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I'd like to share a personal investment tale with you, the origins of which go back ways. I became involved in physical precious metals/futures trading in 1972 after reading Harry Browne's book, How to Profit from the Coming Devaluation.

Not unlike David Morgan (before we knew each other) I accumulated metal and silver futures contracts and rode prices into the March 1980 top. I sold my futures but held the metal until the Hunt Brothers were knocked out of the game after the CRIMEX changed the rules to contract-offset only, collapsing the silver price.

I watched silver drop through Harry Browne's "sell if it goes below $37.50" call to $10.80. Then, during a classic 50% retracement to $25, I asked my broker where he thought silver would bottom. His answer: "$5.00." He called it almost to the dollar, but it took a generation to get there.

In 2000, after buying a one-ounce gold Krugerrand for my daughter's high school graduation and watching people at her party view it with zero interest, I decided to move back into the sector, focusing on physical metals and mining company shares.

As the new bull market was getting underway in 2001, I decided to write on a piece of paper the following sentence: "On June 22, 2011, win, lose or draw, I will exit my position in the metals and mining shares."

Fast forward to May 2011. Having worked with David Morgan at The Morgan Report for a decade, we were following the resource sector daily for subscribers and our accounts. His brilliant call to buy silver in the mid-$20 range enabled his subscribers to re-enter for almost the entire upward surge to just under $50... and then he called that cyclical bull market top, within one day. I called it a day later in an email to Greg McCoach.

You might be asking: "What about that note you wrote to yourself, saying you 'would get out on June 22, 2011 - win, lose or draw.'?" My honest answer is, unaffected by greed or ego?

First, I was aware that we could be looking at a major cyclical top – though I never dreamed it would drag the metals down into a five-year bear market. However...

The Core Reason I stayed in

My 10 years earlier sell call was predicated upon the belief that by 2011 we would have seen massive public participation into a blow-off secular top. But that simply had not taken place.

Sitting through the last 5 years was financially painful, but thankfully, instead of just holding onto everything, I moved in and out of mining stocks during the ups and downs into the December 2015 cyclical bottom, while keeping a physical metals position. It wasn't easy, but knowing that contrarians reap the biggest gains, I re-bought the strongest mining survivors as a new rise seemed likely.

While gold and silver prices dropped about 45% and 70% respectively, mining stocks were eviscerated – across the board. Here are the 2011 prices of four stocks I originally held, compared to where I finished buying them back 4 years later:

$26.00 - $3.50; $10.20 - $0.26; $13.00 - $1.00; $3.20 - $0.09 (nine cents).

This demonstrates why most people who want to control risk and limit the downside during serious declines should focus on holding the physical metal.

In my considered opinion, when silver penetrates and builds a base above $26 on the upside and gold do so above $1,500, we can be reasonably assured that the bull run is back in full swing, with - at the very least - an eventual challenge of the 2011 highs.

Once those highs are penetrated convincingly, above $50 silver and $2,000 gold, the public will enter the market in waves, seeking to buy metals and miners, plus anything remotely connected to them. (My original silver target – which still seems realistic – is an eventual [Phase III] price into the top of $175 - $250/ounce).

Gold Bull Markets - 1970s vs 2000

Courtesy goldchartsurus.com

Recently, I ran across an interesting commentary by Burt Coons – pen name Plunger – about the three phases of a bull market. He looked into how things were going when the first phase of the great 1949 post-WW II U.S. stock market suffered a devastating triple-top correction a few years later. Here's how Coons discusses it:

This (correction) convinced the majority of the market opinion that the bull was over. However, there was a young independent observer by the name of Richard Russell who noted that the market had not yet shown characteristics of phase III. Instead, the market had been busy climbing the wall of worry and hadn’t had time to become manic yet. He, therefore, made a market call that one should buy the correction and hold on and wait for phase III. His career took off from there.

Richard Russell, first among equals

Richard Russell went on to become the doyen of financial newsletter writers, publishing until his passing in November 2015. Notice what factor informed Russell's advice to "buy the correction and hold on and wait..." Because, as he stated, "the market had not yet shown characteristics of phase III...and hadn’t had time to become manic yet."

I am certainly not Richard Russell, but in mid-2011, my metals' decision was motivated by the same reasoning he had reached concerning the DOW.

Over ten years ago, David Morgan made a public comment about silver that I believe is as relevant today as when it was first expressed. He said,

For the record, I will state, there will be another, more frenzied scramble that will carry silver prices to highs that will repair all the excess paper money creation, price suppression, supply deficit, and bearish sentiment over the past two decades. This will become known as "The Great Silver Crisis."

A big reason last fall that David and I wrote Second Chance: How to Make and Keep Big Money from the Coming Gold and Silver Shock-Wave was to make available to our readers, the very best thinking on this subject about why we felt the next few years would offer such asymmetric profit potential.

Second Chance by David H. Smith & David Morgan

With metals, the miners, or both – risking a reasonable amount – to have a shot at gains all out of proportion to the position size makes eminent sense. In it, we offer a complete tutorial on how to structure your position so you can stay "in the game" as long as possible, yet still get out with a big profit chunk of your earnings.

The Bottom Line?

We have not yet witnessed the public mania phase of this bull run. The difference between now and the late '70s, when gold lost half its value before rising 850% in less than 3 years, is that there are now even more legitimate reasons for an extended replay of this scenario.

Instead of less than 4% of the investing public then – mostly in North America, plus a few prominent Arabs, we've got just about the entire world on our side! And there is the Chindian Love Trade. Furthermore, we have an indebted global system that cannot pay back at anything close to its present value. And we're halfway through the last act of The Fourth Turning, which one way or the other is destined to wring out the monumental financial excesses of the last half-century.

You may be dispirited watching "the cartel" continually knock down metals' prices, just when they seem ready to fly. You may be tempted to give up on the metals and join the crowd in a stock market bubble that's been rising for nine years.

We understand your frustration. At first blush, you may not agree with us. But our message to you is this - when it comes to the upside potential for the metals and miners - take some time to consider the evidence and do the math. Because... in our considered opinion, your biggest mental picture still might not be big enough!

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up David Smith, Senior Analyst at The Morgan Report and MoneyMetals.com columnist shares his thoughts on the potential effects of the newfound rise of digital gold based investments. And he comments on some new industrial applications for gold and silver that could have a major impact on the supply-demand fundamentals for the metals. Stick around for a fantastic interview with our good friend David Smith, coming up after this week’s market update.

Gold and silver markets got a boost mid week as turmoil in the White House sparked the biggest bout of selling in the stock market since the election.

Democrats and their allies in the legacy media are ramping up their attacks on President Donald Trump to try to drive him out of office. Meanwhile, Trump administration officials are trying to salvage what they can of his endangered policy agenda. So far, most of the president’s priorities have been thwarted by hostile activist judges and an ineffective, business as usual Congress.

House Speaker Paul Ryan and Treasury Secretary Steven Mnuchin insisted this week that they still intend to push through a tax reform package in 2017. But given that the Republican-controlled Congress has refused to make any cuts in government spending, the Democrats will oppose any tax rate reductions on grounds that they could widen the budget deficit. There is little chance that a closely divided Senate will approve more than a few of the tax reforms that the Trump administration wants.

Even as the swamp in Washington festers, and hopes for major reforms fade, some things are actually getting done for taxpayers at the state level. Last week, the Arizona Legislature approved a measure to exempt physical precious metals from state income taxes. Assuming Governor Ducey signs the sound money bill, Arizona will allow its taxpayers to freely transact in gold and silver coins instead of Federal Reserve notes without fear of triggering state capital gains liabilities.

Under federal law, the sale of precious metals, or barter transactions involving precious metals, are subject to taxes on any nominal underlying capital gains. It’s really an inflation tax, since inflationary monetary policies are largely responsible for driving up the prices of gold and silver over time. The tax on gold and silver prevents them from competing directly with the dollar as money. The tax code even punishes people who invest in precious metals instead of stocks by taxing gains on gold and silver at the higher “collectibles” tax rate.

Fortunately, there is already one legal way to avoid these taxes. And that’s by owning physical precious metals through a Self-Directed IRA. That way, you can capture gains when the time comes within the tax shelter of the IRA. You can also trade the gold to silver ratio or even the gold to platinum ratio by switching out one metal for another when market conditions are favorable for doing so.

Right now, both silver and platinum are trading at extremely low levels relative to gold. The silver to gold ratio checks in at nearly 1 to 75 – meaning it takes almost 75 ounces of silver to buy a single ounce of gold. While silver has gotten even cheaper relative to gold a few times in the past, silver currently trades well below its historical relationship to gold of around 1/16th to 1/20th the gold price.

As of this Friday recording, gold trades at $1,253 an ounce after advancing 2.0% for the week. Silver is up 1.7% this week to trade at $16.85. And platinum is higher by 2.3% to bring its spot price to $945 an ounce.

The platinum to gold ratio sunk to 0.75 to 1 this week. The ratio hit a floor that it has revisited multiple times since early 2016. We’ll see if it produces another bounce – and perhaps a more sustained move back to the 1 to 1 ratio. Platinum has actually traded at a premium to gold more often than not in its price history. But it has traded at a discount for nearly two and a half years now.

Investors who are willing to stomach more volatility in exchange for greater upside potential should favor platinum or silver over gold at these levels. Gold is still the ultimate safe haven asset, though. In the event of a major political or financial crisis, or a crash in the stock market, the yellow metal may fare better than any of the white metals.

Ultimately, all precious metals will serve as a hedge against a fall in the U.S. dollar’s purchasing power. The U.S. Dollar Index fell to a new low for the year on Wednesday. It’s impossible to predict how it will fare against other fiat currencies over time. But we can safely predict that all fiat currencies, including the dollar, will lose value as central bankers pursue inflationary policies.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to welcome back David Smith, Senior Analyst at The Morgan Report and regular contributor to MoneyMetals.com. David, thanks for joining us again. How've you been sir?

David Smith: Very good Mike, it's great to be back.

Mike Gleason: Well, before we get into other topics such as the Silver Institute's latest report on the silver market and also the article you wrote for us recently on digital currencies, crypto-currencies, and so forth, I first want to have you set the stage here on where we are and where we've been in the metals markets. The year got off to a good start in gold and silver and then in April, we saw the typical smack down on the futures markets. Silver, for instance, gave back nearly all of its gains during an unprecedented 16-day losing streak and fell about 12% over that period.

Now here we are talking on Wednesday afternoon. We've seen the metals bounce back off their deeply oversold levels. All of this back and forth is obviously very frustrating for metals investors, David, and it's getting quite tiresome to see these bullion banks constantly pushing around the price and ultimately capping it on the upside. So, is there any end in sight here, and how effective will these manipulation schemes continue to be because you've got to think that they will come to an end here at some point, right?

David Smith: Well, yeah, and I share the view of people who are pretty worn out by this. Like David Morgan likes to say, the declines will either wear you out or scare you out. So, it's understandable because people think it's just going to be more of the same as far as the eye can see. But I do believe that there are a couple of very important factors that are starting to make their presence felt in the market, or will be in the very near future, which are going to start really eroding – and fairly significantly – the ability of the banks and the central governments and the Federal Reserve and the leasing programs and all this to cap the price on the metals way below where they should be if we truly had a system where price discovery operated as it's supposed to and the price of the metals will be much higher.

I think as we see this falling away, this ability to manage things so to speak, we're going to see stronger and more sustained upward pricing on the metals. Not so much the big up and down valleys and peaks that we've seen but more of a fairly substantial uptrend where the corrections are relatively minor and shorter-lived and the move to the upside is more enduring and more powerful. That's the promise that these changes hold out to our long-suffering investors and those people who either would like to add more physical metal or are simply asking themselves, "Should I get involved initially?"

Mike Gleason: It isn't much fun being a bullion investor these days. We've seen significantly more clients selling metal in recent months than we did before. There are, of course, plenty of legitimate reasons for individuals to sell metal and raise cash. However, some are simply getting tired of getting punished for being right. They see the dollar as terribly flawed, and it is. They expect consequences for never-ending federal deficits and the explosion in debt. They see the financial system as a house of cards built by crooked bankers, but that house just keeps standing, and the market rigging continues as regulators turn a blind eye. The dollar seems to be holding its own despite the fact that the full faith and credit of the U.S. government isn't what it once was.

It is a special kind of frustration to watch as the number of reasons to own bullion keep growing while none of these fundamentals seem to show up in the price. What would you say to the tired and frustrated metals investors?

David Smith: First of all, just within the last few days, the U.S. dollar has been making a very sharp drop. It's down about 160 basis points, and it could be the bottom here for a while, but if it keeps on going, we could see much lower prices, which is traditionally very supportive of higher bullion prices. Also, gold and silver have been strong recently. The mining stocks have been really trashed for the last several months, but the point is, once the metal prices firm up and turn around and these things start receding in the rear-view mirror, the market being a looking-forward mechanism, will anticipate this before you or I or the average person on the street can put our finger on it and say, "Yeah, the trend has changed."

What keeps me optimistic on this is first of all, there have never been more elements, which none of us can say, "Okay, this is going to cause that and when." But there's never been more elements which lend support to the idea of the wisdom of holding gold and silver physically as an insurance policy. It's an asymmetric trade. In other words, a person doesn't have to put half of their net worth into the metals. They can put in 5-10% or if they're really bullish, 10 or 15 or 20%, but even a relatively small amount dollar-wise in your possession is what we call an asymmetric trade. In other words, if even part of what we think has the potential to happen and may happen in the near future takes place, you will have a return of several times what you put in. So a fairly small commitment can give you a fairly substantial coverage to cover and protect a lot of your other asset classes.

I can't think of any other asset class that you could say that about now. Certainly not the stock market. Certainly not real estate. Virtually all of these asset classes and then bonds, which have been in the 30-year bull market. These things don't have anything like the upside potential for the relatively small amount of commitment that we see in the precious metals today.

Mike Gleason: Last week the Silver Institute released the World Silver Survey for 2017 and perhaps the most note-worth piece of information in there was that silver supply, for the first time in 14 years, actually declined year-over-year. It also marked the 4th year in a row where we've been in a deficit. Talk about some of this data and then also give us your thoughts on when we might finally see these bullish supply/demand fundamentals for silver finally show up in the price, David.

David Smith: That's very interesting, that report that you referenced about silver supply. You know, Steve St. Angelo did a report fairly recently where he shows that – and I could be wrong on this -- I think it was 1987 was the all-time high for silver projections worldwide, but as you said, this survey shows that it declined last year -- it had been increasing for the first time in a number of years. Also, there have been some really sharp drop-offs even this year in Mexico and in Chile. We don't know if those are one-off drops in silver production. It's fairly substantial. Anywhere from 15 to 35% on a month-to-month basis, and whether that's due to lower copper prices or other things, but I think really it's just getting more difficult, if you look at the global situation, to dig a lot of quality silver and gold out of the ground in ways that represent profit to the miners and that represent consistency and predictability for the supply chain.

I think more and more for all sorts of reasons, the supply of both of these metals are going to become more problematic. And if this survey last week holds up on silver, it wouldn't surprise me to see the same thing next year with a bigger drop. I think the days of easy production of gold and silver and loading up the boat and being able to supply everybody, all comers, at a good price, I think that's really starting to change. By the time the average person in the street figures that out and feels comfortable with it, prices are going to be a lot higher and supply is going to be more problematic.

I'd like to say one more thing on this, Mike. When it's easy to do something in terms of an investment, it's not always the best time to do it. In fact, it's usually the worst time. If you're having a hard time doing it now and you've looked through things, you agree with the issues but it's still hard, it's probably the right time to either start accumulating or add to it. Because if you wait until it feels good, the market will have discounted a lot of that, and you will pay much higher prices for what you do get, assuming that supply is even there in the quantities that you would like.

Mike Gleason: Well put. Certainly the contrarian mindset often does win out when it comes to the world of investing. Now one more thing on that survey, I know solar continues to be a big source of silver demand. The report highlighted that. What are the prospects there, David, because the amount of silver being used in solar is really starting to move the needle, isn't it?

David Smith: It is, and even though they're getting the silver panels (to the point) where they use less silver than they needed to before, the number of panels being produced continues to grow, in some cases almost exponentially. They're getting to the price point where just about everybody can afford silver panels. I think Tesla's coming out with one now that looks like a regular terracotta roofing tile. So, they're going to become a commodity, but those commodities are going to take a lot of silver in order to meet all those needs. That's just one area where you have a lot of growth going on. We've seen a lot of growth in the use of gold, for example, in medical procedures to target cancer cells by delivering a drug right to, or the chemo in that case, right to where the cell is, kill it, but not the good cells. They're using nanotechnology on this, so on an individual basis, it's not a big deal, but when you start realizing that that could take a huge percentage of the cancer dealing industry over the next 5-10 years or so, suddenly it becomes a significant amount and is essentially a new use for gold, which had not been even on the charts before.

Mike Gleason: Obviously there's not a never-ending supply, as we're coming to find out. So, it certainly could be very interesting if we get some sort of new application like that that's going to take up a lot of demand. Now, you recently wrote an article for MoneyMetals.com about the blockchain and Bitcoin, and you highlighted how the ascent of these crypto-currencies -- Bitcoin of course being the main one there -- and how the rise in prominence is actually going to be a good thing for gold and silver. Give us your thoughts there, David.

David Smith: It has a real potential. Whenever people here the blockchain, they think of blockchain hype and Bitcoin. In my article, I barely mention Bitcoin in passing. The reason for that is not because Bitcoin isn't important in the cryptocurrency space – in fact over half of these digital currencies’ volume traded right now is Bitcoin even though there are several hundred other little currencies, most of which will probably disappear – but what intrigued me was that there are efforts made now, and the most interesting effort that I've seen so far is in India, where they are experimenting with the ability for people to buy metal online, digital gold now probably silver soon to follow, in the local currency. I think that's where, if that works, that would be a breakout moment for people all over in different areas of the world because now a lot of the times that you buy something online in the cryptocurrency space, you have to take your dollars or your pesos or whatever and convert those into Bitcoin and then purchase the product.

But now they're able to do this in India with the rupee. In addition, it’s the size of the purchase. You can buy as little as one rupee of gold, and there is 65 rupees to the dollar, so in other words, you could buy a 2-cent purchase of gold digitally with the promise that it would be stored in a Swiss warehouse where you could take delivery of it if you wanted, locally. You could store it there. You could buy it and sell it digitally. So it’s the early days on this thing, but it bears watching, and I think it's important for our readers to understand some of these experiments that are going on and understand that it will be quite a while before the need to buy physical metals as we've done in the past becomes obviated by digital metals.

Maybe that will never happen, but the point is still that it will introduce many new people to the market who probably never owned the metals before, never owned gold before, and it will also encourage those people who are holders – and we know that India and China and other countries in Asia historically have accumulated, and continue to do so, massive amounts of precious metals as a form of wealth and for jewelry and other things – they continue to add to their stash. So, it should increase the pool of buyers and the demand factor. That, at some point, is going to collide with the very thing that you brought up earlier, which is the questionable ability of the mining sector to continue supplying gold and silver in the quantities that they've been able to do in the past. That's going to become more problematic for all sorts of reasons as the months and years go by, much more so.

Mike Gleason: Even though we're talking about digital, I guess in some sense here, if we're talking about an investment that is backed by the physical metal somewhere, obviously there is the demand for that physical product, even if those citizens of India or wherever they are aren’t taking delivery of that gold initially. If the fund still owns the gold, they have to have it somewhere, so there is still that demand for the physical product, so it certainly can add to that.

David Smith: Exactly. The only difference is instead of going into a location and handing your money, your currency over and walking out with the gold in your pocket, they do it digitally, but the gold still exists. That's still removed from the supply basis, and if it's honorably kept, it’s a promise… and that's what any kind of currency – which gold and silver are, they're money – it’s based upon the promise that it's there. If I buy it, that I can take a delivery on it whenever I want, and it will be the stated purity and the amount. And if that promise is honored, the more and more, people will come to be comfortable with the idea of buying metal, whether it's digitally or in person, and there will be, in a way, almost kind of doubling back into the gold standard of 100 years ago, only doing it with an online component versus what we had before of the physical property where you had your currency, which is redeemable on demand. As you remember the Gold Certificates and the Silver Certificates where you could – there was a time, probably before many of us were born – but you could walk into an American bank and demand X amount of gold or X amount of silver for your paper currency. We can no longer do that.

Mike Gleason: Talk about the miners here for a minute, David, because you obviously follow the space very closely. Now, part of the recent selloff in the futures market was due in part to the GDXJ selling off some shares of some of the thinly-traded stocks the index owned, which hurt the sector as they liquidated shares of those companies. But what is the situation with the miners? Anything noteworthy there in terms of how the industry is doing after this continual two steps forward, two steps back price action that we keep getting in the futures markets?

David Smith: First of all, the better companies in the industry are cashed up well. They've lowered their debt. They've lowered their all-in sustainable cost that Chris Marchese talked about in The Morgan Report, which is kind of the gold standard so to speak, pun intended, for evaluating the mining company. What is the cost all-in to produce that ounce of gold and silver rather than some other metric or using two elements to define it? That gives you and me and investors a pretty clear idea of what it's costing these companies, and as Adam Hamilton has pointed out, the primary gold producers today are making anywhere from $275 to $350 an ounce, beyond all-in sustainable costs. They're making money, and the process is looking like they're going to continue to be able to do that.

What you mentioned earlier about the GDXJ, those shares are being sold off because by law, the ETF cannot hold more than, I think, 19.9%. It has to be a little under 20% of the share float of a stock company by law. That's the same thing with big investors or other companies that want to do a buyout. This has grown so popular that they were bumping up against these limits, and they had to sell a lot of these stocks. Now, some of these stocks won't come back into the listing that they have and other new ones will be added.

That's brought a lot of turmoil, and a lot of these stocks that you see that have declined sharply, it has nothing to do with the fact that they're no longer profitable. They're making just as much money as they were before, but because they were sold out, some of these take 14, 15 days of selling to get out of the index, and other people that don't understand what's going on, they say, "Oh gee, the price is down 25%. I've got to get out." They panic, and of course that's going to create a buying opportunity for people that really understand what's going on. As they reinstate these stocks into the GDXJ and add new ones, that will get fresh finances back into the system. So that is not something that people should be worried about.

