to finance the gargantuan US debt, Janet Yellen is telling the government that they must lower interest rates. So we are going into a period where to carry the debt, the interest rates have to be lower because so much of our $35 trillion is very short term treasury paper. So interest rates will drop according to the Fed. But the bond market will start separating itself from the US government if they can't effectively lower the interest payment on the debt. There’s no hiding the interest level and the trillion dollar annual plus interest payment to fund the deficit. So we’re predicting a period of very strong inflation. And gold seems to recognize this, too. Gold Tests $2,800 With investors bracing for election day next week, we expect to see quite a bit of volatility in the markets across the board. Gold is now flirting with $2,800 per ounce, which could have a psychological effect on trades. So it wouldn’t be a surprise if we had a bit of a pullback in the price of gold. As we discussed in our Election Market Expectations episode, historical charts show short-term moves in the gold price after a presidential election. Following a democratic election, you tend to see gold take a jump up. In a Republican-won election, gold will take a short-term decline. Perhaps the market is getting ready for a shift after the election Too Late to Get In? When gold has been stair-stepping upwards, it can seem like it’s just too late to purchase ounces. Realistically, the best way to invest is to purchase gold incrementally and regularly. Gradually add to the ounces that you own. Another strategy to purchase with less risk — buy silver instead. Silver is undervalued and it has a lot of upside potential. When the gold to silver ratio shifts, you can make a ratio trade from silver into gold. Plan Your Metals Strategy How should you fit precious metals into your portfolio? What’s the best way to add ounces to help you reach your personal goals? The McAlvany advisor team is here to help guide you. With decades of experience in precious metals investing, they are happy to speak with you about your strategy for investing in gold and other precious metals. Reach us at 800-525-9556