Gold: How Healthy is the Economy, Anyway?

January was a painful and volatile month for stock investors. No matter what your means, it can be quite scary to watch your future financial security bounce around so easily.

Both the S&P 500 and Dow Jones are down over 5% and the NASDAQ is down almost 8% in 2016. Oil is down over 9%.

In this type of environment, precious metals can help keep you both diversified and sane. Gold is up over 6% in 2016 and silver is up 3%.

Imagine how different you’d feel when you switch on the financial news, knowing that you had some gold and silver stacked in your safe. Always ready to be used or passed on as part of an enduring legacy to your family.

As we enter a new month, I’d like to go deeper into the current health of the economy and what every investor should know about the government economic statistics they hear reported daily.

Shadow Statistics: Exposing the Real Economy

Our clients talk a lot to us about the economy: frankly, everybody is feeling a pinch. There are signs suggesting that the seven-year bull market in U.S. stocks is near its end.

Some economically-sensitive sectors have entered sustained bear markets, including transports, small caps and energy. Walmart, which has a crystal clear window into consumer sentiment, just announced the closing of over 250 store locations in January.

Many clients ask the same question: why do we keep hearing about good economic news, yet the markets don’t seem to be so happy about it?

Here’s your answer: the stats are cooked.

Consider what is reported as the inflation rate (CPI) today. Did you know that it is measured differently now than it was 30 years ago?

At that time, government inflation stats represented the true cost of living. But then, inflation stats were changed and no longer measured full inflation for out-of-pocket expenditures. That may have been politically expedient at the time, but any American citizen can tell you now that everyday items are getting more expensive, much more quickly than government stats would have you believe today.

Labor statistics are similarly flawed. What you see as “unemployment” numbers conveniently ignore part-time workers who can’t find full time work and/or others who simply can’t find a full time job within a relatively short amount of time.

Employ This wasn’t the case prior to 1994, when the definition of unemployed worker was much broader and more accurate to the actual job market.

As you listen to the financial news, and think about Walmart, it isn’t hard to see that the future economy may have some bumps ahead that aren’t getting reported.

Vanguard Group CEO Bill McNabb summed it up in a January interview: “better than decent returns from stocks and bonds can’t be expected over the next decade. Volatility may be with us for a while.”

American Gold Eagle Demand Soars in January

Demand for gold and silver bullion from the U. S. Mint is rising sharply. According to public records, January orders for American Gold Eagles soared 50% in terms of ounces sold, with American Silver Eagle demand rising modestly as well.

Overseas, gold and silver demand out of China and India is very strong. 2015 gold deliveries from Hong Kong to China were the highest since 2013 and Indian gold demand rose 6% in 2015 as well.

European investors also sought out gold as they stayed concerned about the Greek economy and the increased risk of a financial crisis should Greece leave the Eurozone.

Production: How Will We Meet Demand for Gold and Silver?

According to Reuters, global gold production declined in the last three months of 2015 and it appears that silver production has peaked in Mexico (the world’s largest silver-producing nation). Why? Most of the world’s silver production comes as a by-product of mining other metals such as copper and zinc. However, the values of these metals have seen large declines and forced producers to shutter mines.

No surprise, then, that Mark Müller and Michael Riesner, analysts at UBS Technical Research, recently issued a research note titled “The 7-Year Cycle in Equities is Rolling Over… Buy Gold!” arguing that 2016 forms the “basis for the next multi-year bull market” in gold.

Bull or bear market… will your retirement plan be ready in 2016?

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