However, it occurred during the time of soft metal prices in the mining shares in general, so that was just added to the short-term and intermediate-term discomfort.

Mike Gleason: Yeah, and as we touched on earlier, 16-day losing streak there in silver, just an unprecedented sell-off there, totally oversold and now looks like it's finally reversed itself.

And finally, as we begin to wrap up here, are you focusing on the same sort of price targets for gold and silver that you'd mentioned when we had you back on last in January? For instance, are you still looking at $21-$22 as a key level in silver in terms of a resistance level that we really need to see taken out?

David Smith: That's really true, and as David Morgan of The Morgan Report has kept his focus in that area. His ideas haven't changed about where we might end up this year and where we need to be, but for sure, to get rid of all the doubting Thomases, if you see $26 silver penetrated and base built above that, and if you see $1,550 gold, then you can say, "Boy, as far as we can tell, it's never 100% but the coast is pretty much clear." And the point is if you wait for that point, a lot of profit potential for you has been given up, and so by definition, right now, we have information risk because the price is relatively low. At $1,550 gold and at $26 (silver), we have price risk because gold will be a couple hundred higher than it is now per ounce. And silver will be, rather than about $17 an ounce, it will be $9-$10 an ounce higher, that's a lot of price risk that exists then that does not exist now.

Again, going against your emotions, buying on a regular basis, buying within the limits of what you want to accomplish with your outlook and things like that and your ability for risk makes a lot of sense now, rather than waiting until it's all clear because when it's all clear, it's a lot less potentially profitable than if you at least started your stake now and scaled up or scaled down.

Mike Gleason: Very well-put. Right now, we're looking at $18.50 on silver is the overhead resistance level. We seem like we've bumped into that a couple times now and fallen back down, so I guess that's the first overhead resistance level and then $21-$22 certainly looks like the only thing that's going to separate silver from $18.50 to $26. It could get interesting if we finally see things moved to the upside. Obviously, there's some work that needs to be done here, technically, for the metals.

Well, David, thanks so much for sharing your insights and your wisdom with us once again. I appreciate your time and your comments as always. Continued success with the book Second Chance, and I hope you have a great weekend. I look forward to catching up with you again real soon.

David Smith: Very good, Mike. It's been great talking to you, and I really enjoy writing to your audience. We have a lot of people get on there and put a comment and I try to answer every one of them. The idea of principled exchange of information and point-counterpoint, and I think we have a real good demographic in the people that do business with Money Metals.

Mike Gleason: We certainly appreciate all the work you're doing. It's great stuff. If people haven't checked it out, definitely urge you to take a look at David Smith's articles. He writes them regularly for us, and you won't be disappointed.

Well that will do it for this week. Thanks for again to David Smith, Senior Analyst at The Morgan Report and regular columnist for MoneyMetals.com and co-author, along with David Morgan, of the book Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shockwave, a book which is available at MoneyMetals.com and Amazon and others places where books are sold. Be sure to pick up a copy today.

And check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening. Have a great weekend, everybody.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up we’ll hear from David Smith, senior analyst at The Morgan Report and regular contributor to MoneyMetals.com. David tells us whether or not the current rally in gold and silver has legs, and also shares some savvy insights on how to avoid making amateur mistakes and letting your emotions get in the way of making sound investing decisions. Don’t miss a fantastic interview with David Smith coming up after this week’s market update.

The big news out of Wall Street this week is that the S&P 500 and Dow Jones Industrials each broke out to new record highs.

Fox Business Anchor: Well, the S&P 500 has raced out to a new all-time high and other major indices are right on the cusp.

CNN Anchor: Some pretty solid news out there for investors. The Dow has closed at an all-time high after gaining about 125 points on Tuesday. Also good news for the S&P 500 as well. It hit record high for the second day in a row.

Fox Business Anchor: The stock market rally is long in the tooth, in fact now it's the second longest bull market in history

Yes, the bull market in stocks is quite long in the tooth. So any investors who are thinking of buying this breakout would be getting in very late in the game. If a typical bull market is like a nine inning baseball game, this one is now pushing into extra innings. It could end at any time, suddenly and without notice.

Stocks may already be in the first or second inning of a bear market in terms of gold. The Dow Jones actually peaked last December when measured in gold. The Dow to gold ratio hit a high of 17 to 1 and has since slid sharply. Year to date the Dow is down 15% versus gold and down a whopping 27% versus silver. But you won’t hear these figures bandied about in the mainstream financial media!

The stock market gained against gold this week to bring the Dow to gold ratio up near 14 to 1. But there is more potential downside for stocks in terms of precious metals in the months ahead. The Dow could drop more than 50% in gold terms to equal its 2011 low at 6 to 1, when gold prices peaked at more than $1,900 per ounce. From there, the ratio could still conceivably drop much further. Some gold bugs see the Dow to gold ratio returning to 1 to 1, an equilibrium last recorded when gold prices hit a secular top in January 1980.

Gold may well be on its way to new all-time highs, but prices suffered a bit of a setback this week. Gold is down $40 an ounce or 2.9% this week to trade at $1,328 an ounce as of this Friday morning recording.

The white metals are faring a bit better. Silver shows a weekly decline of just 0.6% to bring spot prices to $20.19 per ounce. Platinum is down 1.2% this week to trade at $1,087. Palladium prices jumped 4.0% as the lesser known precious metal closed Thursday at new highs for the year. Spot palladium prices are off slightly today and currently come in at $646 an ounce.

Of course, the white metal most in demand among investors is silver. The Silver Institute this week released a report on surging investment demand for silver in the first six months of the year. According to the Institute, holdings in silver exchange-traded-products hit a record 662 million ounces. COMEX silver futures contracts also grew to record levels. As for actual physical silver bullion demand, coin sales in North America are up 29% in 2016 on the heels of a record year for Silver Eagle demand in 2015.

Strong investment demand could single handedly push the silver market into a deep supply deficit and be the catalyst for much higher prices. Although industrial use remains the largest single component of silver demand, we don’t necessarily need growth in industrial demand to drive the bull market. Rising investment demand at the margins coupled with a drop off in new mining supply are enough to turn the fundamentals of the silver market wildly bullish.

There are few primary silver mines in existence. Most silver is mined as a byproduct of base metals mining operations. With copper and other base metals prices still in the dumps, there is little incentive or ability for struggling mines to ramp up production.

Even if silver prices continue to march higher in the months ahead, downward pressure on new silver production will persist for some time. It can take years to restart a shuttered mining operation or bring a new one into production. In the meantime, investment demand for physical could exert an outsized influence on the direction of the silver market.

Well now for more on where silver may be headed in the future, and much much more, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege to be joined now by David Smith, senior analyst at The Morgan Report, and regular contributor to MoneyMetals.com. David, it's always great to have you with us. How are you?

David Smith: Very good, Mike. I enjoy coming back.

Mike Gleason: Well, as we're talking here on Thursday morning, we're seeing the metals holding up quite well under the circumstances, and especially given the recent strong advance by the sector. Prices have pulled back some, and maybe we're seeing a pausing of sorts here after the big run up that we saw immediately following the Brexit decision. But silver is $3 an ounce higher today than it was essentially 3 weeks ago, if you go back to the day before the Brexit vote. Coming into this week, we had 6 straight weekly gains in silver. So the question on nearly everyone's mind, David, is does this rally still have legs? If you think it does, what makes this one different from rallies we've had over the last 5 years that have always seemed to fizzle out rather quickly?

David Smith: I believe it does have legs, Mike, and I would temper that by saying we're in the middle of the summer season which usually is quite soft for the metals, and it wouldn't surprise me at all to see backing and filling in here, and maybe even substantial short term decline going into August itself, and then getting stronger into September. But we've had 6 or 7 months of amazing movements upward in the mining stocks, and very strong action in gold and silver, as you mentioned. And I think what's interesting about this is the way it came off of that 4 and 1/2 year cyclical bear market low and it surprised a lot of people, and a lot of analysts were even getting in and out and kept watching, or whatever, so it's been frustrating and fascinating for people, and the main thing has just been, I think, for metal holders, to buy in tranches, and if they're going to do it every 30 days, or when they have extra money or whatever, but not to try to wait until there's some magic point where you would suddenly take or add to a position.

Just do it calmly, knowing that this is long-term trend, which has now moved to the upside, and the squiggles will bother you less if you simply come up with your plan and then adhere to it.

Mike Gleason: There does certainly seem to be somewhat of a sea change here and optimism seems to be warranted, at this point, based on what we've seen.

Why do you refer to the 2016 gains in the metals as the "Trump Rally?"

David Smith: Well, because looking at Donald Trump's political accomplishments, without being on one side or the other, in terms of making value judgements about him, is that all the commentators have been wrong. They didn't think he was going to even get out of the gates, and here he is looking like the presumptive nominee in the Republican Party. So he was continually underestimated and belittled and all this sort of thing, and he may or may not make it to the presidency, but I think he's gotten further at this point than almost anyone could have imagined.

And I think it's the same way with the mining stocks. Sometimes we try to analyze things too much rather than just sitting back and watching. Maybe think we know more than Mr. Market does. If we give Mr. Market the benefit of the doubt, and just watch and listen, we can learn a lot more than trying to interpret every little squiggle on the charts sometimes.

Mike Gleason: Speaking of the charts, our mutual friend, Steve St. Angelo, at the SRSroccoReport.com wrote an article about how silver is flirting with a sustained breakout above its 50-month average, which is sitting at around $20.35. Why would this be a major level, and what are the key levels above that?

David Smith: Well, this area has been one that has contained silver prices for quite a while, and if you look at the path that silver took from almost $50 in 2011 to its decline down into the low teens range, you can see a series of areas where on the way down, it would stop and find support, and then breakthrough that. And that was the theme from 2011 right up until last winter, and then (it) started changing with base building in silver and gold made – the physical prices – in December. And then then confirmation with the mining stocks themselves, which if you want to put a date on it, I think it was January 19th that we really saw confirmation because a lot of these mining stocks made temporary intraday lows, then reversed on higher volume and moved higher, and they’ve never really looked back.

All the quality mining stocks now have made very large gains, and the metals have gone along concomitant with that. So they're both moving in the same direction, and I think it's very fascinating. It really, I think, tends to prove a lot of credence to David Morgan's view that we are now entering into the last big secular leg of this market, which probably will go on for several years. It could go on even more than 3 or 4 years, but it's going on for a while. And it will carry prices eventually into a phase that will be a public mania phase, where people will be attempting to buy the metals and they won't be able to find them, and when they do, the price will be inordinately high, not only in terms of the actual nominal price itself, but the bid-ask spread will go much, much higher than it is today.

Mike Gleason: Expanding back on my first question about does the rally have legs, it sounds like there's a lot of data points out there, both technically and others that do point to the rally being sustained. Is that fair to say, David? Are we looking at a lot of different positive data here?

David Smith: I definitely think so. And here's the thing, too. An awful lot of people right now are bullish, and a lot of the commercial traders who fade the trade are bearish. And so we have this big conflict going on between the bulls and the bears, but it shouldn't bother anyone who's looking at it from a fundamental standpoint. Because we've actually had, I looked at the chart here this morning, we've had three discernible “retracements” on the way up to where we are now from January, and they lasted a couple of weeks. And if you look at them in the perspective that you would normally expect, you would look, "Well, this is interesting, and it's to be expected." And I've been almost hoping for a larger decline in here, certainly this summer. I think this will be the opportunity for it to happen over the next few weeks, which would give people an opportunity to add to their metals holdings, at a little bit better prices, and also if they've been sitting on the fence, to go ahead and make that move to establish a physical position.

The thing with human nature is that people say, "Oh, when prices decline to a certain level, I'll buy," but then when they decline there, the news sometimes is pretty negative, and they forget that they have to go against their little feeling on that and take a position, and they say, "Well, I'll wait until it gets cheaper," and they wait and they wait, and they never take a position. There are people right now that are waiting for $10 silver, and frankly, I don't think we're going to see that.

Mike Gleason: Has it surprised you how well the metals, and especially gold, which is often viewed as the ultimate safe haven asset, have performed of late, considering we're seeing all-time highs being made in the DOW and the S&P nearly every day? Not that gold has been soaring per se, because it appears to be consolidating and doing some backing and filling here, but it is holding up quite well in the face of the “risk on” trade. Gold had a huge $100 move post Brexit, and it hasn't really given much of it back. It seems to be solidly hanging in there. What do you make of that, David… what are your thoughts there?

David Smith: Well, I think the game elements are changing a little bit here. Now we have this massive liquidity that the central banks are putting into the system to try and stimulate buy in and strengthen their economies in Japan and Europe, and the United States and they think if they put enough money out there, which eventually some of it's going to become helicopter money where they actually drop it almost literally from helicopters to try to get people to spend it, and Japan is on the verge of doing that now. These type of things mean that we're in a different environment where a lot of assets are going up, and the fact that, for example, real estate, and the DOW and some of these other assets, and even the U.S. dollar going up, to me, doesn't concern me about being a gold and silver holder because fundamentally, real money is going to outlast all of these other things.

These are bubbles, and the metals are not in a bubble. They're just people returning to what has been real money for thousands of years, and gold and silver will be the last man standing when this architecture of debt finally implodes on itself. So this is an opportunity to add to your position, or to start, when prices are pretty calm and it's not on everybody's radar screen.

Mike Gleason: Former Fed Chairman Ben Bernanke, the man who coined that phrase, and the man who's also often referred to as "Helicopter Ben," as you just alluded to a moment ago there, with dropping money from helicopters, talking about how the how the central banks can always generate price inflation if needed. Many in the precious metals community have been wondering when the Fed might get around to actually implementing this policy and handing out money to people. Heaven knows they've tried all manner of radical policies. On Wednesday, FOMC member Loretta Mester confirmed that officials might just go to this length if the existing measures proven effective.

It would have sounded insane a few years ago, but we've seen some extraordinary stuff, QE's, 0% interest rates, and we already know that negative rates are on the table. What do you think is coming from the Fed, because it looks a little to us like they might be getting ready to try something even crazier than what they've been doing?

David Smith: It really looks that way, and these type of things that you just mentioned are often trial balloons which are put out there to see what the public’s and the market's perception and reaction will be. I think it's interesting that Ben Bernanke is actually now almost wearing the "Helicopter Ben" as a title of honor. It's not something that he shrinks from, and the fact that they're even thinking like that just makes you really wonder. We're actually have interest rates that are the lowest in recorded history, if you can believe that, because they're negative.

Would you ever imagine that you would have a bank account where you would have to pay the bank to have your money put in there? It just goes against human nature, and it goes against the idea of capitalism and business and everything else. You have a solid capital base when you save money, and people are able to loan it out through the banks to create more businesses and more economic activity, not when you spend yourself into a hole that says that you have nothing left, and then somehow that's supposed to be helpful. You become practically a ward of the state. So all of these things are turned on their head, and people just have to remain confident that they can keep their own sanity in it, because it doesn't make sense, and eventually it will collapse of its own absurdity, the weight they've put up there.

Mike Gleason: You touched on a little bit earlier in the interview, but I'd be remiss here if we didn't spend a little bit more time on the mining sector, which has been white hot this year. What's going on there after this huge 140% up move in the GDX and the HUI gold stock indices? Is it time to take some profits there, David?

David Smith: I think it makes a lot of seen, and you know, some of these stocks are up 200, 300, 400, 500%. We're even to the point now where I would say pigs are starting to fly, some of the ones of questionable value that are running as well, too. But if you hold onto the good ones, and if you hold your core – and I think this is really important, it's something that all of us have to continually ask and remind ourselves – if we hold mining stocks, if we hold something in the resource sector, even in the physical metal, what's the difference in our view, between holding it as an investment and holding it as insurance? And in the case of the miners, what's our core holding versus our outer core or trading positions?

So you want to hold on to the main core aspects, your best companies that you want to hold through the rest of this cycle, and you can do some trading in and out, and it really, it doesn't have to be big. You can trade a little bit and it makes you feel so good that you've taken some profits, and you don't see them all erasing when the markets are down a bit like they are this morning. But if you sell too much, and this is what's happened to some people already, they've taken the advice – which in normal circumstances is great – where you sell half when you have a double. So you buy a stock at $3, and it goes to $6, and you sell half. Well, that's fine, but I bought a stock at 9 cents that was almost $3, if you can believe that 3 years ago.

I bought it at 9 cents, and it's 75 or 80 (cents) now. And I've sold some of it, and I also bought some of it back. I've taken some profit, and I've reinvested it when it dropped a little bit. If I had sold half every time it doubled, 9, 18, 27, on the way up like that, I'd have about 10% of my original position, so these are different times and they call for different strategies, and of course, we have to do what we're comfortable with, so I don't and I can't legally give financial advice, but I certainly listen to others, and I listen to myself, and I come up with a plan that works best for me, that I am comfortable with, and I think that's what all of our listeners have to do.

But I'll tell you one thing, I think that people will be much calmer and more comfortable, anyone listening to this, if they have not established a position that they're comfortable with in the physical metals, if they do so, almost regardless of what the price is this summer. It's hard to lose, if, emotionally, you just set out a 90 day program where you buy every 30 days, regardless of the price. You're not trying to catch the lows and the turns, and all this kind of stuff, and listening to all the discordant voices. You're just doing something that you know in your heart is right to establish an insurance position, and then you can go ahead and figure out how to make the big money in the mining stocks or some other venue.

Mike Gleason: That sort of leads me right into my next question here and you alluded to this a little bit ago, and I've asked you about this in the past, but it's worth revisiting. I want to talk to you about investor psychology here for a minute, because you've always had such a great level-headed approach to these markets. So talk about the idea that some folks have when it comes to timing a purchase, because many might now view the metals, after the recent run up, and the very first strong six months that we've had this year, and see them as overpriced, or too expensive. After all, silver isn't in the mid teens anymore. It's now over 20 dollars an ounce, and gold isn't $1,100 like it was back in January, it's a couple hundred dollars higher than that now. So what is your advice when it comes to first time investors in the sector, and what would you say to someone who was already heavily invested?

David Smith: Well, I think you have to work things in a way that you're comfortable with, and you have to realize that you can't have what David Morgan calls the "Amateur's Perspective" and that kind of alludes to what you just said, where they think, "Oh, shoot. I could have bought in January, February or March so I've missed the low," and they get so concerned with that, and they're trading, essentially in hindsight. The low most likely isn't going to come back in again here, and so if you wait, you're not buying at $20 silver because you missed it at $13, and then what happens is you're not buying at $26 because you missed at $20, or $40 because you missed at $26. It goes on to the point where you can watch the trade go by the whole thing, and you can watch.

At some point, you have to take the dip, and you plan your work and you work your plan. If you decide that precious metals are for you, then you start buying them, and then you don't worry that, oh, you didn't get the low, because if you believe as we do, that we'll see 3 digit silver in a few years, a very good likelihood of that, why would you be trying to get a few pennies and leave dollars behind by never taking a position? So you've got to be comfortable with what you do, you've got to be informed. And that's what I think is so great about the Money Metals website, is because there’s an archive over there of all these different articles that I've written and that other people, very, very capable people have written. Read these articles, and it's a companion that can inform someone who's just starting out so they get the idea of what's going on, and how to approach things. Then, go from there. I think if people do that, they'll be very happy with the decisions that they've made going forward.

Mike Gleason: Yeah. Education is certainly a very big part of what we're trying to do, and part of our mission, and you're obviously a big part of that.

Now, maybe the guy that is more heavily invested, has a position already, maybe he can afford to gamble a little bit more on a pullback, but again, he's already got some, so adding to his position, he might try to be a little bit more strategic, versus the guy who doesn't own any, and shouldn't necessarily try to get cute with his timing. Is that what I'm hearing what you're saying?

David Smith: I think that's exactly correct, Mike. And you know, the person that has a big position, and hopefully they've got a little bit of cash reserve, or they’ve maybe sold a little bit over the last week or so. There’s plenty of indicators that the risk/reward over the near term is shifting in the opposite direction for where it had been, but if you have a little bit of cash handy, or if you plan to deploy new cash going into here, I think the next few weeks, 4 to 6 weeks maybe, will be an opportunity. And the key there, whether you're buying the metals, if you've already got your position, or the mining stocks, is to buy into weakness. So today the prices are down. If you were going to buy, you'd do it today. You wouldn't do it no yesterday's spike, that type of a thing.

And the nice thing about that, even tranches, and my lucky number on that is 3. I don't always get all 3 of them in, but you try to buy 3 portions lower, and you start looking for lower prices. It's just the opposite. You turn on its head – and I think it's so important – the psychology of the marketplace, where people that try to buy it all at one time, they go, if it drops, they feel like they've lost, or they're panicked, and they sell out at the bottom. If you buy your first portion into a declining price, and you hope to buy the second one even lower, and if that happens you really get excited because you think, "Wow, now I have a chance to buy that third one down the line," you're rooting for lower prices, which is just the exact opposite of what most people that listen to Mad Money on TV or something like that are hoping.

They're hoping that prices will go up immediately after they buy, so they take a big plunge and they put it all on that one price point, and then the price drops, and then they're really upset and before long, they're panicked and can't sleep, and sell out right at the bottom before it turns around.

Mike Gleason: Talk a little bit about the recent article you wrote for MoneyMetals.com, titled, How High Is “Sky-High” Silver? You talk a lot about some of the things you're speaking about now, but for those that haven't checked that out yet, give us an idea of what you wrote about there.

David Smith: Well, it put out some price points for what silver could do, and a couple of the points are kind of fantastical. And so what I'm hoping, and I also try to do in the latter part of the article is get people's attention with some of those price points, but also the underlying message is two-fold. Number 1, that silver is almost destined to go much, much higher than it is. And number 2, that it's almost irrelevant what that price point is. Whether it's $100, or $200, or $500, or whatever that is, if people focus on that point, they lock themselves into a mindset that doesn't give them any flexibility, and they go, "Oh, if it doesn't get there, what am I going to do?" Or, "If it gets there, I'm going to fund my son's college education.”

Rather than saying, you know what? Fundamentally, the drivers, the tectonic plates of demand, and supply are crunching together in a way that make it almost inevitable that silver and gold prices are going to go much higher, and we don't have to have a collapse in society to see 5 or 6 or $8,000 gold and $100 and some dollar silver. Supply/demand factors themselves are driving in that direction, because for example, in China, and India. A third of the world's people live in those 2 areas, a couple billion people. They want a better life, and they want financial security, and unlike most people in North America, financial security for Asians comes from having gold and silver in their hand that they can touch. They don't want it in an ETF, they don't want it in an gold CD that pays some interest.

It was so hilarious. A few months ago, the Indians tried to introduce a paper contract whereby you would bring in your physical gold and they would give you a certificate and they would pay you some interest on it, and they would hold the gold for you, but it wouldn't be in your name, right? And this thing went on and after about three weeks, they had collected something like 11 troy ounces of gold. I mean, it was stunning. This is a nationwide campaign, so it was really laughable. It shows just how little clue that bureaucrats have about what motivates humanity and human nature, and what's motivated them for thousands of years. They look askance at bureaucrats and their fantasy ideas of, "We'll hold the gold for you. We'll pay you some interest," and it doesn't bother them that gold doesn't pay interest. It bothers them that gold values have never gone to 0, unlike every paper instrument that's ever been put out there.

They know it in their gut, and they hang onto it, and more and more people in our country are coming to the same conclusion. That's why Steve St. Angelo mentioned just about a week ago, and I use this chart in this recent article for Money Metals that you mentioned, 100 million ounces of silver were sold in the United States last year to investors. We’re not talking about the industry, but investors. That was 1/3 of the silver that was sold globally to investors last year. So people are starting to get it, and I'm sure some of that silver is being sold going out of the country, but a lot of it is in country, too.

We're seeing more and more people, and I'm guessing that you are, too, with your business base, we're seeing more people understand and appreciate the silver story as something they want to be a part of, in a way that sits into their own risk tolerance and their own ability to make financial decisions and how much they want to protect their other assets, as an insurance protection vehicle.

Mike Gleason: Yeah, very well put. Well, as we begin to wrap up here, David, what are you looking for, over say the next 6 to 12 months, especially given the fact that we've had a very good last 6 months in the precious metals? What are you looking for ahead as we get closer to the election this fall, and just talk about the rest of the year and into next year? What are you looking for?

David Smith: I look for volatility to increase, the prices up and down to become sharper. I think that corrections will be shorter than what we saw over the last 4 or 5 years, they’ll be in the opposite direction. We've seen this played out so far the first 6 or 7 months. I think we're going to see more of the same with higher highs and higher lows, and we're going to see more people coming into the marketplace, more volume and more money coming in, and more pressure, investment pressure, against the available supplies of gold and silver. And if we have any kind of disruptions at all in some of these areas, that's going to add impetus to the bullish argument.

So I think it's a great time to be involved, and the people that have bought scaled down over the last few years, and the ones that are still just coming in now, you're coming in at a good time, because Mike, I think, if we're having this talk a year from now, I can't tell you where the prices will be at. I believe they'll be substantially higher, but the point is, by that time, another year on us, we're going to have the public recognition phase, for all sorts of reasons, I think is going to be upon us, and a lot more people are going to be understanding what's going on, and taking action. And that's going to make, regardless of where that price point is for gold and silver, it's going to make acquisition more expensive, more complicated, the bid-ask spread is going to be wider, the premiums, all of this sort of thing, it's going to be more complicated.

It's going to become much more emotional and complicated, and difficult to work your way through than it is right now. You were talking about what will prices do over the next few weeks, or are we going to get a retracement or whatever. The analogy that I'd like to use would be going out in a rowboat. You go out, you get yourself ready. You get a light preserver, you get an extra pair of oars, you have 2 motors, you do a few things, you dress properly. You know that you're going out into a situation where you may see some rough water, and you take account for those type of things, and you get started on your trip.

You're planning where you want to go, but when you get out there, the first time the wave comes up a little bit, and the wind comes up, and the temperature drops, you don't turn around and head for shore. You keep on going, because you prepared things well, you know what the risks are that you face, and you've taken a calculated risk, and you just keeping on tacking to get to your destination. And you don't turn around at the first sign of something being the other way, and so that's what I think we need to do with this.

People need to be calm, they need to come up with a plan, and then work that plan. In the letter that I wrote some time ago that you have on your site for new customers, talking about the psychology of investing and how your mind is that secret weapon, that secret tool, if people just think about that and go by some of those principles, I think they'll be well served, and they'll be able to do it without losing a lot of sleep, or having high blood pressure, because they're constantly wondering what will the price do next.

Mike Gleason: Yeah. Very well said. Good analogy. Always love the way that you are able to simplify things. You're right, the investor psychology and the way we use our mind and keep our emotions in check is going to help us sink or swim. Well thanks very much for your time and your excellent insights as usual, David. Keep up the great work that you're doing. We'll be keeping an eye out for your next article for MoneyMetals.com. It's always great stuff, and we look forward to talking with you again real soon. Appreciate your time, and enjoy your weekend, my friend.

David Smith: You bet, Mike, and you know, I always enjoy reading the comments that come in, not only from the articles that I and others write for Money Metals, but also after these podcasts, and I really enjoy responding to people that have questions or comments, and so just have them come in on the site, and I'll be happy to jump in and respond to all of them respectfully.

Mike Gleason: Well that will do it for this week. Thanks again to David Smith, senior analyst at The Morgan Report, and regular columnist for MoneyMetals.com. To check out any of David's insightful columns, just go to the news section on MoneyMetals.com, or just type in David Smith in the search box and you'll get links to all of his fabulous work. Be sure to check that out.

And check back here next Friday or our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason, with Money Metals Exchange. Thanks for listening, and have a great weekend everybody.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up we’ll hear from David Smith of The Morgan Report and MoneyMetals.com columnist. David talks about the bullish market action in the metals so far this year, why the environment figures to be positive moving forward, and why those who haven’t secured the low-priced bullion they want yet could be running out of time. Don’t miss a fantastic interview with David Smith, coming up after this week’s market update.

This week the white metals made some impressive gains. Silver prices broke to new highs for the year, while platinum challenged the $1,000 level and palladium saw a big advance on Thursday.

Silver broke out above the $16 level on Tuesday, recording its highest close in more than 10 months. As of this Friday recording silver trades at $16.20 an ounce and is up 5.1% on the week.

Platinum ran up to the $1,000 level mid-week and managed to finish slightly above it on Tuesday. However, the platinum market pulled back a few dollars on Thursday to negate the potential breakout. Platinum prices currently come in at $986 per ounce, good for a 1.8% weekly gain.

Platinum’s sister metal palladium looks higher by 4.2% this week, with prices currently coming in at $567.

Turning to the gold market, the yellow metal saw price weakness as it lost safe-haven appeal. The U.S. dollar and stock market are both gaining on the week as investors turn more optimistic on the economy. The Dow Jones Industrials powered ahead by 350 points to close at new highs for the year on Thursday. Copper and other industrial commodities joined in the party, but gold didn’t. For the week, gold prices are down 0.8% to trade at $1,230 per ounce.

The upshot is that the gold to silver ratio is starting to improve in the favor of silver. When silver outperforms, that’s generally bullish for the entire precious metals complex. The gold to silver ratio hit a multi-year high of 83 in February. It has since fallen to 76 as of Thursday’s close. It could potentially fall a lot further – perhaps back toward the low 30s as was seen at the 2011 high for silver, or perhaps back all the way toward the classic ratio of 16 to 1, although that is a long way off at this point.

Despite the recent strength in silver, oil, and other commodities, the official inflation gauges are barely budging. The latest Consumer Price Index report put out by the Labor Department on Thursday showed that the CPI rose a miniscule 0.1 percent in March. This, after the CPI fell 0.2 percent in February. With no immediate inflation threat, the Federal Reserve will almost certainly opt to keep its benchmark rate right where it’s at when Fed officials get together for their policy meeting later this month.

The real question for investors is whether the Fed’s ongoing commitment to ultra-low rates will ultimately work to the benefit of stocks, bonds, and other financial assets. Or whether precious metals will be the prime beneficiaries as investors eye overvaluations in financial assets and their susceptibility to rising inflation down the road. A case can be made that precious metals are undervalued in general and that silver in particular is extremely undervalued.

It’s important for investors who want to diversify into physical silver or other precious metals that they choose a reputable dealer who offers prompt and reliable service. Customers who buy based solely on slick advertisements or low quoted prices risk getting left holding the bag when a dealer fails to deliver. About 18 months ago, a so-called “low cost” dealer called The Tulving Company went bust. And earlier this month, Northwest Territorial Mint filed for bankruptcy court protection in the wake of a staggering damage award for libel and customer complaints of long delivery delays.

One of David Morgan’s ten rules of silver investing is to avoid problems with your dealer. In a recent Morgan Report video presentation, he elaborated on this imperative:

https://www.youtube.com/watch?v=PaT8FQ9q6mQ]

David Morgan: Rule number 5: Do not get a raw deal from your dealer. Because of the specialized nature of the physical precious metals markets, selection of a well-established dealer with a quality reputation is essential. A good dealer will provide timely execution of your trades at fair prices, with reasonable fees. Note, going for the lowest price is not necessarily the best price. In the past, some dealers that squeezed their price margins too low in order to attract clients, were unable to make delivery, leaving those clients holding the bag. Obviously, there's those that shop price only, or, I guess you could say, learn the hard way.

We have said it before – precious metals investors need to be careful about who they deal with. They should take a few minutes to investigate a dealer’s online reputation before ordering. They should expect the dealer to provide a firm estimate as to when the order will ship when that order is placed. If the dealer misses that estimate by weeks, it is time to find another source.

Here at Money Metals Exchange, we have quoted shipping delays on certain products in extremely rare situations over the past 6 years. We can think of no legitimate reason for delays of 6 to 8 weeks or longer when it comes to the popular and widely traded bullion coins, rounds, and bars.

Our customer reviews are overwhelmingly positive for a reason, including an A+ rating from the Better Business Bureau, being named the Bullion Dealer of the Year in the United States last year by a global ratings organization who compared Money Metals to 400 other American companies in the field, and having more than 60,000 satisfied customers. So regardless of whether you’re a new customer with a small budget or an experienced stacker, you can buy with confidence from Money Metals.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason:It is my privilege now to be joined again by David Smith, senior analyst at The Morgan Report, and regular contributor to MoneyMetals.com. David, it's always great to have you on with us. How are you?

David Smith: Well, it's good to be back, Mike. I'm pretty excited about talking about the metals today.

Mike Gleason: Well, David, we've had some big moves in the metals so far this year. Gold stole the show during January and February, with silver lagging a bit, but now silver is finally playing a little catch-up and has surged over the last week, and recently made a 10-month high at over sixteen dollars an ounce. What do you make of the market actions so far this year, and what do you think is driving the advance in the metals?

David Smith: I think it's very positive. It's fooled a lot of the people that are chartists. They look at these charts and they don't realize that, after five years of decline of a cyclical bear market, that when things turn around, sometimes the rules change a little bit. And these points that they look at that are supposedly providing resistance to upside prices have been cut through like a knife through butter. Now, of course, if you look at the metals today, we're seeing a retrenchment in gold and silver, which is to be expected, and we may see back and forth here for a little while, but I think the tone of the market is different than I've noticed in the last five or six years. The buying that comes in on the mining stocks is very powerful, with a lot of volume. And when the better stocks decline, they do so slowly. I think a person really needs to feel that we're, in all probability, looking at the resumption of the secular bull market in gold and silver, which began right after the 2001/2002 area. And I believe that this leg is going to take us to new all-time nominal and real highs before it's finished in a few years.

Mike Gleason: Speaking of mining stocks, you of course follow the mining industry extremely closely and do a lot of analytical work, along with David Morgan and the rest of the team there at The Morgan Report. Now, as we're talking here on Thursday morning, we're looking at gold bullion up roughly 16% for the year. And based on this week's advance, silver has pulled ahead slightly, and now shows a gain of 17%. However, if you look at the GDX, the major gold mining index, it's up about 65% so far this year. The HUI has done even better and had a huge advance this past Monday. So why have the miners outperformed the bullion by such a wide margin?

David Smith: Well, for one thing, they've been sold down on a proportionate basis much more severely. If you look at, say, the 2011 highs in gold and silver, gold has dropped, I think, about 42% from those prices, and silver is down around 70%, but the mining stocks, some of them are trading at sixty to eighty year lows on the TSXV. So they have been sold down into a hole, and I could just give you a couple examples without mentioning names, but one stock I follow was $11.50 in 2011, and it had one operating mine and it now has two that will operate above $20 silver. I bought that stock for $0.27 a couple months ago, an $11.50 stock. There are many, many others the same way, almost across the board. A lot of the producers have dropped by 90%. So they were in such a deep hole, that when they came out, it almost had to be vertical, and that's what we've seen so far with some of these, up three and four hundred percent from their lows of just two months ago.

Mike Gleason: A lot of people talk about whether it's the bullion that leads the mining stocks, or the mining stocks that lead the bullion. What do you look for there in terms of confirming a breakout? What do you like to see?

David Smith: People have different opinions on this, but I think it's very positive that the mining stocks are being bid up in a way on big volume and big money. Institutional money is coming into these areas, especially the indices that you've mentioned. The metals themselves have specific chart points that people look at, and they say, "Well, if it goes above that, it means such and such." I think for silver, we need to see prices move up above ... it's above $16 right now, but move up into the area of $18, $20 later this year. And those are very important pressure points.

I think when that happens, when those levels are attained and maintained, then we'll have further confirmation that the lows are in, and that we're facing the possibility of a very long and lengthy bull market. Above $26, and that's an incredibly important point from the chartist standpoint. If we get silver, or when we get silver, above that point, that will really say something very important, because then you'll see a sustained rise beyond that if that level is attained. I'd say about $1,450 on the gold.

So those are two rough areas to look at, but the point being, I think if a person waits, if they don't have any physical metal now, and they wait into those areas, they're going to pay a lot more, obviously. But then, there's the question of just how much is available. When this market was getting started, right up until 2011, there were questions about supply from time to time, especially in 2008, which was kind of an artificial situation. But I think now we have a systemic issue of being able to find enough metal for the demand when it comes and increases the way it has been. So sooner rather than later, if a person intends to either establish a physical position or add to it.

Mike Gleason: Talk about your philosophy here with respect to mining stocks versus having the bullion itself, because you've actually written articles about this, including a great one last summer on MoneyMetals.com. Now, there certainly can be major investment upsides to owning the miners during bull markets, but you've noted that mining stocks and streaming companies should not be a substitute for owning the physical itself. Explain your thinking there.

David Smith: That's really true. And I stand 100% behind what David Morgan has always said in his discussions in The Morgan Report, and that is get the physical first. Get what you need as an insurance policy, and perhaps an investment piece of it, before you start in the mining stocks, because they're a whole different creature. The mining stocks are a tool for trying to increase your wealth, but the gold and silver physical that you hold in your hand, that's an insurance piece that you would use if you needed to use it for barter, if you have a collapse of confidence in the paper promises that's in your wallet, if you have runaway inflation. There's so many uses for that physical metal.

So you want to have that, have it in a safe place, keep it a secret, don't be telling people that you have it, your neighbors, this type of thing. Then, if you want to go to a higher level of risk, then you can start investing in the mining stocks after you've researched them. And they tend to outperform the metal, but they have not done so for most of this bull market, but I think that's going to change. They potentially have the leverage of two or three times what you might make in the physical metal itself. But they are not a substitute for the metal and, in my view, they should not precede holding that metal. For one thing, if you wait around and try to get some metal, you may not be able to find any. And I think we're going to see that day coming down the line where it's extremely difficult to get the product that you want, with the premiums going higher, taking longer to have it delivered, and in some cases, might not be able to get it at all.

Mike Gleason: Furthering the point on supply here, copper is taking a major beating. Now, we're due to the economic slowdown. Of course, silver is mined as a byproduct of copper often, I've read something like 20% of global silver supply comes from copper mines. So talk about this because, as we all know, and you just alluded to it, the supply-demand situation for silver does not allow for a lot of margin. So if copper mining is going to slow down significantly, what effect might that have on silver?

David Smith:Well, by definition, there'll be less silver produced since between 60% and 70% of silver is a byproduct of base metal supplies. You mentioned copper, also lead and zinc. And there's another issue too, there's actually a certain amount of silver that is, not what you would call a byproduct, but is created when you're separating gold as well, too. I think that's another 6% or 7%. So the overwhelming majority of silver comes from those sources, with about 25% coming from pure silver miners, where the majority of their silver comes from actually mining the silver veins, and they still get quite a bit of lead and zinc in there with that as well, too.

To me, that is an indicator that you watch, but you don't try to make your trading decisions based on it. It's a lagging indicator. It's just something that adds fuel to the supply question fire if you see a sustained reduction in the production of copper and base metals.

Mike Gleason: Platinum and palladium have also done well in 2016, although they're both lagging behind the money metals, gold and silver. Both of the PGMs are up in the neighborhood of 11% to 12% this year. But it does look like they're having a hard time sustaining upside momentum over the last month or so. So why are platinum and palladium lagging? Is it economic concerns pointing to less industrial demand? What is it?

David Smith: I think a lot of that is the concern with the global slowdown in the economies, because platinum and palladium, they have a certain investment quotient and a certain jewelry quotient and a certain medicinal uses. But by and large, they are industrial metals. As you know, platinum and palladium, the biggest uses for those two metals are in catalytic converters for automobiles and trucks. So when we see sustained strength in the economies going forward, that will tend to turn things around.

Then, also, there's the question of the supply coming in. For example, just a couple days ago in Zimbabwe, there was an internal memo that showed that the largest platinum producer there might have structured their payments of the money for their salaries so that they would avoid Zimbabwean taxes. If that is the case, the government could come down pretty heavily on them, maybe even nationalize the company. And they're one of the major producers of platinum.

These things all come together in the mix. I think you'll see sustained higher platinum and palladium prices as we move more into an inflationary environment down the line. But I believe that they will lag gold and silver at this point, because gold and silver are functioning as money now.

If I could make one point, Mike, here on gold and silver, I think it's extremely important for people to understand. I've noticed a lot of hand wringing the last couple weeks about, "Oh, gold has been strong and silver has not been as strong." Here's the thing, Adam Hamilton and others have shown, and David Morgan as well, too, that there's about a 90% correlation in the direction of gold and silver over time. So in other words, if gold is going up over time, silver will as well, too. But they do not move in lock step on a day to day basis. And what I remember from my trading, when I was trading futures in the 1970's up until the 1980 bull market top, I would see, and this is especially in the latter days, I would see gold just moving higher, day after day, and silver just absolutely sitting there. Then, all of a sudden, it was like a tag team. And all of a sudden, silver would just break out and start moving. It would go higher day after day, and gold would just be going sideways.

People should not be concerned about this, if they're not moving in tandem on a day to day basis, because that's just not the way they operate. I've noticed the same thing here in this beginning of this new bull market phase. I think people should kind of keep that in mind. Now, if they're both moving down sustained, you don't want to see that. But at the same token, don't worry if just one is moving up in a given week and the other is pretty quiet.

Mike Gleason: Yeah, prime example here, this year we saw, as I mentioned earlier, gold doing quite well in January and February, silver lagging a bit. Now, this past week, we get a big silver surge. Gold is just kind of going sideways. And lo and behold, they're now up about the same percentage for the year, 16%-17%, but on a week to week or day to day basis, they are trading quite differently and have over the first three and a half months of the year.

One of those potential rocket fuel situations for higher metal prices, of course would be the central bank policy decisions. We've seen negative interest rates in Europe. They've maybe talked about that a little bit here in the States. Obviously, they've been reluctant to raise beyond the quarter of a point that we saw back in December, that's driven a lot of the metals advance. What are your thoughts there? Are we going to continue to see very accommodative interest rate policy, very inflationary monetary policy, coming out from these central banks? What are your thoughts on that area?

David Smith: Well my read on this, Mike, is that the central banks, and also the big banks, in these different countries are running out of options. They continue to do things that haven't been working very well. And they don't have an option of doing things that will work well because they don't have that mindset, at least yet. The old story of what Winston Churchill said about Americans, they always do the right thing after they've done everything else first. And I think that's what the central banks are in the process of doing. They're trying to go down, and they now have in some cases, negative interest rates where you pay the bank to store your money, or you pay the bank to buy a bond. That's insane. If you have negative interest rates, the signals that interest rates give off, as to the viability of a project or an investment, are no longer there. The customer cannot make an intelligent decision. So I think we're going to see them continue to push things down. And what they're trying to do is to stimulate the people to buy and to make purchases and get the velocity of money up. People aren't doing that.

You look at Japan, where they pushed things down to an incredible extent, what they've done, the only thing they've stimulated in Japan is for people to buy record numbers of safes so they can store their money at home. They have a huge demand for 100,000 yen notes, which is about $1,000 in our money. But they're not going out and buying things. Until the velocity comes up, they're going to have a deflationary situation, which is the greatest fear of central banks, rather than an inflation. Believe it or not, they want inflation, which by definition takes away the purchasing power that you and I have year after year.

Mike Gleason: We got news today that Deutsche Bank settled a class action lawsuit from investors regarding rigging the silver fix price. Turns out the bank was cheating its own customers by colluding with the other participants fixing to manipulate the price. And it sounds like Deutsche Bank is promising to hand over the goods, emails, and electronic chats and so forth from the other banks who participated.

Now lots of metals investors have almost given up on the idea that any of these criminal bankers would ever really be held to account. The CFTC spent five years investigating these issues, and ultimately failed to prosecute anyone. To us, the story is just further confirmation that price discovery in precious metals is a flawed, broken, and corrupt process. What is your take on this story and the issue of price discovery generally? Any chance metals producers and investors can escape this flawed system anytime soon?

David Smith: I think Mr. Market is exerting his muscle in this area. And this doesn't surprise me at all, what Deutsche Bank has admitted to. This is just soup of the day. You can go back and you can look at all these other banks have done the same type of a thing Goldman Sachs, just a couple days ago, agreed to pay something like five billion dollars for misleading customers about the viability of certain mortgage vehicles. The banks have admitted, in the UK, that they rigged the LIBOR rate, which is the inter-bank rate that banks charge each other. I mean, if there's something that they can rig, they'll do it. All markets are rigged. I think Chris Powell (of the Gold Anti-Trust Action Committee) said, “There are no markets, just manipulation.” It's really true.

You don't have to be a cynic to think that they're doing the same thing in gold and silver. They're just after the unlimited amount of money that they can fleece the public for. So far they've gotten away with it, but these events like you just mentioned, and the power of the internet to breath light into the dark recesses that these bankers and investment banks operate in, are showing that, more and more, it's getting difficult to hide your misdeeds. And I think that ultimately will bring down the house of cards. When people realize just what's going on, and they say, "You know what, we have to have this thing cleaned up, and not just pass some more laws that insulate the biggest players, and take money from the public in order to take care of their misdeeds." There's going to be an insurrection on the part of the consumer and the investment people and at some point gold and silver will be the vehicles that allow that to happen, because they're real money. Paper money is never able to stand up against the truth and the light that real money bring to the investment areas.

David Morgan points out, and he's done a lot of research on this, there has not been a single paper unit that has survived the test of time. They have always gone to their intrinsic value of zero. And people go, "Oh, but with the U.S. dollar in my pocket, I can go down and I can buy a car today." You know what, I bought a Firebird in 1979 for $4,250. That same car today, not produced even nearly as well, would probably cost me $40,000. So tell me about how much my money has lost in that time. The U.S. dollar is worth two cents of purchasing power compared to what it was in 1913 when the Federal Reserve was put together. And go back and compare that with the purchasing power of gold and silver. And I think the people that have some will be pleasantly surprised.

Mike Gleason: Yeah, excellent point. That's really the crux of owning precious metals, owning gold and silver, it's preserving that purchasing power, a way to have some insurance against your paper money. Those examples are fantastic in terms of what an ounce of silver or an ounce of gold would buy today versus 100 years ago. Then, compare that to how little your paper money buys today versus that same time period.

Well as we begin to close, what do you envision for the metals, the balance of the year here, David? We did see strong starts to both 2014 and 2015, only to see the metals fizzle off as we went throughout the year and they ended lower. So what do you see ahead in the last few quarters of 2016 for gold and silver?

David Smith: I think we're going to see big swings in the precious metals and the mining stock prices throughout this year. What I want to see is the classic definition of a bull market, which is higher highs and higher lows. So on any reactions that we get, one of which we're looking at now as you and I are talking, I want to see some of those lows holding, and then I want to see new buying coming in on volume. So you have low volume on the way down and higher volume on the way up. And then, over time, stair stepping up, even as people worry that these signals are not going to hold and get us through the year.

I think it's very possible that we'll see solve in the mid $20s by the end of the year, and gold perhaps as high as $1,400 or so. It's really difficult to predict price and time, and very few people do it, wisely that they don't do it, but I think this is going to be the base-building, strength-building year where people start getting back the money they've given up before, if they held the mining stocks over the last five years. And I think it's an opportunity, I think it'll be the last really good opportunity to add to your precious metals holdings on a physical basis. If you don't have them, or if you don't have enough, at prices that are reasonable in relationship to the premiums and the demand. And I think 2017 is going to really show us that the supply situation has become quite tenuous, and if any new demand comes into the market on the part of the individual investor or the institutional investor, which I think they'll do it in both cases, I think you're going to find a real difficult time getting the metal that you want for a fair price.

So going forward, I'm very optimistic about the market. I think the bear market is over, the cyclical one. I think the secular (bull market) is reasserting itself, and we're going to have several, three, four, five, six, very good years ahead for people that hold precious metals and mining stocks.

Mike Gleason: Yeah, we've got, obviously, a lot of constructive things happening here with the prices. As we talked about offline, a lot of black swans seem to be circling around in these markets. And if any one of those seems to happen, then, obviously, we could have a huge spike in demand, supply issues could rear their head again, and we'll see what happens from there. It figures to be kind of a bullish setup.

Well thanks very much for your time and your excellent insights as usual, David. As always I'm looking forward to your next article for MoneyMetals.com, which I believe is coming out very soon. That's always great stuff. And we certainly look forward to talking with you again real soon. Hope you enjoy your weekend, David, and thanks for joining us.

David Smith: Very good, Mike. I always enjoy speaking with you and your audience.

Mike Gleason: Well that will do it for this week. To check out David's insightful columns, just go to the news section on MoneyMetals.com, or type in David Smith in the search box and you'll get links to all of his work. Be sure to check that out. Thanks again to David Smith, senior analyst at The Morgan Report, and MoneyMetals.com columnist.

Check back next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening and have a great weekend everybody.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up we’ll hear from David Smith of The Morgan Report and regular contributor to MoneyMetals.com. David talks about the state of the mining industry, the developing supply shortage in the silver market and how the set-up today might compare to the late ‘70s in precious metals. His comparison there just may surprise you. So don’t miss a terrific interview with David Smith coming up in just a moment.

Well, it appears that another so-called government shutdown looms. Just how damaging would a shutdown be to the economy and financial markets? You’ll hear some surprising facts that neither the Democrat nor Republican establishment leaders in Congress want to put out to the public later in this podcast.

First, though, let’s get to this week’s market action. Instead of getting a post-Fed bounce, the stock market is suffering a post-Fed slump. After Federal Reserve policymakers left rates unchanged last week, investors reacted not with excitement about the continuance of ultra-cheap money, but instead with concern about the weak economic outlook. At one point this week, the Dow Jones Industrials had shed more than 300 points to test the 16,000 level. Should the blue-chip average finish below 16,000, that would be its lowest weekly close of the year.

Precious metals, meanwhile, are faring better. As of this Friday morning recording, gold prices show a small weekly gain of 0.4% to trade at $1,145 an ounce. Silver prices got pushed down below $15.00 an ounce earlier this week. But the white metal rebounded on Thursday to bring prices back to break even on the week. Silver prices are down slightly so far today and are flirting with $15 once again and come in at $15.06 an ounce, down 1.2% since last Friday’s close.

Turning to the Platinum Group Metals, we’re seeing an extreme divergence – with palladium up big and platinum way down. The reason? A major scandal involving Volkswagen’s diesel vehicles in the U.S. – one which caused VW’s CEO to resign. Turns out that millions of vehicles were built to evade emissions standards – and those diesel autocatalysts use platinum. So platinum has taken a big hit, and palladium – used mostly in gasoline engine cars – has risen sharply. That’s why palladium prices are up a whopping 9.2% so far this week and are at $665 an ounce at present. But platinum now shows a weekly decline of 3.6% to trade at $948.

What’s significant about today’s platinum price is its relationship to the gold price. Platinum now trades at its biggest discount to gold in 30 years.

This may be a once in a generation opportunity for value investors to pick up some platinum on the cheap. One-ounce platinum bullion bars as well as Canadian and Australian platinum coins are available. And for those looking to start accumulating platinum on a smaller scale, Money Metals Exchange now sells tenth-ounce platinum bars. These smaller unit sizes of pure platinum are easy to accumulate and handy to have on hand. Platinum, like gold and silver, is a precious metal that will fare well when inflationary fears start gripping markets.

And speaking of fears, should you be fearful over the increasing likelihood of a government shutdown? Maybe not so much.

The new fiscal year begins next Thursday, October 1st. If Congress and the White House can’t agree on a deal to fund the government before then, that’s when the shutdown will begin.

However, the essential functions of government aren’t going to shut down. The national calamity that the Obama administration and the TV news media are warning could happen would only be a calamity for a small number of people. The so-called shutdown would involve non-essential federal employees staying home and groups like Planned Parenthood having their federal funding withheld. Yes, there would also be inconveniences inflicted on the public, such as national parks being shuttered.

But for the most part, the economy would get along just fine with a stripped down government. The bigger long-term financial threat is that the government re-opens with a bigger budget, an elevated debt ceiling, and no plans in place to arrest the unsustainable debt growth.

The reality is, taxpayers will get a raw deal no matter what. If the government stays open, the debt spending will continue unabated. If some government functions are temporarily defunded, taxpayers will still have to pay thousands of furloughed government workers their full salaries. They’ll effectively be enjoying a paid vacation.

We as taxpayers are damned if they do and damned if they don’t keep federal bureaucracies up and running. A superficial analysis of the partial government shutdown that occurred for 16 days in October 2013 shows that the economy suffered a $23 billion hit. That’s according to Moody's Analytics.

Yet for the fourth quarter of 2013, the economy expanded at a 2.9% rate, outpacing the 2.1% growth rate for the year. And following the shutdown, the stock market actually rallied. Treasury bond values also rose as yields fell. And there was no credit downgrade from any of the major ratings companies.

What could potentially trigger a ratings downgrade and panic in the markets is if brinksmanship over the government’s debt limit reemerges this fall. A debt ceiling standoff between the Republican Congress and Obama White House back in 2011 caused Standard & Poor's to downgrade the U.S. government’s credit rating from AAA.

The government actually hit its statutory $18.1 trillion debt ceiling in March. Since then, the Treasury Department has employed unconventional accounting maneuvers to prevent spending cuts from being implemented. The Treasury Department would run out of wiggle room by late November or early December if the debt ceiling doesn’t get raised.

It almost certainly will get raised, somehow, some way. And when it does, Republican and Democrat leaders will congratulate themselves for averting disaster. But all they will be doing is postponing and enlarging the debt disaster that will hit home at some point, in some form.

But raising the debt ceiling to fund Obama’s agenda will not come without a huge amount of flack from grassroots America. Flack about out-of-control deficit spending is getting more intense by the day. In fact, the heat has pushed Speaker John Boehner – a man at the center of most of the big government sellouts in recent years – to announce his resignation this morning, effective at the end of October.

If not through default, then through inflation. As former Federal Reserve chairman Alan Greenspan has noted, under our monetary system, the government need never formally default on any of its debts. That’s because the Federal Reserve possesses an unlimited capacity to buy government bonds with freshly created currency. But, and this is the key point to it all, it simply cannot guarantee the purchasing power of that currency if those loose monetary policies are to continue.

And now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to be joined by David Smith, senior analyst at The Morgan Report and regular contributor to MoneyMetals.com.

David it's always great to talk to you and since you and I haven't actually spoken for quite a while, how have you been doing?

David Smith: I've been doing well Mike and I always enjoy speaking with you. I think we're going to have a lot of fun today and probably even transmit some knowledge out there for other people.

Mike Gleason: That's definitely what we aim to do here, and it's great to have people like yourself join us so regularly. So thanks again for being generous with your time.

Well David, you follow the mining industry very closely, and to start out here I wanted to have you comment on the current situation with the miners. We've had a prolonged period of low spot prices, and I know it's got to be crushing mining industry companies, for many it's really just a matter of survival right now. So what are you seeing there, and what effect is this having on supply, specifically silver?

David Smith: It's difficult to make an across the board statement about where the miners are, or how they're responding because some of the biggest ones like Glencore, are still almost in death throws in terms of getting their act back together again, and sell off assets, this type of thing. But what I'm really encouraged by, and especially in regard to silver, are what I would call the primary silver producers, and as many as your listeners know about 70% of all the world's silver comes from base metal producers. For example, BHP Billiton is an example. The silver that they produce, even if it's millions of ounces a year, is just small potatoes for them because they make most of their money on lead, zinc, and copper, and even uranium.

But the primary silver producers, which there are less than two dozen in the world, get most of their income from silver itself, and they tend to be in Mexico, and Peru, and some of these locations. They also produce a fair amount of lead, zinc as well, and even a certain amount of gold. But their primary money comes from silver.

I'm looking at the charts on some of these, the ones that I follow, and they look very good to me, even as we have seen silver make new lows a few weeks ago, in the physical price, these stocks did not make new lows. In fact they were making and are still making, as you and I are talking, higher lows within the context of getting ready to make higher highs. So to me that's very encouraging, and some of these stocks I know very well, and I know their financial situation where they're actually at least trading dollars at the current prices, and they're going to be survivors. Those are the ones you want to watch for, and it looks to me like the mining sector is not going to completely blow away, although it has certainly looked like that over the last four and a half, to five years.

Mike Gleason: These mining companies, I would assume, at these prices are probably not exploring quite as much, and maybe that's going to hurt some of the silver production and silver supply in the coming years. It does take a while to get new projects on line. What are they doing in terms of exploration, and what kind of impact do you think that's going to have on the supply outlook?

David Smith: Many of them have certainly cut back, and if they’re exploration stocks they don't have any income, so they have to almost go into a wait and see mode. The ones that I really like to follow, and have a lot of confidence in, are ones that may have cut back a lot on the overhead expenses, and they're being very specific on the targets that they do for drilling. They are sitting on their cash, and they're spending it when necessary. Whether it's to make another acquisition for a property, or to update their mill, or to look at doing infill drilling where they've established good results from the main drill holes and they drill between them to get more resources identified.

They're doing this in a way that enables them to keep on doing their production, but they're kind of in a holding pattern until prices go higher. There's one company that I follow that is not producing at all now, they're up in the Yukon, they're on care and maintenance with their two mines. But the thing is, they are not going to produce until silver hits around $20.00 an ounce.

Mike Gleason: Certainly these sort of markets can always bring out the best in certain companies, the strong survive. We may see some consolidation there. From an overall perspective, some of the numbers are showing a decline in the overall global silver production. Steve St Angelo there at the SRSrocco Report has been reporting about how there's been a big decline in the last few months in global silver supply.

Now on the demand side of the equation, it looks like maybe industrial demand is flat to down based on a slowing global economy. But we have seen a massive increase in the retail demand for physical silver, since June specifically. The low spot prices have meant a huge amount of bargain hunters are continuing to see major value and are switching some of their paper dollars into something tangible in a big big way here.

So where do you see this heading? We've got pressure in two major areas of the supply-demand equation… declining global mine supply, overall anyway, and very strong investment demand. How do you think this is going to end up?

David Smith: You know Mike, I call these two factors tectonic plates of supply and demand. We have several things going on, as you mentioned. The industrial demand has dropped back, but the investor demand has more than made up for that. So we have a lot of new customers coming in, that I don't think bought metals before, and I think these people will be staying with us. In other words, they will add to the pool of investors that want to add to their silver holdings. I think that's going to keep demand strong.

In addition, we see countries like India, who, at the torrid pace that they're importing silver this year -- it could be 40% of the world’s production this year -- which is really a massive amount. It's several times more than they have been importing in recent years. So this demand factor that's going to keep on going, I think, is not going to subside quickly like it has the last few times. If you look at the price for 90% (silver bags) or what's called “junk silver”, the premiums, they're as high as they've been in the last several decades. The last two times this happened (was) in 2000, and 2008 was the second one... the premiums went up, then they dropped sharply there soon after.

I would not be surprised to see these premium stay elevated for quite a long time, because I think this time it will be different. And this duel between the paper derivative pushers in the futures contacts, (and) with the real world physical price that you and I have to pay for the metal, if we can find it, I think is going to become distorted at a point that the paper pushers are going to be much less relevant in determining the physical price than they ever have been in the past.

Mike Gleason: We really do have two markets there. We've got the paper price, that's set in the futures market, and then the physical price, where premiums have just been soaring. Cheap junk silver, Silver Eagles, silver Maples... supply is just really tight and we're seeing premiums elevated. And that's how the two markets diverge from one another. There’s a physical market and (then) we've got a paper market. And people just need to understand that. That (higher premiums for the actual metal itself) is the physical market's response to paper under pricing of the market.

That's essentially what we've got... a huge amount of sellers in the features market that are driving the price down, while we've got massive buying in the physical market. And something has to give. It's an interesting thing to watch play out.

Now, and you mentioned it a moment ago, we have seen a big increase in new precious metals buyers here recently in the U. S. And there's some indication that this is a worldwide situation with folks seeking protections against the risks of all the paper based wealth out there. What are your insights about the apparent rise in new precious metals investors?

David Smith: It's difficult to get a handle on these now, but when you look at some of the sellers of metals to the retail sector, and they say, "oh we're up 200, and 300%," some of that certainly is additional buying from customers that have been around for a while. (But) my guess is that a big chunk of that are of people who have never owned the metals before. They finally have seen a lot of data, (and are saying) “we’ve got to have some protection here. We've got to have some insurance... we need to buy gold and silver.”

Again, I think these people are just making their first tranche of buying, and they're going to be consistent buyers. Now that they get the story and they're really starting to lose confidence about what's going on in our political system, and the economic system, and they can see how the Federal Reserve’s policies of the last seven or eight years have been detrimental to long term stability in our economy. (They) have indeed put us in a place where we haven't solved any of the problems that we had in 2008, they've only gotten worse. I think that's what's going to help continue to keep the demand elevated.

Going back just a minute to what we talked about, about the demand issue, and the difference between the paper and the physical price. In 2009, I remember this very distinctly, sliver was pushed on the paper price down to around $9.00 an ounce. Yet if you tried to find it at anything less than $12.00 to $15.00, you couldn't do it. People that have thought, and probably thought up until recently, "oh I'll wait until silver gets down to such-and-such a price," maybe it's $12.00 or $14.00, $15.00 whatever, and gets down to that point, and then suddenly they go out and they find that they can't find it. It's trading at $15.00 right now but they're going to pay $21.00, $22.00 for Silver Eagles -- if they can find them -- and they're going to wait for several months.

So this is the thing that people need to keep in min. You're going to see this constantly anytime we have the paper price where it is now, that the physical market is telling us that it doesn't make sense in relationship to the demand out there.

Also, the supply, and this is something which again, it's not something that we can say, "oh this is a trend." But i's really something to pay attention to, and that is... Steve St. Angelo has done a lot of good work on his SRSroccoReport.com site, we're seeing fairly substantial fall off in production, not just in one country, but in severalm In Australia, in Mexico, in Peru, and even in the United States. And most recently Canada. These are very large falloffs in supply production, right at the very moment when demand is going through the roof. Those two things don't make for lower prices. They make for higher prices, and they make for more difficulty in getting supply at all.

Mike Gleason: Expanding on that a bit, on the technical side of things, since I know you follow that very closely, do you think we're nearing a bottom in here? We do seem to be carving out a major floor of support in these current price ranges for gold and silver. Is that true in your view?

David Smith: I really think so. And as the late Yogi Berra who passed away a short while ago said, "it's difficult to predict the future." But the thing is, we have to look at it anyway and make an effort. And I really believe that we have either seen the lows in the price for silver for this particular down part of the cycle, the cyclical cycle within the larger secular bull cycle. If we have not seen the lows in price yet, it will be a spike low, it will not be another leg down. A lot of analysts think we're heading for that. I just don't see it. If you think about it this way... let's say there was another dollar or even two dollars on the downside, and even if that were to last for a while, compare that to what the upside is. The upside is literally, ten to twenty times perhaps, over the next few years where we are now in terms of price.

So the risk-reward ratio, even if you only assumed a move back up to $50.00. You have $2.00 on the downside of the risk, whereas a number times that on the upside. It certainly seems to me, you're never going to find something with no risk, and if you wait until there's no risk, that means the market is already determined what that information is, and there's also very little potential for reward. So to me, the risk-reward ratio is extremely attractive in here for physical holdings.

Mike Gleason: In talking about the potential for a big bull move in the metals eventually coming to fruition here in the present day, or the not-too-distant future... now the high times for gold and silver bugs was back in the late 70's and early 80's, and I guess, in relating that to today and what things could look like if our current floor does prove to be a bit of a springboard for things to come... for me David, this appears to be quite a different setup today, versus that period some three decades ago, when a big part of the price run up was mostly attributable to just a few people like the Hunt brothers, or the Saudis, who basically cornered the silver supply using the futures market.

But today, we've got significantly more industrial demand than we did then given the advancements in technology, medicine, alternative energy, and so forth – which is where a huge amount of silver goes -- (and now) it looks like we could have the masses starting to get involved in silver investing. So the cornering could come from all corners of the globe this time around. How would you relate where we are today compared to the late 70's and early 80's?

David Smith: I have a chart which is very fascinating, and it shows the current decline we've had since 2011 in gold and silver, and (if you) compared that with the bull market, as you mentioned that developed in the late 1970's, and I remember that very distinctly when gold lost half of its value, and then proceeded within... and this was over a period of a couple years after it had gone up to a new high. It then proceeded to build a bull market that, within a couple of years after that, had gone up over 800% from where its value had bottomed.

As you just said, the elements of this are so much more powerful and all pervasive than they were then. There was no internet, there was really no significant participation from Eastern nations, a very small percentage of the population was involved at all. The Hunt brothers and a couple of other big names were doing most of the buying on the futures exchange, and we didn't have the systemic issues that we do now. We have (not only) high inflation, this type of thing, but also the massive debt that we have, (which) is an order of magnitude larger than we had before. There's debt throughout the world. The economies are not being run properly in relationship to sustainable improvements for the majority of the people.

Everything, including the internet, which gives us instantaneous ability to buy and sell stocks, and the metals if we can find them. This is going to mean everything is going to be faster and more powerful than the last time around. You and I have, and the people listening to this podcast, have the ability to do research, and to make buying and selling decisions in our accounts, that only some of the very top brokerage houses had in the 1980's. If a company comes out with a new drill result we can go and check that on their website, we can look at other resources like Yahoo.com and we can find out, within a very short period of time, the type of information that we would wait days or weeks for from our broker, and it would take them a long time to put it together.

So I don't think people realize just how much information capability that they have at their fingertips, that was just a glint in someone’s eye in 1980. That's why prices move so quickly, that's why a stock of a company can double overnight. That's why we can see the $1.00 or $2.00 move in silver that might have taken weeks or months to take place before. To me it’s fascinating, and I think it's going to offer tremendous profit and insurance opportunities for people going forward.

The average person on this street, that informs themselves, and holds some physical metal for insurance purposes, and looks into some of these stocks, I think they're going to find over the next few years, it's going to be pretty amazing on the upside for them.

Mike Gleason: Finally David, before we let you go, I want to ask you about the great article that you wrote for us this week, and we'll encourage our listeners to go to MoneyMetals.com and read that, but please give us a brief summary of what you wrote about in that piece because you touched on a great principle when it comes to investing, and many things in life for that matter. That is the KISS method... talk about that briefly if you would.

David Smith: Well you know, Mike, I'm not an investment counselor so I can't give investment advice but I certainly give my thinking. From my reading and the experience I've had in going to these different mining operations, and this particular article -- which I really enjoyed writing -- it's about investing in a way. It's not only about that, but it's (also) about how you go about it and how you relate it to the other aspects in your life. If you're successful at your investing, you can do good and well at the same time.

If you get your money through honorable means, and you think about how you can help your fellow man, it can really be rewarding beyond whatever your bank account shows at any given time. So I wrote this article, about a man named Jim Teeny, who invented the Teeny nymph, which is a fishing fly that he started tying in the 60's, and he's still tying today. I know Jim, and I've fished with him, and I have so much respect for him. I got to thinking about how Jim approaches fishing, and there may be some correlations here about investing. I gave a little background about Jim, there's a nice video where he was interviewed recently, an eight minute one, and there's a hyperlink in the article that people can go to see about his interview, and see how he approaches things.

Then I looked at how he looks at fishing, and how he goes after his quarry, most of which he releases, and how that would relate to investing. I came up with several parallels that people could use and see the connection between fishing and investing. Then also think about how, when we do well, how we can help other people... whether it's members of our family, or people that we love and respect, or maybe someone that we run into that's really down on their luck.

And (with respect to) silver, and I love doing this, is taking a one tenth ounce silver, which you wouldn't think of that big of a deal, it's worth about $1.50 to $2.00 now in terms of the silver content. It's about the size of the dime that we used to have in our pockets, which were 90% silver. But these are three nines (.999), or four nines (.9999) fine. So they're pure silver. To just hand that to someone, whether it's a tip, or someone on the street, or whether it's someone that doesn't expect to be getting something, and see the glint in their eye. It really makes you feel really good that you've done some little good for someone, or give them an opportunity to go ahead and research on their own, what the idea of silver, holding silver in your hand, is all about.

I think this article, which again I enjoyed writing so much, and I think people will find the bigger picture of investing and what it really means. It isn't just about making money. It's about how you make the money, and what you do with it after you get it.

Mike Gleason: Well it's always enlightening stuff, and that's one thing that I love about your writing, and also you as a guest here on this podcast, and thanks again for your time, and your excellent insights as usual David. We certainly look forward to talking with you again real soon, so enjoy your weekend.

David Smith: You bet Mike, and I've enjoyed speaking with you, take care.

Mike Gleason: Again, to check out any of David’s insightful columns, just go to the “News” section on MoneyMetals.com, or just type in “David Smith” in the search box, and you'll get links to all of his work, including the afore mentioned article from this week, which is titled, More than Making Money: Living, Fishing, and Investing the Jim Teeny Way. Be sure to check that out.

Well that will do for this week, thanks again to David Smith... and check back next Friday for our next Weekly Market Wrap Podcast. Until than this has been Mike Gleason with Money Metal Exchange, thanks for listening, and have a great weekend everybody.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up later in today’s program is an exclusive interview with mining expert and metals market insider David Smith. We put the mining industry under a microscope and talk about how today’s sharply lower precious metals prices will impact mine production.

David makes a forecast about supply shortages that you really need to hear. Don’t miss my interview with David Smith.

But first, here’s this week’s market update.

Well, Republicans achieved what some are calling a landslide victory in the mid-term elections. They captured enough Senate seats to become the majority party in the upper chamber and extended their majority in the House of Representatives to their largest since World War II.

It’s also been a landslide of sorts for the precious metals markets. Prices for gold and silver have slid off a cliff. They continued sliding Wednesday as investors celebrated the Republican sweep by pushing the Dow Jones to a new record high. Metals were also hurt by the Bank of Japan, which vowed to engage in a “no limit” quantitative easing program. That buoyed the U.S. dollar against the Japanese yen, and it rallied against most other foreign currencies as well.

On Thursday, precious metals markets stabilized. As of this Friday morning recording the metals are experiencing a much needed rally in the wake of the recent bloodbath, albeit a small one. Gold is up about 1% on the day and now shows a weekly loss of about 1.7% to trade at $1,154 an ounce. Silver has swooned 3% on the week though it's above its lows from earlier in the week, prices are all the way down to $15.65 an ounce.

These incredibly low prices are sparking a buying frenzy in Silver Eagles and other popular bullion products. By mid week, the U.S. Mint was unable to keep up with the surge in demand and mint officials said they’re all sold out on Silver Eagles for the time being. We’ll be keeping a close eye on that situation but we should note that since Money Metals has a large on-hand supply and sells from inventory we still have immediate availability of Silver Eagles for the time being.

Getting back to the market’s reaction to election results, what will the sea change in Congress mean for money and metals over the next two years?

For one thing, Richard Shelby of Alabama is set to become chairman of the Senate Banking Committee, which oversees the Federal Reserve. Senator Shelby helped lead the opposition to Janet Yellen as Fed chair. But there’s little the Senate can do to affect policy at the Fed, which operates as an autonomous entity.

And with a liberal Democrat still occupying the White House, don’t expect any dramatic policy changes to become law. Both Republican and Democrat leaders have vowed to try to work together to achieve modest objectives. Successful compromise in Washington often means that Republicans get the tax breaks they want while Democrats and Republicans get the spending programs they want. It’s the path of least political resistance.

It’s also the path to more debt. The national debt will soon hit the $18 trillion mark. Over time, debt growth is positively correlated with gold prices.

During the manic precious metals run-up of the late 1970s, budget deficits got up to around $310 billion in inflation-adjusted dollars. You may recall that gold and silver prices were in the process of bottoming out in 2001, the last year the federal government ran a budget surplus.

By 2009, the government was running annual deficits in excess of $1 trillion. Since 2011, however, federal budget deficits have shrunk as revenues have increased. That’s helped lift the dollar and alleviate inflation fears.

Next year could see the deficit shrink slightly again – even though the annual shortfall would still be a staggering number. The Congressional Budget Office projects a $469 billion deficit in 2015. Nowhere near balanced. And that may be as good as it gets. The CBO forecasts annual budget shortfalls to rise steadily in the following years – ultimately back to more than $1 trillion by 2022. That timetable may be optimistic.

Precious metals prices have taken a shellacking amidst the popular perception that trillion-dollar annual deficits are behind us and a new normal will play out in the years ahead. But a debt crisis is coming.

Look, neither Republican nor Democrat members of Congress are going to be willing to call for cuts in entitlement programs and other “mandatory” spending. The reality is that the biggest portions of the federal budget are on autopilot to grow exponentially in the years ahead.

Some Republicans even campaigned on a vow to boost spending – at least on the military. If we get drawn into new wars in the Middle East, then it’s a given that military spending will grow and a possibility that commodity prices spike.

Perhaps the biggest threat to federal finances, though, is if interest rates spike. Uncle Sam can comfortably carry an $18 trillion balance on his credit card only so long as the interest payments remain super low. But if rates rise to more normal levels as seen in the 1990s, interest costs would explode, and so would budget deficits.

We may not necessarily see anything dramatic happen over the course of the next year. But looking out 5 to 10 years, a strong likelihood exists that gold and silver will have an opportunity to shine as money metals. And in a national debt crisis, they may shine even brighter than they did in 2011.

Well, for more on the state of the gold and silver markets, and what a constricting mine supply and a hiatus from QE will mean for the metals, let’s get right to this week’s exclusive interview…

Mike: It is my privilege now to be joined by David Smith, senior analyst at The Morgan Report and regular contributor to MoneyMetals.com. David, how are you today? Good to have you back.

David: I’m good Mike, how are you?

Mike: Real good. First off David, before we get to broader topics I wanted to get your take on what's happening here in the precious metals markets. We've obviously taken out some pretty major support levels. So what do you see from here from a technical basis after the damage that's been inflicted on the charts over the last week in particular?

David: Well, you're right. Some support for gold and silver that was expected to hold was taken out. There are some levels of support below that, but sentiment seems to be the big driver now. Most of the newsletters that are out there writing are negative, so that’s putting downward pressure on. But what I find is really interesting is the volume of sales that people buying silver, American Silver Eagles and Canadian Maple Leafs; the volumes are just amazing. They’re also seeing a pretty heavy volume in Europe as well too, not to the mention the gold bullion coins. Kind of counter intuitive but it’s kind of interesting that people realize value when they see it I guess.

Mike: One of the largest wholesalers in our business is just not taking orders for Silver Eagles and Silver Maples right now. It’s really astounding. There’s going to be some real fireworks happening potentially. One of the main reasons I wanted to have you on this week is because you’re an expert on the mining sector and have dedicated much of your life to following that industry. We’ve got some real issues brewing here from a supply standpoint.

For instance, just last month one of the largest silver producers, First Majestic, announced that they would hold back a big portion of their third quarter production because spot silver prices are simply too low to make it worth their while to sell it. Their CEO Keith Neumeyer claims their cost of production is in the $15 to $16 an ounce range, but I’ve also seen other miners report higher all in production costs that are closer to $20.

What’s going to happen here? Will the mining companies follow the lead of First Majestic? Will they just stop production given these prices? Will they go out of business? What’s going to happen here with supply given these ridiculously low prices that are really just a result of all the paper market selling?

David: I think all of the above. It depends on the financial status of the particular company. You mentioned First Majestic, they withheld over 900,000 ounces from the market and they may withhold more. Not every company can withhold some of their production, because a lot of them are just trading dollars right not if that. A couple of other companies have done this a couple times before on a short term basis to get a better price and sometimes they’ve been able to sell for two or three dollars higher a few months down the line or a few weeks.

I think it would be very positive if some other companies took First Majestic’s lead and it wouldn’t surprise me if they did, because as you mentioned now just about all of them are selling at or below cost. Even some of the others that have kind of secondary silver supply coming from primary base metal production. I think in terms of the supply over the short term for people that want to buy silver the effect isn’t going to be too great.

What I’m concerned about is the intermediate to longer term with both silver and gold and especially gold, because I think that they are causing some systemic issues within the industry. Because as you probably know an awful lot of gold supply that comes in that is purchased as projects by the big gold miners; this comes from exploration companies from small companies that go out and take the risk and explore properties and drill a lot of holes and prove up a resource. Because the big companies they don’t do too much of that.

What these companies a lot of them going out of business, or basically having enough money to keep their quarterly filings but no drill holes, this is going to impact the ability of the big gold companies to replenish their supply. Don’t forget their mines are a wasting asset, their digging gold out of the ground, and each quarter there’s that much less gold in their project.

I think if we look at what’s happened over the last ten years with all of the high prices; we had gold from $300 to actually below $300 to $1,900, and there was only one major gold deposit discovered and the few intermediate sized ones. The biggest one that was discovered was nationalized by the country where it was discovered.

If all movement can only bring about a fairly small amount of new discovery, you have to wonder what the situation we have now is going to do where the money is tight for exploration. And where the few remaining of any companies that are around are not going to be able to fill the pipeline of the majors when they need to replenish their supplies.

Mike: You alluded to sentiment earlier there. You’re talking to the people in the mining industry. What are hearing? What are they telling you right now given what they’re seeing in this paper market?

David: I think all of them are tightening up their expenditures and some of them are closing unproductive mine shafts, and adits. Others are cutting overhead, that’s the responsible thing to do in any kind of environment. The big majors are selling off a lot of their assets, some of them are pretty good assets. Others are just not going to keep exploring them. You can’t just turn around and wrap these things back up when the price goes up.

Right now with the sentiment being really negative and a lot of it has to do with people that have been disheartened because the price has dropped to where it is now. But as you alluded to a lot of this is paper selling, it isn’t that the demand isn’t there, because the demand in many cases is higher than it’s been in the last couple of years. China and India continue to purchase large amounts of gold, both above and below the radar.

It’s really the paper market that’s the tail wagging the dog on this thing. That’s the thing where people deferring buying physical, they think they can spot the bottom, but oftentimes this like pouring liquid down a beaker and it comes up the other side just as fast. I don’t know if that’s what will happen, but it wouldn’t surprise me if it did. When you get down into the area like this now, people that want to add more or that haven’t take a position, I mean it’s certainly a price that makes a lot of sense to consider buying physical at this point.

Mike: How long do you think this supply/demand imbalance can continue before we get some sort of a pop and see higher prices to dry out the additional exploration and more supply, more scrap, what have you. How much longer do you think this can go on before we have to see something like that?

David: I think when the price turns around there’s going to be, not just the investors are going to doubt that those prices are going to hold up, but the actual producers themselves and the explorers. Just because silver goes up to $18 or $20 that doesn’t mean everybody is going to break out the champagne and start mapping out these big exploration projects. They want to see the price hold for a considerable time, so they’ll be a lag. No matter what happens to price, it will take a while for the investors and the producers and explorers to believe that this is real and it will be sustained.

Mike: Switching gears here a little bit, you’ve said before that the fear trade is what got you into gold and silver, but the love trade is what can make an investor rich. Explain your philosophy there, because you say that gold and silver can also be “good news metals” as well; talk about that.

David: It’s true, and Frank Holmes was probably the first one to popularize what you just mentioned about the fear and the love trade. Of course a lot of trade has to do with buying jewelry for your relatives and creating a dowry for your wife, especially in India, not your wife but I mean your daughter who’s going to get married at some point. The beauty of having gold jewelry and being able to give it as gifts and have it yourself; there’s a tremendous amount of demand for that and not just in Asia, but also here as well.

When the price gets down like this it really is appealing to people and you can see the volume go way up in the jewelry stores. Even if you’re not buying jewelry, if you’re buying an American Silver Eagle, or if you’re buying a Canadian Gold Maple Leaf, or a Gold Buffalo, American Gold Buffalo, these are beautiful, beautiful coins. They are pleasing to look at, to hold in your hand, and to have as a store value. They do both of those things. They’re not just something like you buy a fancy TV set or something. They’re actually true money in addition to having value for their beauty.

Mike: You’re colleague David Morgan has often quipped that markets can be irrational for a lot longer than you can stay solvent. I guess that’s speaking more specifically to those that are trading with leverage and in the futures market and so forth. Markets do act irrationally for a lot longer. You can reach these extreme oversold levels, just like we could reach an extremely overbought level on the other end of this that investors will be reaping the benefits of. Explain that, talk about that mindset, sort of give a little bit of advice I guess to folks who are feeling a little bit worn out right now.

David: David Morgan has often said that these markets will either wear you out or scare you out. Silver has usually bigger percentage moves in both directions than gold. Of course, now we’re seeing pretty good size moves in both of them. I think the thing for people to remember is that when markets are going down, especially when they’re going down in a sustained manner like this, you’re going to see, most of what you’re going to see is negative reporting. When they’re going up you’re going to find all sorts of reasons why they’re supposed to keep going up.

The only way to really come out really well in these things is to try to be a contrarian and when the market is really lopsided, when everybody’s on one side of boat, then that’s when you want to take the other side of the position. Especially if it fits into your financial circumstances and you’re plan, and you’re ability to handle risk in this sort of a thing. By the time just about everybody you talk to or read about is saying, “It’s time to buy gold and silver,” well a lot of that potential profit will be gone, because gold and silver will be much higher than where they are now.

Who knows if this is the bottom; prices could go lower. Nobody knows and the best in the business will tell you honestly that they didn’t know they were buying at or near the bottom until sometime after. I find it really works well, whether it’s buying mining stocks or the physical, to have people consider buying in tranches. If you were going to buy “X” amount at a certain price and you think it could fall further, buy half of that or one-third.

The thing is you’re taking action regardless of the size of your purchase, as opposed to trying to wait and then think you can time it. Because once it really starts up either you won’t believe that it’s going up, or it will go up quite a ways, and you’ll think well gee I could have bought it so much lower but I didn’t. But if you’ve been buying in increments, whether it’s a particular mining stock you’ve researched or the physical itself, you won’t feel like the train left the station without you on board.

Because you’re continually adding at better and better prices, in a logical, rational, calm manner and it really makes a whole difference in the perspective that a person has with market action when that’s going on. Because the market could be really moving in a big direction one way or the other and frothy, and you can be quite calm, and that’s what you want to try to achieve.

Mike: QE ended last week, which caused a big downdraft in the metals, and then coupling that with the GOP’s big victory on election Tuesday is maybe a bit of a one-two punch against precious metals. Is there a perception now that there’s going to be a newfound fiscal responsibility in Washington, an improved economy now that the Republicans controls both the House and Senate.

Is that going to be a drag on the metals going forward do you think? Is inflation no longer a concern at this point given the recent Fed announcement…a bit of a loaded question there, but what are thoughts on all that?

David: There may be a perception that things are really getting better, but you know the systemic problems have not even been addressed by either party. To think that there’s going to be a sea-change because of what’s going on, I think is overly optimistic if not downright naïve. Because we have about two years before the next Presidential election, we have a lot of legislators that are up for election in 2016 that weren’t now. Their primary focus is to get reelected and to get themselves committee chairmanships and things like that. I would be surprised if we see anything major that really solves any kind of a problem coming up any time soon.

The issues of overleveraged banks and other entities, and the tremendous debt that we’re carrying and the slowing economy globally, all of these things are going to be a drag on any kind of a big turnaround. When you look at the DOW having new record highs and how much of that money is actually coming from Fed stimulus money and from high frequency trading as opposed to individuals and large entities that are actually buying stock because they feel it represents value.

You can see that if you look at the metals right now, which is about as contrarian as you can get, to buy the DOW versus the metals it looks to me like a no brainer that you would want to be very, very careful buying the DOW and less careful buying the metals. Because you’re getting real value that over a really short period to intermediate time I think you’re going to be pretty happy you picked up some, rather than just trying to wait for the all clear to go.

Mike: I couldn’t agree more. Things seem to be teetering and maybe we are on the brink of some sort of a collapse and so forth. Very well put indeed. We always appreciate your thoughts and words of advice at times like this.

Before we go we want to urge our audience to check our David’s latest article on MoneyMetals.com. He wrote about how metals investors can learn a thing or two from the recent Ebola scare and makes some great comparisons there in a thought provoking article. We didn’t have time to talk about it here today, but folks should definitely check that out at MoneyMetals.com.

Well, David thanks again, enjoyed it as usually and we look forward to catching up with you real soon.

David: It’s been great to speak with you Mike and you have a great day.

That will do it for this week. Thanks again to David Smith. Check back next Friday for our next weekly Market Wrap Podcast. Until then this has been Mike Gleason with Money Metals Exchange. Thanks for listening and have a great weekend everybody.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up we’ll hear an important interview with David Smith, Senior Analyst at The Morgan Report and MoneyMetals.com columnist. David gives precious metals investors some tremendously useful advice in the face of some difficult market action for gold and silver -- and he also tells us why he believes 2017 will be the year that general public discovers gold and silver in a big way. Don’t miss my conversation with David Smith, coming up after this week’s market update.

Precious metals markets have been slammed hard in recent days. Hawkish comments from Federal Reserve officials drove a breakdown of support levels in gold and silver, and that breakdown trigged a wave of heavy technical selling. Gold suffered its biggest down day in nearly three years, while silver dropped 10% on the week through Thursday’s close.

Some gold bugs are asking whether the Federal Reserve has an agenda to drive down precious metals prices and keep the stock and bond markets elevated. It’s not an unreasonable concern given Fed chair Janet Yellen’s recent comments indicating that the central bank is considering buying assets in the stock market and other markets. CNBC’s Rick Santelli weighed in with a rant on central banker overreach:

Rick Santelli: What if the central banks all get together and decide, "Well okay, we don't want that to happen, let's buy Deutsche Bank, or when any other bank or a company is in trouble. We'll buy that," or as you get the political highlight points, like at election times. You want to keep everything pretty clean. Make sure nothing goes down. Is that the world we really want to live in?

As of this Friday recording, gold prices come in at $1,256 an ounce, posting a 4.7% decline this week. Silver is down twice as much or 9.4% since last Friday’s close to trade at $17.44 an ounce. The platinum group metals also got besieged with selling pressure. Pla tinum is off 6% this week while palladium is down 5.9%

The bad news for metals bulls is that prices are down and the near-term momentum is negative. The good news is that sharp, severe corrections like these are often quite short in duration. They typically represent good buying opportunities. The name of the game is to buy when value opportunities present themselves and not worry about trying to pick a bottom. You won’t buy in at the exact bottom of any pullback in markets as volatile as these unless you’re incredibly lucky.

Well, luck isn’t on the side of those whose homes are right in the path of a massive storm. As a devastating Category 4 hurricane rips along the Florida coastline and moves up the Atlantic coast, millions of people have faced the prospect of severe property damage and protracted power outages. In recent days, gasoline shortages spread throughout the southeast and grocery store shelves were stripped bare of bottled water, batteries, and other emergency supplies.

In any kind of disaster situation, those who fail to prepare – or wait too long to prepare – will be the most vulnerable. You can never know when a freak weather event or natural disaster or man-made disaster or financial meltdown might adversely affect you and your family.

Regardless of where you live, make sure you have emergency backup supplies of bottled water and long-lasting food on hand. Backup power sources, including solar and gas powered generators are also worth considering.

Make sure you are ALSO prepared for a financial emergency. The banking system is fragile and vulnerable to any number of threats, including derivates blow ups and cyber attacks. If banks close and ATMs become inaccessible, you’ll be glad you kept an emergency cash stash.

But don’t put your full faith in the value of the dollar. It is sure to lose value over time and could one day suffer a massive loss of confidence all at once. If top Treasury and Federal Reserve officials get their way, cash in the form of coins and bills will no longer even circulate in a future cashless economy.

The ultimate money in the event of a war on cash or in any type of crisis situation remains physical precious metals. If you need to use gold and silver for barter and trade, you’ll want to have a variety of sizes for maximum flexibility. One ounce gold coins are great for storing large amounts of wealth, but they are not necessarily ideal for buying produce at a local farmer’s market. Having gold in quarter ounce, tenth ounce, and even 1 gram denominations gives you more options.

Of course, silver is the more practical metal for smaller transactions. One-ounce silver coins and rounds will be widely useful. For smaller transactions and to make change, you’ll also want to have some fractional sized silver.

Pre-1965 90% silver quarters and dimes are essential for any barter stash. During an economic panic or retail silver shortage, premiums on pre-1965 silver coins could surge. It’s best to stock up on these historic, no longer minted coins while premiums are still low, as they are now.

And finally, don’t worry about being ridiculed for diversifying out of the financial system. The ones doing the ridiculing are the same ones who didn’t see the financial panic of 2008 coming. And today, of course, they don’t see any trouble ahead for conventional investments.

CNBC Anchor: I'd rather have cash because both assets are of value.

Steve Liesman: Some people have thought that for the last eight or nine years. And they've missed a very powerful move, both in the bond market and in the stock market. I wish them well. And some of them are also sitting on great big piles of gold, or perhaps cans of tuna down in their bunker.

No, you don’t need to build a literal bunker or go overboard with stockpiling enough food and supplies to last you for decades. But it is prudent to have at least one month’s worth of survival essentials readily accessible in your home. Better to end up never needing it than to one day need it and not have it.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to be joined by David Smith, senior analyst at The Morgan Report and regular contributor to MoneyMetals.com. David, it's good to talk to you again and welcome back.

David Smith: It's always good to be back, Mike and we're in momentous and interesting times right now with the metals and the miners.

Mike Gleason: Yes we are. Well as we're talking here on Thursday morning David, the metals have a faced a tough week so far. Silver fell nearly a dollar on Tuesday alone and gold sold off more than $40 that day which are some big, big moves for both metals. They're continuing to drop a little bit here Wednesday and Thursday. Now when we had you on back in July, you were calling for a pull-back and after not seeing much deviation from the range trades that persisted in the two-plus months since that conversation, we finally saw the range broken to the downside here this week. So we are finally getting that correction just like you had predicted.

Before we get into what a great opportunity that this is presenting to metals investors, give us your thoughts on what's driving the correction here. Is it just technical selling that's driving this now that we've take out support levels and then do you think it's going to be short-lived or do you see more downside to come?

David Smith: Well Mike, I think a lot of use were looking for a potential correction from May on really, because this has been an historic rise in the mining stocks and to a lesser extent the metals themselves. But there was kind of like rope-a-dope going on the last couple of months before this thing finally hit and it looked like, "Oh this could be a correction and it would go on up and make a new high," and that's the sort of thing that shakes a lot of people up. Well, we’ve finally got it.

I think this is what we've been waiting for and hoping for, until I came here at any rate but it is the pause that refreshes. And it's painful now but it's important for people to realize that if we didn't have something like this and it goes up vertically and gets out of control, then it's going to crash and burn the same way which I believe most of us believe will happen and we want to see, if we want to see an enduring market in the gold and silver (markets) and the mining stocks that last through several years we need to have this type of a consolidation and re-tracement in order to shake out the weak hands. This is what Mr. Market does and then it consolidates and makes a new platform and then goes off on its way up again.

Mike Gleason: Despite the fact that we did breech support on the charts, is the longer term uptrend that began back in January still intact? What's that looking like now, David?

David Smith: It really is. A lot of people look at sloping trend lines and the professionals tend to spend a lot more time on what are called the horizontal support and resistance so you want to look at lines that have held before, drawn in a line right across the chart and look at some of these longer term lines and not get wrapped up in the 50 day (moving average) so much or even the 200 day. Some people even look at the 20 month. So when you look at the bigger picture, bigger, bigger, bigger, then you can see what's going on over a period of years and not get caught up in what's going on right in front of your face and then get too emotional about it.

Mike Gleason: Yeah, and people should keep in mind that despite being off their highs from a couple of months ago, silver is still up almost $4 on the year and gold is up about $200. So it just shows you how fantastic they performed over the first 6 or 7 months of the year so a pull-back was definitely in the cards, as frustrating as it may be to witness for precious metals bulls… mining stock investors, bullion investors and so forth.

I want to get into your most recent article here for MoneyMetals.com where you talk about how 2017 is going to bring about a public recognition phase for gold and silver in your view. Give us some insights into your thinking there. What will cause the average investor to get precious metals religion next year, David?

David Smith: Well, I think if you look at how bull markets get started, regardless of what the product is, it's going to be a bull market. Usually, the public doesn't pay attention for about a year after it gets started. And then they start seeing more positive articles and their gurus start talking about it and they look at charts and things like this and they start getting interested. And it's kind of funny. People tend to get interested once the price has risen quite a bit, most people. So they don't want to buy when it's on sale because it could go lower but they think if it's high it could go higher. They assume that will happen and then start coming in.

So I think next year, because of the culmination of a lot of the problems that we've had that are getting harder and harder to cover up at the international level, I think people are going to start seeing that they really need to hold some gold and silver if they don't have it or even add to it because this business of trying to move everybody into digital transactions where you don't use cash at all for things, all this is is a control technique on the part of governments around the world because they can track everything you do and if they want to have negative interest rates they can debit your account and things like this. So gold and silver are even more important now than they've ever been before. That's why we have this move by the governments to restrict our ability to have some kind of privacy.

Mike Gleason: In that article, you talk about some key levels on the charts that you're looking at down the road as we move higher, talk about that and then what do you think may happen once we do take out some of those key technical levels overhead for gold and silver?

David Smith: I think there are a couple of levels. This is not just exactly to the nearest penny, but let me round it a little bit. I think $26 for silver is extremely important because that was an area that a couple of years ago was penetrated after 4 attempts on the downside and when you see a price go 4 times over a period of months to a certain level, you really want to pay attention so it broke through that at $26 and then went down into the low teens and it took a couple more years to do that. So when that level has penetrated not just a poke, but when it gets up there and establishes a platform to move on up, I think that people are going to go, "Oh, my gosh. Look at this. This is huge." And they're going to get really, really getting interested and of course the smart money has been buying before that.

But they'll be continued to add and then the new people coming in will add more impetus to the volume and this doesn't operate in a vacuum because other things will be going on in the greater scheme of things, politically and economically and things like that which will be supportive of that. And then for gold, you could actually say a band of $1,450 to $1,550, but I think to be safe, I think you’re looking at $1,500 to $1,550. When prices get up there and spend a few days there and get ready to move on up, people are going to go, "Oh, my gosh. It's only $350-400 away from its all-time high, I'd better get going." And those 2 levels, they may not occur at the exact moment because gold and silver play tag-team in the bull market, but one of them will get there at that level that I just mentioned and then at some point within maybe a few weeks or even a few days, the other one will reach that particular other critical level for itself and then you'll have a matched pair and then it'll be off to the races.

And that will become an emotion driven market much more than a fact driven market and that's what's going to cause the metals to move very quickly upward to challenge the belts of resistance up to their nominal highs of 2011, which is around $50 for silver and around $1,900, I think $1,923 was the exact high for gold.

Mike Gleason: We're a little bit further away from those key overhead levels now. $26 silver is a little further away than it was just a few days ago so investors may have to wait a little bit here in order to see that line approached.

I love having you on during weeks like this David because your calming voice of reason is just what the doctor ordered for many metals enthusiasts. Now it has been very encouraging that we've seen some tremendous demand and huge buying this week in the physical market as the dip buyers and bargain hunters have been out in droves so perhaps some people are keeping the bigger picture in mind finally, but talk about investor's psychology here for a minute because while many may be seizing on this buying opportunity that seems to be presenting itself during a week like this, a majority of folks still aren't because perhaps they've gotten spooked. What advice do you have for people here? How do you keep from letting your emotions get the best of you during volatile market conditions?

David Smith: Guy Christopher made a comment on my article on the website there a few days ago and I commented to him and I used the quote by Stu Thompson when he talked about the fact ... This guy's a real professional, you know. He says, "We all have to undergo pain when we buy and price declines. And we just have to admit that we all feel that way and we have to go against that when we've done our research.” And that's what it is, and if you're not willing or able to do that then you're not going to make the big score. So that's the bottom line. You (need to) go against that.

It isn't easy for me to add money stocks this week. I put some orders in. That's another thing. You put the order in, you decide where you're going to go if it gets there and when it does you do it and you block out all that side reference and it's a good feeling knowing that you bought quality company for 30-40% off from what you would have paid a month ago and you go about your business.

And another thing I think that helps, and this is not just from mining stocks, but it's also for physical buying too. Maybe people that are considering buying some more gold from you and silver, or if they've already bought some or a new position, don't say, "Oh, today must be the bottom. I'm going to put every cent that I have into this situation” because it may be but it probably isn't. But if you go in trenches, and this is something I've written about a number of times on the site. If you buy in portions, let's say if you want to put X dollars into silver and you think, "Today looks good. It's down sharply," then buy half of what you intend to buy, your whole program. Tell yourself, "How much do I want to contribute to this idea altogether?" And then buy half of it or buy a third of it.

And when you do that, it turns the psychology of investing on its head because if you buy today and silver's down another 50 cents tomorrow, you are just absolutely rubbing your hands together because you're going to get it cheaper tomorrow or next week or whenever that is. And so you won't be in a panic if you bought it all today and then you go, "Oh, I was wrong. It's down tomorrow," then you're immediately being upset. So it's about controlling your emotions and you've got to do that otherwise you just have a lot of heartburn.

Mike Gleason: It's certainly good to keep some powder dry but then also seize on the opportunity that presents itself. Don't overthink it, especially if you're convicted and you understand why you want to own this stuff in the first place. Now offline, before we got going here, you were talking about something you just ran across regarding tunnel vision. Talk about that. I thought that was great.

David Smith: I been thinking about this in terms of any kind of threat management, whether you're looking at an accident on the freeway that you're trying to avoid or whether you've been attacked by a mugger or whatever it is or whether, or your accounts have been attacked by falling prices. What happens, when any kind of a threat is going on, this goes back to the caveman days. You know Mike, this is something too… I call us today, primitives with computers. We have these computers and we can push a button and do all this stuff or use our cell phone to buy and sell but we still operate out of the reptilian brain. And the moment that something goes on that startles us that we hadn't planned on, we go right back to what we did in the old days and we develop this tunnel vision and we block out everything on the side and we're focused on the threat. And for now the threat is lower prices in the metals.

You're looking at that and you're getting emotional and it starts out as a thought and then it becomes an emotion and then it goes into your stomach and it's hard to operate that way when you let all that take place. But if you realize tunnel vision is the sort of thing that nature gives us to deal with a problem. You go into that and you focus on what that threat is but you can come back out of it and look around and then you can go back in again.

You look at the prices, you look at the chart. You see where silver and gold are down today and then you can come back out and look at the bigger picture and go, "Wait a minute. Why did I buy in the first place? It's because I believe that because of all the problems that we have that aren't solved and also because of the love trade coming out of China and India, 3 billion people are going to be buying more gold and silver with their new wealth, that this story has a lot of merit. I'm a believer in it so why am I upset now? Why am I not happy that I'm getting something on sale that I hadn't planned on?"

I went to the grocery store yesterday. I like this type of tea, Numi Tea. They don't put it on sale very often and so I was looking to buy 2 or 3 kinds. I walked in. It hadn't been on (sale) for a long time. It was on for $2.50 a box off. I was going to buy just a couple boxes altogether. I went in and I saw that, I bought about 10 boxes because that's a deal. I just made my money go farther. And so I think if you look at the metals and the miners the same way and you buy in trenches and you do your research ahead of time I think you'll be well ahead of the game and when this is over and prices are going up and exceeding the highs that we saw a couple months ago, you're going to feel pretty good about it.

Mike Gleason: We're about a month away now from the big November election and I'm curious what you're thinking about all of this madness on the campaign trail and what effect do you see the outcome having on the metals specifically? Because David, I think you might be able to make a case that... either it doesn't matter who wins or that gold and silver might get a boost with either outcome. What say you, David?

David Smith: I think you could make a case for both of those because you're going to have the flash estimate of the market and it's going to be simple. Who knows what it is… I've heard compelling cases for both sides of what it's going to do for either candidate. But also the fundamental problems haven't been worked on at all and you're assuming that whoever gets to be president is going to have this massive hand that brings solutions to all sorts of problems and the reality is first among equals, there's hundreds of players that are going to pound out decisions that may or may not work. We've got so much systemically going on that has not been addressed for many, many years that this is not going to be solved overnight.

So when the prices calm down, whether they have a bump or whether they have a drop, they're going to get back to reality and people are going to go, "Okay, where are we now and where are we going to go over the next few years?" They're going to see that the problem still remains and they're going say, "You know, I'm glad I've got some gold and silver, because it's real money, it always has been and it'll help insure me against the depredations of the government is going to do, which often doesn't work."

Mike Gleason: They certainly are the true safe havens and I think more and more people will be recognizing them to be just that, especially into next year just like you were writing about in that article.

Well David, as we begin to close here, any final thoughts on what the rest of the year might hold and then also give us some information on the book that you and David Morgan are working on because when I saw you last in late August, you were hard at work on that and you told me this is a book that you and David really believe needed to get out to the public this year. So talk about that as well as we begin to wrap up.

David Smith: Okay, well let me give people a link first of all that they might want to look at. I just read this this morning. Bob Moriarty, and you can find it on his site at 321gold.com. He wrote something to the effect of, "I'm a buyer at $16 silver." Look at this as not so much a predictor of where you should buy silver at $16 or whatever, but look at it as a way to calm yourself down and see the bigger picture. And Bob has an unerring ability to catch big turns. Not to the day, but within a reasonable time frame. And I think if people read what he writes, I think that will help them see the bigger picture and put things into perspective.

Regarding the book that David and I are working on, we hope to have it available for the Gold and Silver Summit November 14th & 15th in San Francisco. It's going to be pretty tight but it certainly will be available soon thereafter. I was just talking to the publisher today and doing some things on it, waiting for that first galley. But it's called Second Chance How To Make and Keep Big Money During the Coming Gold and Silver Shock Wave. That's a pretty good mouthful for a title but it says what we really want to get out there. The idea that the second chance, you may have missed it in the run up in 2011. You may have missed what's going on now. You may have invested in May and now you're under water.

The point is, this is just the beginning of the third major secular up-leg in gold and silver that we believe will take them to all-time nominal highs, well above anything that they've achieved before. The idea too, a lot of times most of the books that you'll see something like this is about how to make a lot of money in the markets but it doesn't talk at all about how to hang on to it. And so we believe that there's a sensible way to deal with your profits when they accrue so that you can keep a lot of those profits when the market finally turns down some years hence, rather than ending up riding it all the way up and all the way down like people did in dot-com 2000, and like they've done in most other booms and busts.

We've got a long way ahead of us for higher metals prices but at some point you'll need to reassess that when those price levels are achieved. So we want to give people an opportunity to think about it that way and we're directing our book at two primary groups. We're directing it at the Baby Boomers, the people that were born between 1946 and 1964 and the Millennials who were born from about 1982 to 2004. Both David Morgan and myself have two millennials that we have raised.

We feel this might be a way to help out a little bit and give something back to the people in our children's generation who are going to be the new leaders who are going to take over when the Baby Boomers step off the stage after all the mess they've made and we hope the Millennials can get things put together. But this is an important time in our history and we believe that it's an important time to be thinking about the biggest picture and we think that the precious metals play a very important role in helping people to end up with the wherewithal and the insurance coverage to, as we go through that new great gate of destiny that Neil Howell talks about and Strauss in the book before The Turning.

It will be a generational change, we want to have the Millennials and the Boomers too, who are both under-capitalized and under-financed right now, we want to help them perhaps move to a little better space financially and not to mention emotionally so that they can be change agents along the way and help out and also be people that are independent and can help in the rebuild process rather than people that are standing in line waiting for the government to do something to get them off the dime.

Mike Gleason: Really looking forward to that. I'm sure it's going to be fantastic information. You and David putting your minds together and your experience into a book is going to be very exciting. David, it's always enlightening to hear your thoughts and listen to your wisdom. Thanks once again for your time and your excellent insights. Keep up the great work. Good luck with the upcoming book and we'll look forward to your next article for MoneyMetals.com. It's always great stuff there as well. I hope you enjoy your weekend, my friend. We'll talk to you again soon.

David Smith: Thank you very much, Mike. Have a good weekend and we'll look forward to speaking again.

Mike Gleason: That will do it for this week. Thanks again to David Smith, Senior Analyst at The Morgan Report and regular contributor and regular columnist for MoneyMetals.com. To check out any of David's insightful columns, just go to the news section on MoneyMetals.com or just type in David Smith in the search box and you'll get links to all of his fabulous work. Be sure to check that out.

Check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening and have a great weekend, everybody.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up David Smith joins me to talk about the ongoing destruction of the U.S. dollar. He explains why he believes those who continue to ignore the dollar’s decline will end up like the homeowner who one day discovers his house has slowly been destroyed by an army of termites, but learns it’s too late to anything about it. Don’t miss my conversation with David Smith, Senior Analyst at The Morgan Report and regular contributor to MoneyMetals.com, coming up after this week’s market update.

Precious metals markets are mounting a modest comeback this week. Gold and silver gained on Thursday following the implosion of the planned North Korea Summit.

President Donald Trump announced he would be pulling out of a much-anticipated meeting with Kim Jong-un after the North Korean dictator spouted off some bellicose rhetoric at the United States. It was a dramatic turn for the worse in U.S. relations with North Korea. Just a few days ago, there was talk of President Trump possibly winning a Nobel Peace Prize for bringing North Korea to the negotiating table. Now it appears the unpredictable regime is going back into isolation and preparing its population for war.

Of course, the North Korean government would get completely wiped out if it actually engaged in a nuclear war with the United States. But having nuclear weapons and the ability to threaten South Korea with them deters the U.S. from pursuing regime change. The regime stays in power by portraying itself as ruthless and unhinged enough to use nukes… without ever actually using them. So perhaps the best case scenario peace advocates can realistically hope for is a continuation of the stalemate that has been in place for decades.

There are other hot spots for geopolitical conflict simmering right now, including Venezuela, Iran, Russia, and China. U.S. economic sanctions and tariff threats aren’t sitting well with much of the rest of the world. But the rest of the world still largely trades goods for U.S. dollars, at least for now.

Dollar strength versus foreign currencies persisted again this week, marking a 6-week rally. However, the dollar did lose ground against the hard currencies of gold and silver. The gold market sports a 0.8% gain this week to bring spot prices to $1,303 an ounce as of this Friday morning recording. Silver checks in at $16.54 an ounce, up 0.3% on the week.

The silver market had nearly broken down below its narrowing trading range last week, but buyers came in to rescue it from the abyss at least for now. Bulls now have an opportunity to push prices through overhead resistance levels and force short sellers to cover their positions.

Silver and gold are both showing impressive strength in the face of a strong dollar. If the greenback starts to falter, that could give metals markets the final push they need to finally break out into a major rally.

The Federal Open Market Committee released the minutes from its last meeting on Wednesday. Fed officials vow to hike rates again “soon” – likely next month. But they gave no indication of an increased pace of monetary tightening. They just confirmed what was already priced in to the markets.

One longer-term takeaway from the FOMC minutes that could be bullish for precious metals is that the central bank reiterated its willingness to allow inflation to have a “modest” overshoot of the 2% target. The question is whether inflation will in fact continue rising – and rise more rapidly than the pace of rate increases. Such a scenario could be very bullish for gold and silver.

Many gold and silver bugs believe precious metals prices have been artificially suppressed – manipulated by the powers that be as a way of tamping down inflation expectations and supporting the dollar. The extent to which that’s true is debatable, but what’s not debatable is that market manipulation does occur – even if for more mundane purposes like banks and brokerage houses wanting to screw their clients on trades. Illicit tactics such as front running and spoofing have been well documented.

This week the Commodity Futures Trading Commission launched a market manipulation investigation into cryptocurrency trading, as reported by Bloomberg News:

Bloomberg News Anchor: Do we know any more about what the U.S. is actually investigating?

Ed Robinson: Yes. This is a significant moment, and I would point out that the agency involved in working with the U.S. Justice Department is the Commodity Futures and Trading Commission. So, this isn't coming from the Securities and Exchange Commission, which is already investigating initial coin offerings, or ICOs, for fraud. So, now you have the two capital markets agencies in the U.S. both investigating these processes. And when it comes to the CFTC justice probe, it looks like they're really looking at the traditional frauds that we've seen in the stock market. You're seeing spoofing. You're seeing wash trades. You're seeing basically all of those manipulative tricks.

For many years, sound money advocates have been trying to get the CFTC to crack down on manipulative tricks in the gold and silver markets. The CFTC has heard the complaints but done little about them. We’ll see what regulators decide to do regarding crypto markets and if that has any implications for commodity and precious metals markets.

Freer and fairer markets should be the goal regardless of what’s being traded, but many cryptocurrency enthusiasts fear a government crackdown. Greater government interference in markets could be a solution that’s worse than the problem. Right now, the threat of heavy-handed government overreach is much more immediate in cryptocurrency markets, which sold off this week in part because of such fears. Government restrictions on trading are much less of a threat in precious metals markets, at least while they remain quiet and off the radar of the media and publicity seeking bureaucrats.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to welcome back David Smith, Senior Analyst at The Morgan Report, and regular contributor to MoneyMetals.com.

David, thanks for joining us again, how are you?

David Smith: You bet, Mike. It's great to speak with you again.

Mike Gleason: Well David, we published an article you wrote on inflation this week on our MoneyMetals.com website, and it's really great, by the way, and I hope everyone listening will take a few minutes to read it, because the subject matter, that being inflation, is very timely.

Right now, metals are suffering because of a rally in the U.S. dollar. There's lots of talk on Wall Street about how well the dollar's performing over the past few weeks, but traders, of course, are focusing exclusively on the dollar's exchange rate with other world currencies. You and I know that isn't really what matters. What counts is not how many euros or yen the dollar will purchase, it's how much gasoline, or housing, or food it will buy. And the reality is that it buys less of those things every year. We have inflation regardless of whether you define the term as an increase in the money supply, or as an increase in the price of goods and services.

However, precious metals have fallen in recent weeks simply because the dollar is stronger in foreign exchange markets. The fact that the dollar buys more yen is trumping the fact that the dollar buys less oil. It's as if we have deflation but the truth is, inflation is actually positive and starting to accelerate. So, what gives here, and how long do you think it will be before Wall Street figures out what is really happening to the dollar's value, David?

David Smith: Well, Mike, I think a lot of it has to do with Wall Street looking at the exchange rate because they're asking themselves what effect will it have on the profitability of companies that do business overseas or that import things and it has a significant effect on them if there's a change in the dollar's relation vis a vis to the currencies.

But the more immediate effect happens to the rest of us because we start paying more with inflation for things that we buy and sell on an everyday basis. So we're in a different universe from Wall Street in that regard. I don't know about you, but I've noticed the price of services going up substantially. Some prices have stayed the same for several years at the grocery store, beyond just the normal seasonal fluctuations of produce that you might expect to be more like avocados certain time of the year.

But a lot of other things, too, that normally have been pretty stable seem to have a built-in upward bias and all that does is to take more and more purchasing power out of our pockets, yours and mine, and the people listening to this, and place them someplace else. So, it's kind of a subterranean type of thing that's going on but it's not to the good for any of us.

Mike Gleason: Yeah certainly, well put and obviously the markets seem to be focusing very much on what it does relative to those other currencies and not really what it's buying, like you said right there. I mean everyone can attest to the fact that things are getting more expensive. There's no doubt about that.

As you have written, inflation is a destructive force for most of us. The powers that be have done a masterful job of painting a degree of inflation as somehow healthy for the economy, but you spend a lot of time traveling in South America, as you mentioned in this week's article. So you've seen firsthand what is happening in places like Argentina and I guess the government there has given up talking about how wonderful it is that money buys less every year. Obviously nobody there is going to be buying that line of bull anymore.

In Venezuela, people are starving, and violence is on the rise. Talk a bit if you would about what a rampant inflation looks like on the ground. You recently took another trip to South America. Tell us what it's like when confidence in the money begins to fail.

David Smith: Well, it's very insidious and ultimately it tears away at the fabric, the social fabric of the country because it encourages all sorts of malinvestments and people buying things that they don't need just to have the money put into something that they can probably barter with down the line. I mean, have people owning five refrigerators. The demand goes in ways that aren't productive at all.

In South America, they've dealt with this for a long time. Macri now, who was a very forward-thinking individual that was elected a couple years ago in Argentina, things were looking really good. But here's the problem. If we define inflation as an increase in the money supply, a lot of what's happening now that Macri's having to deal with really was the increase in the money supply under Kirchner, the former President of Argentina.

I remember very distinctly, her person, I don't know whether she was a central banker but she was a very high person up in the monetary creation universe of Argentina saying that we see no connection between an increase in the money supply and inflation. And that was just absolutely absurd because by definition she's 100% wrong.

And so now those effects which take time to develop are rippling through the economy and they're causing a lot of trouble. And a lot of it is not Macri's fault but he may pay for it politically at the next election next year and they may try to reelect someone that gave them the same thing they did before, which is going to guarantee more and more inflation and more destruction of the currency.

And you know what's really sad, too, this has been happening several times in the last century with Argentina, is that people have learned to keep their money out of pesos, either buy things with it or have a false refuge of the U.S. dollar. So for example, you can have a bank account in U.S. dollars in Argentina. But what happened last time, just a few years ago, is that the banks when things got really tight, they actually converted those U.S. dollars, without the permission of the account holder, into pesos. So, even though people had done something that was going to help them quite a bit in the inflation, they were taken out at the last minute, blanked by the banks themselves. Illegally of course, but what could you say? And so their accounts became worthless as a result.

So, a lot of effects that aren't immediately observable are going to take place but as things go down the pike there, you get a lot of strange relationship in terms of people's behavior toward it.

Mike Gleason: Of course, the conventional wisdom is that the U.S. is well-insulated from that sort of currency crisis. America's much wealthier and the dollar is too important in world trade for it to be abandoned. We would acknowledge that those things are true but we don't think either of them have been written as a commandment in stone or that it will remain true from here to Kingdom Come. So, what do you see as the important similarities and differences between the U.S. and a place like Venezuela or Argentina and how would you gauge the risk of a currency crisis here at home?

David Smith: Well first of all, I think anybody in our country who thinks “Well, I won't worry unless we end up with 100% inflation a year or 1000% a month like you have in Venezuela”… that's really waiting until the horse is out of the barn because I don't care if it's five percent – let alone 10% or 15%, each year – at five percent inflation, that means that your money is worth 95 cents on the dollar at the end of that year.

Every year it goes on, your Social Security payments that you're going to get, which are not really indexed to the real rate of inflation, are going to be eaten away. And so, it's more like an army of termites eating away at your house. And you go, "Well, it's still standing and I really can't see anything going on." But inside the structure is being destroyed, one bite at a time and then at some point the house falls down, which is a little late to do anything. You want to keep the termites under control or get rid of all of them before that happens.

And so even the five or ten percent inflation that goes on here, which is substantial really, is nothing to not be concerned about. And it happens, as I mention in the article, the government will tax you on phantom profits. So let's say your stocks go up ten percent this year and five percent of that is inflation. You're paying tax on that five percent that you didn't really earn because it's not there. But yet you get taxed on something that really didn't happen to you.

It has all sorts of negative consequences and it's very debilitating over time. It's something that people should be worried with even if it is true that the government says we're just trying to get two percent inflation, which they have now – and it's actually maybe four or five times that – that’s still very corrosive to your ability to maintain your purchasing power.

Mike Gleason: I know Senator Ted Cruz has introduced a bill to get rid of that illusory gain where you are taxed on the gain that's as a result of inflation. He wants to back that out. Of course, they would probably be using the government's inflation numbers anyway if they were to put that through, which we all know is artificially low.

Now the reason you do regular traveling in Mexico and South America is to visit with people in the mining industry and tour some of the projects being covered there at The Morgan Report. Talk for a minute about how gold and silver miners have been doing in recent months. Metals prices have been rising since the end of 2015, but not dramatically. Fuel prices meanwhile are now back on the rise, so that will have a significant impact on cost, to be sure. So, are miners profitable in general David, and is there enough capital to fund some exploration for reserves to replace current production?

David Smith: The places that I've visited this last year, a number of them have really gotten to be fairly profitable, even before the increase in fuel prices because they've really cut costs and things like this. So, they're doing pretty well.

But regarding the issue of capital involved in the gold process and finding it, it's not just a matter of throwing a bunch of dollars at things, it's a matter of what are you going to find? And so, the deposits have become further and further apart of any size, and it takes two to three times as long to develop a project from the first hole that they find gold in that looks good, to production, and much, much more expensive.

And so, in a sense, it almost doesn't matter how much money you throw at some project, if you're not finding much or if it takes so long to develop that becomes inconsequential in relationship to the output.

Mike Gleason: I recently heard a statement from a top mining executive, I believe it was the head of GoldCorp., saying that we've reached peak gold and that after some 40 years of increasing mine supply we're now to the point where we're going to start to see a decline each year. The World Gold Council has indicated the same thing, so this may very well be a narrative that gets more and more traction. And if it does, you have to think it could drive the price.

So, what are your thoughts on the idea of peak gold, David, and what are the ramifications if it does become a reality that we are going to start to see a decrease in the annual production from this point forward. Because the world's demand for gold is still very robust, maybe not so much here in the west right now, but it is in the east, and let's not forget China and India alone make up 35% of the world's total population and they already can't get their hands on enough gold as it is.

David Smith: This is something that I think is definitely a big factor. Pierre Lassonde at Franco-Nevada has commented on it and he made a very trenchant comment about six or eight months ago saying in the 80s and 90s, every year they would find a 50 million ounce deposit and they would find eight or ten, ten million ounce deposits and they would find five million ounce (deposits) too numerous to mention. And that hasn't happened in the last 20 years. So I think the biggest one that I'm aware of was Fruta del Norte, and that was 2006. And that's just now getting to the point of production.

But this is going be a big deal. It's going to keep happening even if they find a couple more good-sized deposits that we don't know about. I think the days of easy money of finding big deposits and bringing them into production, cost effectively, and timely, are (in the) past. It takes up to three times as long now to move from finding that first deposit that looks good or that first hole that looks good to actually producing. And it's becoming more complex with environmental concerns, etc., you name it.

So, I think we're in for more of the same. And you know, David Morgan has long made the comment which I think is extremely important and overlooked by many people, and I know people listening to this have felt, “Well, prices have been low and longer than we thought” and they're getting losing faith and all that, but they really should remember that I think we're getting very, very close to that realization on the part of the broader market that things have changed.

And David has always said you know, if you have a lot of supply of something but you have a demand that starts outstripping that supply, it almost doesn't matter over the intermediate term how much you have because the price is going to go up because demand is the true driver. And I think we're going to start seeing that later this year and if this trend gets underway, reestablishing the trend that started two years ago, the bull trend in the metals, in the miners, we're going to see substantially sustainable prices for the next three to five years.

So, it really is the quiet before the storm and it's just something that people really need to steel themselves for and pay attention and not lose faith just before the turn happens.

Mike Gleason: Yeah, very well put. Well, David, we're about to enter the summer months here and in many years seasonality in the markets, and in particular the PMs, has lent to some lackluster price action during these upcoming few months. So, what do you expect here over the short to medium term in the metals through these summer months and as we move towards the end of 2018?

David Smith: Well in the summer, there can be a double bottom in the miners, almost no matter what's going on with the trend that preceded it. There tends to be a primary bottom in late June, early July. And then the secondary bottom in late August, just before everybody comes back from their European vacations and gets back to the trading desk. And I suspect it'll look like that again this year.

It would not surprise me with the weakness we've seen in physical gold and silver and the demand domestically that we could see an attempt by the floor, so-to-speak, to drive prices down through recognizable support levels in gold and silver on the technical charts and shake out the last of the weak holders.

What happens a lot of times, especially silver, it's even more evil if you want to call it or whatever, but more spooky than gold because it will establish two or three lower lows and all of a sudden the technical charts turn down and then it turns right around and you've got a false bottom that came in there, a bear trap, so-to-speak, and take off. I would look for that sort of thing to happen not only in the physical price but also the miners themselves.

So, right now the better miners are holding up reasonably well. I mean obviously they're backing and filling and that type of thing but they're not in a downward path. And so if the whole sector was going down I would just about lose hope, but it's not the case. The better run miners, as we talked about earlier, that are making money now, the smart money knows that and they're taking positions in it. And the smart money also continues to do their buying programs in physical gold and silver.

And this is something that The Morgan Report, David Morgan's flagship newsletter has said over and over, and we say the same thing on his blog and of course in Riches In Resources, where we have articles that you can read for free. Just start boning up on what's going on and don't listen to the people on Wall Street that are touting their own story to get commissions. And just keep, when you can, buy gold and silver and I think that you will be vindicated and you will feel very, very good in the near to intermediate term.

Mike Gleason: Yeah, it's certainly very much still on sale and one of these fundamentals that we just spoke about with rising energy costs, you have to think at some point it's going to either destroy the supply to the point where we have to get a bounce because we'll have a supply-demand imbalance in physical metal or it's going to cause the cost of production to go up to the point where we're just going to have to see higher prices as a result of that, just the fact that it's more expensive to pull the stuff out of the ground.

Well, David, thanks as always for your time and your great insights. We really enjoyed that article you did this week and we urge everyone once again to check it out. It's a great commentary on the subject of inflation. Keep up the good work my friend and we look forward to catching up with you again before long.

David Smith: Thank you, Mike. And anybody that reads those articles that wants to write in with a comment, as you probably know, I answer all of them. Or if I'm out of the office or something, somebody at Money Metals does, so we value and honor everyone's comments to stimulate the thinking and so don't hesitate to make a comment and we'll address it.

Mike Gleason: Well that will do it for this week, thanks again to David Smith, Senior Analyst at The Morgan Report and regular columnist for MoneyMetals.com, and the co-author, along with David Morgan of the book Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave, which is available at MoneyMetals.com and Amazon. Pick up a copy today.

And check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason, with Money Metals Exchange. Thanks for listening and have a great Memorial Day Weekend everyone.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up we’ll hear another terrific interview with David Smith of The Morgan Report and MoneyMetals.com columnist. David weighs in whether crypto-currencies and precious metals can coexist and talks about what we can glean from the current mania in the cyrptos as it relates to the upcoming mania in precious metals. Be sure to stick around for my conversation with David Smith, coming up after this weeks’ market update.

Now that Republicans have passed their tax cut package, investors are trying to position themselves in what they think will be the big winners as the new law takes effect next year.

Broadly speaking, the new law is a big win for U.S. corporations. Their tax rate will drop from 35% down to 21%. President Trump believes lower taxes on businesses will lead to more factories being built, more jobs being created, and stronger economic growth. He’s probably right – at least to some extent.

On Thursday, the Commerce Department announced GDP growth for the third quarter coming in at a robust 3.2%. Economists are now projecting close to 4% growth next year as the tax cut stimulus kicks in. Of course, with our government’s serial under-reporting of true inflation rates, these economic growth numbers are overstated in real terms.

But the conventional wisdom is that U.S. stocks will continue to charge ahead. This week saw some notable divergences develop in markets, however, and that could be foretelling major trend changes. Bonds, along with interest-rate-sensitive sectors such as real estate and utilities, sold off. Meanwhile, oil and natural resource stocks rallied strongly.

Investors appear to be reacting to the potential inflationary side effects of stronger economic growth that’s fueled by deficit-financed tax cuts. Yes, the tax cut package is expected to grow the deficits by as much as $1.5 trillion over the next decade.

Metals markets responded this week by moving higher. Copper prices rose 3% to near a 3-year high. Palladium ticked up to a 16-year high, while its sister metal platinum gained over 3% this week to pull out of its recent slump.

As for gold and silver, they are posting modest advances. Gold prices are up by 1.4% this week to trade at $1,273 and spot silver trades higher by 1.6% to come in at $16.36 an ounce as of this Friday morning recording.

If metals markets continue to show strength into 2018, they may well be signaling a larger inflationary trend set to take hold. Any significant increase in consumer price levels would be disastrous for the bond market – and spell trouble for some or even most sectors of the stock market.

Higher rates of inflation are bad news for most financial assets… but good news for most hard assets. Precious metals markets tend to thrive when the inflation rate is rising faster than interest rates – in other words, when interest rates are trending negative in real terms.

There is the potential threat of Federal Reserve rate hikes pushing rates positive in real terms. But you can bet President Trump’s incoming handpicked Fed chairman will back off at the first sign of serious trouble for the stock market. Trump is on record favoring higher asset values and a weaker dollar – which effectively means he favors higher rates of inflation.

The government itself has powerful incentives to promote price inflation. The IRS gets to tax the nominal gains on assets artificially boosted by inflation. And the Treasury Department gets to see the real value of its massive debt obligations steadily eroded.

But the biggest inflation trick the government employs is understating it. Using manipulated inflation gauges such as the Consumer Price Index enables the government to artificially hold down cost of living adjustments for Social Security. Understated inflation also generates stealth tax increases.

One “inflation tax” hazard for investors is winding up in higher tax brackets due to nominal increases in income. Wages or investment income that rise merely at pace with inflation can push taxpayers into higher rates of taxation.

The problem of “bracket creep” is supposed to be offset by annual increases in the bracket cut-off levels based on the Consumer Price Index. But a provision buried in the GOP tax bill passed by Congress this week changes the inflation gauge to “chained CPI.”

The difference between chained and unchained CPI is small in any given year. But according to the Joint Committee on Taxation, the obscure little change to “chained” will generate $30 billion in additional tax revenue through 2026. That’s because chained CPI usually comes in lower than regular CPI.

Inflation is an insidious threat to investors in more ways than one. And while gold and silver markets aren’t guaranteed to keep pace with inflation every single calendar year, the precious metals often massively outperform official inflation rates during periods when they flare up.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to welcome back David Smith, Senior Analyst at The Morgan Report and regular contributor to MoneyMetals.com. David, Merry Christmas, and thanks for joining us again. How are you?

David Smith: Very good Mike, and thank you and the very same to you and yours.

Mike Gleason: Well, as we start out here, David, let's talk first about the setup as we finish up 2017 and move into the new year. There are a lot of similarities to last year, maybe the year before. We've had the Fed just announce a rate hike. The move was well telegraphed and all the selling in the metals happened prior to last week's FOMC meeting. Open interest in the futures got pretty extended about a month ago, and as often happens in that scenario, the speculative long buyers were taken out to the wood shed and punished as the bullion banks cashed in on their shorts. Now we're seeing a bit of a rally in the metals, so the situation in these regards is very similar to a year ago. What are you expecting from the metals markets in the weeks and months ahead? Are you looking for a rally to match last year's?

David Smith: I really think that we could be looking at a very similar set up to 2016 where the metals actually bottomed in December, and the mining stocks tried to put a lower low in in mid-January. And I'll never forget it, January 19th, and on an inter-day basis, they turned around, and then it was up and away for the metals and the miners for the next six months.

Then between then and now they gave back about 50% of it, which is what you'd expect on a retracement, and nobody can predict the future exactly, but I really feel pretty strongly that we're going to see a very strong, right out of the box, in January, on the metals and miners, and it may even turn before the new year, but there's so many technical indicators themselves, that when you add them all up, they become something larger, and so I think if a person is waiting to purchase their metal, they shouldn't be waiting too much longer if they had the same view I do.

And not only that, as you know, when the demand starts ramping up pretty quickly, the premiums go up too, so you would have a double whammy against you, buying at a higher price and paying a higher premium if you wait until a lot of other people kind of get the same idea.

Mike Gleason: Yeah, certainly a buyers’ market right now, both in terms of low spot prices, and also the premiums, as you mentioned. And the last couple years, we have had pretty strong, right of the gate, moves there in the metals and the miners, and maybe 2018 is going to have the same thing.

Now in your most recent article that we published this week in MoneyMetals.com, you make the case for physical metals and cryptocurrencies to coexist. Now we think that is a vitally important idea right now as people are working through questions about what the advent of Bitcoin and other cryptocurrencies will mean for gold and silver. It would be pretty easy for people to look at price charts and leap to the conclusion that metals are quickly becoming irrelevant. The reality is that the times we live in are desperately calling for honest money and that both cryptocurrency and metals both have important roles to play. They have very different strengths and weaknesses, however, so talk for a minute, David, about how these two asset classes are likely to coexist.

David Smith: Well, the majority of the buying right now worldwide in gold and silver is in the Far East, and it's been that way for a while… probably 65-70% of the volume. Things have tailed off a little bit in the United States, but elsewhere in the world, that's not the case. In fact, Germany came out of nowhere to be, I think one of the, if not the largest country buyer of the last few months of gold. And a year ago, their volume was almost nothing, so Turkey is I think number 3 in the world now.

So these areas are all becoming more and more important demand pieces for gold, even as gold and silver look to be tailing off in terms of production. It's getting more expensive to do it… the grades continue to drop in both gold and silver in many of these mines. So, we're going to be seeing more demand and relatively less supply and that's going to put upward pressure on the prices. And as you've mentioned before, we're talking about gold and silver having been money for thousands of years.

They're going to continue to occupy that stage, and not only that, a lot of the people that are in Bitcoin are actually buying metals with the Bitcoin, so the price has gone up and they get to buy more gold, and they get to buy more silver, before it drops again. And we've been seeing these huge, huge swings. It's nothing to see bitcoin drop $5,000 in a couple days, and so far it's been able to recoup most of those, but I mean, that's a tremendous amount of volatility. It makes mining stocks look like they're designed for widows and orphans compared to the cryptocurrencies right now.

Mike Gleason: Yeah, you are one of many gold bugs who has become interested in Bitcoin and cryptocurrencies, and it isn't just about the price appreciation, though the action in those markets is definitely a spectacle, as you mentioned. You, like many of us, can see the potential for crypto to change the world. People are starting to imagine something like Bitcoin becoming a major world currency, and a very real threat to banks, including central banks. There are even some who think the current price explosion is signaling that this sea change is already upon us.

Now we happen to think that is a bit premature, Bitcoin for example, is not ready yet for prime time. The network is horrendously backlogged with transactions, taking hours to confirm. Fees have risen dramatically. It is nowhere near being able to serve as a major world currency. The network would need to handle tens of thousands of transactions a second, not the current limit of less than 20.

Now, there are solutions being proposed to these scaling problems, but it will be some time before anyone can say with confidence they will work. So, in the light of that, we're wondering if price hasn't already moved ahead of capability for Bitcoin. What are your thoughts there?

David Smith: It's really possible, and the thing is, as you mentioned, the issues that Bitcoin has about the state of execution and scalability, but there are a number of other altcoins, you might say, that are trying to do something similar, and even Bitcoin Cash, which is a spinoff fork – since August of this year it has really been trading because it moves transactions much more quickly. And then of course, there is Monero and Litecoin and Dash, and so, there are a number of other similar coins that are doing similar things and there's no way to know which one will end up becoming top dog. It might be something other than Bitcoin, but right now it has the first mover advantage.

But one of the things that I think that is very positive for gold and silver and people who believe in it, is that, Doug Casey made this argument, and I think it's a very powerful one. He said, "The interest in Bitcoin is stimulating people to ask, 'what is money?'" They hadn't really been talking about that so much anymore, I mean, the hardcore gold bugs and silver bugs have always felt that way, but the average person on the street never asks themselves, "what is money, and what does it mean to have it deteriorate in value?" And so, the money in their pocket buys about 3 cents from what it did, say, as far back as 1960. So, this is going to, when people really ask that question, and they say, "what has been considered money for centuries and millennia?" They're going to go "Oh, you know, it's been gold and silver." And so, I think it's going to introduce a lot of new people to the precious metals that maybe hadn't ever held it, so that is a salutary advantage of what's going on with all the chaos that's going on in Crypto Space, in my view.

Mike Gleason: We’ve had a huge influx of folks buying metals with Bitcoin this year, and especially over the last 2 or 3 months. And aside from being an outlet for people to spend their crypto profits, we are one of the only national dealers out there who also has the ability to pay people in crypto, whether it be Bitcoin, Litecoin, Etherium, etc, when customers are selling to us. So, we’re seeing a lot of coexistence between these two asset classes for sure, at least from our perspective as somewhat of a leader in terms of doing metals for crypto transactions both ways.

Now, another aspect that I wanted to touch on between the amazing developments that have taken place, and are currently taking place in the Crypto Space, and comparing it the potential for precious metals, is this incredible volatility that can accompany a mania phase for an asset class. Now that mania is in full force for the crypto world right now, but perhaps that day will be coming soon for metals as well. Talk about that for a minute because we could see a foreshadowing here of what might happen in gold and silver markets once people start to pile into physical ownership of the metals. Talk about what we might be able to glean from this crazy situation in Bitcoin that we're in the midst of. How might a mania in the metals look similar and how might it look different?

David Smith: I think that we will see in a few years a mania in the metals, and it'll be similar in terms of the velocity of money moving around and the spikes up and down, and the price of the metals. And the reason for that is because communication is so quick nowadays, it's instantaneous, and that's the reason people all over the world ... This is the first time in world history where people all over the world are invested in an asset class at the same time, for many different reasons actually, but that's why I think the people that were calling for a Bitcoin mania in January, when it was $900 and then all the way through the year, then when it was $2,000 or $3,000, $4,000, and they've been spectacularly wrong, and nobody knows. Maybe the top was registered a couple days ago, but it wouldn't surprise me to see it go much higher, with big swings up and down at the same time.

But when people move into the metals in a big way, which they inevitably will, you're going to see the same type of a thing when the supply/demand ratio gets out of kilter. And people are going to be striving to find metal at any price, at some point. And they're going to be able to have that same level of communication around the globe and trying to do that, that people are doing now with their cryptocurrency. So, it does share that one element in common, plus human nature never really changes, does it?

Mike Gleason: No, certainly not, and obviously one of the issues that we're dealing with right now is that with these low prices, the producers, especially the primary silver producers are not terribly profitable at these types of prices, so there's not a lot of new exploration. Thus, supply is going to continue to dwindle. If we go with the data that tells us that maybe 1-2% of Americans actually own an ounce of precious metal.

If, all of a sudden, that doubles during a mania phase. It takes a while for that supply to come online, as you well know, studying these miners. It's not a switch that you can just flip, and automatically have a bunch of new ounces being pulled out of the ground. It takes years in many situations to get a mine up and running... go after those exploration projects and so forth. So that really could potentially drive that mania and make it go even quicker than we were expecting if you truly can't get your hands on the metals. Speak to that.

David Smith: That's really true because they're not making any really large discoveries anymore. The article I wrote last month, quoting Pierre Lassonde. He just said, "We're not finding anymore 15 million ounce gold discoveries and we're finding just a few 3 million ouncers." And so all the companies that are producing today, regardless of the metal they're producing, they are wasting assets. Unless they find ways to bring in more ore on stream, they are producing ounces that aren't going to be replaced and then that means the value of their company goes down, and what they can produce. And so, this is going to be something that's going to weigh on the whole industry big time going forward. It's just not very likely that you're going to see any more mega-discoveries, like were fairly common 30 years ago.

Mike Gleason: Sticking with the mining industry here for a moment, what is your intel showing in terms of the state of the industry? How are they doing? Are you expecting more consolidation as the prices remain suppressed here? What's the situation with the mining industry?

David Smith: A number of the better run companies are doing reasonably well. They're producing at a reasonably good profit. There's going to be more consolidation in the industry because the medium-sized ones are going to get swallowed up by the larger ones. It's a lot cheaper for a big company to go out and buy a project that's already been permitted and maybe even having production going on, than to go through the permitting process. I visited a company in BC this year that took almost 20 years to get through all the environmental permits and the agreements with First Nations, and, not to mention, to keep delineated enough of a resource to turn it into reserves.

And so, it’s just a whole lot cheaper to buy a company that's already figured it rather than to go out and find it on your own. And as that happens of course, that's not adding anything new to the total amount of gold and silver that's available to be produced. It's just shuffling the card deck, so to speak. So, it isn't like they're buying a new project that's never been put into production before. Some of that's going on, but a lot of it's already buying companies that are already in the pipeline and then they just add that mill or that mine to what they're already doing.

Mike Gleason: Getting back to your article, you lay out all the reasons why it's important to stay the course and not let the noise get in the way of your investment plan. Recap that a bit here for our listeners and talk about the dangers that the average investor faces these days given the over saturation of information that's constantly bombarding us with the 24/7 news cycles and all the talking heads constantly giving their opinions on anything and everything in the investment world.

I mean, in terms of precious metals, the fundamentals that made it a wise investment a few years ago, and the very things that probably peaked our interest about owning it as a hedge and as insurance against financial turmoil, is still just as relevant today as ever despite the price kind of languishing, so you have to just phase out all of that noise and resist getting tempted by alternatives or swayed by this opinion or that opinion, don't you David?

David Smith: You really do because it's hard for all of us to maintain our bearings when all this information's coming in, and we have to look at each piece of it and try to determine if that is valid or if that changes our thesis. And the thing is, as you said, all the reasons for holding the metals are as valid as they ever were, in fact if not more so. And the fact that the metals haven't gone up sharply as we're talking doesn't mean that they're invalid, it just means that it's taken a little longer than we expected.

I look at the uranium market as a classic example. This thing went on, people said, a year and a half ago, "Well, we've never seen a market that's been in the bear markets for six years, the odds that it's going to turn around very quickly." Well, it took another 18 months, and even now it's still just getting started. But the thing is, once it makes that turn, and once the smart money is starting to position itself, and once a certain amount of the public get on to the idea, you can have a very, very fast move upward, just like we had in 2016. And it's very difficult to get on, and on that move, it caught so many people by surprise, both in the physical space and also the mining shares space, that the vast majority not only didn't get on – because they were waiting for a retracement that never really came – but they also sometimes got out too quickly. They thought "Oh, well, this'll be a couple months and it'll be over, just like it has been the last four years." Well, it didn't turn out that way. It went for seven months with hardly any kind of a correction.

And these prices today, the better companies and, of course, the metals themselves, are still above where they were when that turn was made, so if you wait a little longer, you're going to find yourself buying at prices higher than they were when they were in 2016. So, if a person believes in it, they should start accumulating in tranches, or buying into weakness, or buying on a dollar-cost averaging, or whenever they have the extra money to budget for, rather than trying to pick the exact low. Try to buy 30 cents lower and then end up paying a 40 cent premium, that you wouldn't have had to pay then, plus maybe 40 cents higher… the old "penny wise, pound foolish" theorem.

Mike Gleason: Yeah, certainly letting the emotions get the best of us in the investment world has taken down many people over time. Well finally, David, as we begin to wrap up here, maybe talk about some of the key support or resistance levels you're watching here in the metals, in terms of the charts and so forth. And then anything else that you're focused on in the metals or financial world that we maybe haven't hit on yet as we wrap up the year and look forward to 2018.

David Smith: Well, I think in silver, we want to see silver get above $17 and of course, it would be very, very positive psychologically and chart-wise to get above $20. And then you have a real solid base start to be built there. That would be very important.

In terms of gold, getting well above $1,300 and staying there, $1,325, $1,350. There are a lot of respected economists and analysts that feel that we'll see $1,450 to $1,500 gold this (next) year, even without some major issues.

So, I think that the risk/reward is really turning in the favor of a cautious investor who decides on how much to put in, and then does it, rather than trying to wait for even more ducks to line up because Mr. Market seldom waits until everybody understands the story before it moves. And by the time you feel comfortable about it, it's going to probably be moved quite a bit a ways away from where we are talking about it today.

Mike Gleason: Yeah, very well put, obviously we're seeing a lot of this type of situation play out in the crypto world. A lot of people I'm sure are kicking themselves for not having gotten into Bitcoin $10,000-$15,000 ago on the price charts, but we could be looking at something very similar in metals. If you've got a conviction and you know that precious metals are the place that you need to be long-term to protect yourself, by all means, go by that conviction and make your moves.

Well, David, thanks so much for your time today and for enlightening us with your wonderful insights once again. I've certainly enjoyed having you on this past year, and wish you and your family a very Merry Christmas, and I look forward to catching up with you in the new year. Take care, my friend.

David Smith: Okay, take care, Mike, and I've enjoyed speaking with you too.

Mike Gleason: Well, that will do it for this week, thanks again to David Smith, Senior Analyst at The Morgan Report and regular columnist for MoneyMetals.com, and the co-author, along with David Morgan of the book, "Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave", which is available at MoneyMetals.com and Amazon. Pick up a copy today.

And check back next Friday for our next Market Wrap Podcast. Until then, this has been Mike Gleason, with Money Metals Exchange. Thanks for listening and Merry Christmas everyone.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up MoneyMetals.com columnist and Senior Analyst at The Morgan Report David Smith joins me for another wonderful conversation on why he thinks the recent correction in metals is creating what may be the last great buying opportunity in the sector, and also why he believes those who do buy should be thinking insurance first and profit second. So be sure to stick around for my conversation with David Smith, coming up after this week’s market update.

As the Federal Reserve prepares more stimulus injections into the financial system, investors continue to flip back and forth from favoring safe haven assets one week to growth stories another. This week markets swung back toward growth, perhaps in hopes of progress on U.S.-China trade talks.

Global equity markets got a bounce mid-week. Industrial commodities including copper and platinum group metals also made gains. Bonds, meanwhile, sold off, and gold and silver struggled to hold significant near-term technical levels.

Gold prices dipped on Thursday to test $1,500 per ounce support. As of this Friday recording, gold is struggling to close the week here and comes in at $1,480 and shows a weekly loss of 1.8% now.

Turning to silver, the white metal is down 0.7% this week to trade at $17.51 an ounce. Platinum is up 0.9% for the week, now checking in at $891. And finally, palladium recorded another new record high. The catalytic metal currently trades at $1,696 per ounce on the heels of a 2.0% weekly advance.

Metals traders are processing the latest price inflation data as well as the prospects for more monetary inflation courtesy of the Federal Reserve. Thursday’s Consumer Price Index report showed the CPI rising by a miniscule 0.1% in the month of September and 1.7% year over year.

With government statistics showing annual costs of living running below the Fed’s 2% target, Fed chairman Jerome Powell may be inclined to cut rates again later this month. The minutes from the last FOMC meeting show policymakers divided over the issue, with some reluctant to cut at all and at least one ultra-dove favoring a 50 basis point cut.

Odds favor a 25 basis point cut by the end of October, and perhaps another by the end of the year.

Perhaps just as importantly, the Fed is also expected to continue expanding its balance sheet as an outgrowth of its recent rescue operation in the repo market. The Fed will continue to provide daily liquidity injections into the first week of November at least while making some of its “temporary” open market operations permanent.

Chairman Powell insisted this week at a Q and A with economists that the Fed isn’t pursuing QE – Quantitative Easing. Critics aren’t buying Powell’s denials.

Moderator: Is the Fed almost coming back into QE or would you describe this intervention as something different?

Chairman Powell: Let's start there. This is not QE. In no sense is this QE. This is nothing like at all. I'll come back to that point.

Financial News Anchor: Lots of pains taken to label it, not QE. But there's still balance sheet expansion… still money being added.

Ben Emons: Well, you know, it's kind of a misnomer, right? Is this QE or is it just open market operations? At the end of the day you aren't going to expand the balance sheet.

Max Keiser: Is this the beginning of Quantitative Easing? Is it the same as Quantitative Easing? Is it different than Quantitative Easing? It looks and smells like quantitative easing on the short end anyway. How does it differ?

Ben Emons: Well, it is. It's a permanent open market operation, so they're going to be adding liquidity and eventually they're going to come in, and whether they want to call it QE4, QE5. We've discussed this before. It's QE infinity.

Chairman Powell: But not QE. Did I mention that?

Moderator: Not QE. You did mention that.

Compared to previous QE iterations, the Fed is more narrowly focused this time around – specifically on manipulating overnight lending rates lower for banks. But what matters here is that it has dramatically reversed itself on balance sheet management.

When Fed officials were unloading assets off their books earlier this year, that was called Quantitative Tightening. Now that they are absorbing Treasuries from the repo market to the tune of several hundred billion dollars, it sure looks an awful lot like “QE something.”

If more trouble hits the banking system or the economy, perhaps Jerome Powell’s “not QE” will grow and morph into the biggest QE to date. “QE forever” or “QE infinity” are definite possibilities that investors shouldn’t take lightly.

What all this QE, “not QE” madness may be building toward is an ideal environment for precious metals.

Gold and silver markets broke out to multi-year highs this past summer. They have rallied this year overall in spite of the fact that the U.S. Dollar Index so far refuses to break down. Although it is showing some weakness this week, the USD exchange rate remains higher versus other major foreign currencies for the year.

And for the year, gold and silver are looking strong in terms of all major fiat currencies. It makes sense given that central bankers around the world are all pursuing easy money policies of their own.

Still, it’s been largely a stealth rally in metals up to this point. Gold and silver aren’t garnering much attention in the financial media – perhaps because the U.S. bond and stock markets have also shown strength since the Fed turned dovish late last December.

Equities could potentially run up further as the Fed continues to ease. But if the recent hiccups in the repo market are a sign of bigger trouble to come in the financial system, then the Fed may be behind the curve. The stock market may be headed for some volatile times ahead.

Although gold and silver can go up based on their own fundamentals regardless of how financial markets perform, public demand for physical bullion tends to go up during times of fear. Ordinary investors and savers may come to fear an accelerating loss of purchasing power in their dollars and dollar-denominated stocks and bonds. That would be an ideal environment for precious metals indeed.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to welcome back David Smith, senior analyst at The Morgan Report and regular contributor to MoneyMetals.com. David, good to talk to you and thanks for the time. How are you?

David Smith: Same here, Mike. I'm just fine. It's good to speak with you again. Interesting times indeed.

Mike Gleason: They always are it seems. Well, you recently wrote a piece for the MoneyMetals.com site last week in which you termed this most recent correction in precious metals as "the last train out” for bulls. Gold and silver had been trading range bound for years now. We saw a false breakout in 2016 when silver ran do about $1 an ounce and then got smashed lower.

People can be forgiven for questioning whether things are really different from metals now but expecting prices to remain stagnant given what the Federal Reserve is doing and the awful fundamentals for the U.S. dollar also seemed like a pretty bad bet. Can you elaborate on why the opportunity to buy metals at these levels is going to be limited? What has changed today versus 2016 for example?

David Smith: Well, I think there are so many elements that are pointing toward this being different than 2016 more and more of the sophisticated money, the large funds, the people that are kind of the first in line to see a trend change – a major trend change – are coming up publicly stating that they're taking major positions in gold, silver and the mining stocks. Also, in the last few days, I've run across two intriguing elements, which also I think are under most people's radar and it supports a comment that I made here in the next essay that I'll be talking about.

About the idea that we all know how much gold and silver had been purchased and continued to be purchased by Russia, China, Turkey, and India, but what's happening is that Europe, which had been relatively light on purchasing in terms of European retail sales are really starting to amp up. And I think that's going to be the spark that's going to set off the demand situation where we already have a fairly declining silver and gold supplies and yield, and actual ounces each year for the last several years. And I think this is going to nudge it more and more toward that breakout point where the public recognition phase starts to kick in. And my guess is that that takes place early next year.

It's starting to take place now and so where most people still are a little bit fearful about adding to their position or even getting started. I think this is an excellent time for the people in the retail sector to be buying the physical metal and putting into the way into periods of witness whenever possible.

Mike Gleason: You study the silver supply fundamentals quite closely as you follow the mining industry and analyze the sector for The Morgan Report and I want to ask you about the state of things with regards to silver supply.

As we both know, the silver price has done very little over the last few years and that is tamped down exploration among the miners. What can you say about silver supply, David? And share with us any you have there about what appears to be some dwindling stockpiles.

David Smith: Well, the production of silver has been declining for the last several years. And the thing is this can take quite a while for it to really be reflected in the price. If you look at palladium, it was in a deficit for quite some time and people thought not much was going to change, and all of a sudden there was a price explosion. And I don't think anybody, including myself, would have imagined that it would go to $1,600 and then stay there…. 15, $1,600 an ounce.

And it wasn't that long ago when you could buy it for seven or eight or $900 and I think that's what's going to happen with silver. It'll be a little bit different scenario, but when it really gets going, silver as such an emotional metal that people really get involved with it. And it's also an industrial and an investment metal, and it has that going forward even more so than palladium does.

One of the things that I meant to mention was that the two charts that I saw here within two days of each other, one is that the silver – looking at the global ETFs all around the world, the exchange traded funds that actually holds silver – they have the highest amount of silver that's been deposited in that since they've kept records on that type of an activity. And then two days later, I saw the same thing for gold.

So, the strong hands, that's what's happening, the metal is moving in the stronger and stronger hands. And the last of those who kind of gave up and thought it'll never change or it's 2016 all over again, they're getting rid of their metal, but other people are picking it up. And so that's a very strong indicator along with the increased sales in Europe and especially France, Germany and UK that indicate to me that that unexpected spark is getting ready to be lit under the price and the actual supply of the precious metals getting well on their way here before the end of this year.

Mike Gleason: What do you make of gold's outperformance over silver? The ratio has been pretty firm here in the 80s. Now it did get up to say 90 to 1 a few months back, but silver can't seem to get below 80 or 85 to 1 on that ratio.

I know we like to see silver lead in a bull market, so what do you make of the fact that gold has really been the better metal for, say, the third year in a row now?

David Smith: That doesn't bother me at all. I was actually involved with futures and the physical metal during the run up into 1980. And gold outperformed initially and there were times when silver would just sit there for several weeks at a time, and gold would be roaring and people would wonder. And then all of a sudden you'd wake up and you'd have three weeks of almost vertical moves in silver. So, I'm not concerned about that at all. I think it's important that the ratio is declining and it's kind of a trend change.

And I think you're to see that over time declining where silver becomes more and more viable in relationship to gold than it has been in the last couple of years. So, I don't think people should obsess over where that thing's going on any given day, week, or even month. Just to understand that the trend is changing and that the outperformance of silver is getting ready to be taking place over the next few years in relation to gold. They'll both do very well, however.

Mike Gleason: Yeah, for the year, gold is up about 17%. Silver's up about 14%. We're not talking about a major difference this year and silver has performed quite well as that ratio got over 90 to 1 a few months ago. It has come down a little bit since then, so it does seem to be trending in the right direction, if you're looking for silver to lead a metals rally.

Getting back to the Platinum Group Metals, David, I know you like to find value in the PGMs where you made an amazing call a few years ago when you were banging the drum for palladium at the time when no one else was thinking about it and it's nearly tripled in prices when you first started telling our podcast audience about that value play. What are your thoughts on the PGMs and do you see any opportunities there today like maybe going short palladium or long platinum? Let's hear your thoughts on the other precious metals there, David.

David Smith: Going short is always dangerous in a bull market and palladium hasn't shown any indications that it's ready to roll over just yet. I do think the platinum makes some real sense because it has so long been actually more expensive than gold by usually several hundred dollars and we've had a period of several years now where it's been just the opposite. And for example, platinum is a little bit under $900 now and gold is about $1,500 so that's a $600 deficits per ounce in relationship to the price of gold to compare it to it normally being $300 over.

So, there's almost a $900 difference and it wouldn't have to go back to that ratio to make it a very good investment. If it just closed the gap by, say, half of that $400 to $500, that would be a substantial improvement without gold going anywhere. All platinum has to do is rise above that amount. And it is an industrial metal, it’s used mostly for catalytic converters and things like this. So, I understand the question about the global economy, how strong it is, and this type of a thing is weighing on that a little bit.

But really, I think the downside risk on a percentage basis for platinum rounds for example, or platinum bars, is really not any larger than it is for gold and silver. So, I think they all share that one aspect of being an asymmetric trades. And by that I mean where a relatively small amount of committed funds has the potential to outperform substantially in terms of the risk-reward ratio.

Mike Gleason: Yeah, I think that's a great point. And I would stress the fact that, yeah, I would say there's very limited downside risk and platinum at these prices. Sure it could go maybe a hundred dollars down from here, if it even does that, but I think you could get a two bagger potentially if it starts to finally catch a bid. And of course, you've got the automotive manufacturers who have been choosing palladium for several years now because palladium was a fraction of the price of platinum a few years back and they haven't ended up really switching back to platinum even though it's about half the price of palladium. Has that surprised you a little bit or is that just a function of the fact that it takes these manufacturers a long time to retool for some other type of raw material?

David Smith: I'm no expert on how long it takes, but you hit the nail on the head. Because I've read this from several sources that tend to know and in the manufacturing space. You don't just flip a switch and stop using palladium and certain applications and do platinum. It does take a while and I think that's what doing market does what it does best, over time it moves to what makes the most sense from a financial standpoint. And my guess is that quite a few of these operations that have used palladium are now quietly moving over to the platinum space.

And I think that's what's going to start that extra amount of usage being taken place. And so, and another thing too, Mike, not only with platinum but also going back to silver for just a minute and even gold, but when the person is coming in to buy physical metal, when things are relatively quiet, the spread, the bid-ask spread decreases and also the premium decreases, because there'll be a little bit more supply there.

So, it's always good to be doing it either in terms of falling prices and/or in terms of quiet prices when you want to accumulate. You don't want to be running with the herd if you want to get the best price. And so, going in in portions, not just buying it all at once and doing it when we have things like we have are going on today when the metals are on the weak side. It really makes a lot of sense over time to get to keep your overall cost down per ounce as much as you can get them, because it increases your insurance capability, and your profit potential over time.

Mike Gleason: Yeah, well stated. That's a good point. Well, David, give us a sense of what you think for the rest of the year. You alluded to this a little bit in your first answer, but talk about that and then also 2020 is an election year. We've got that on the horizon now.

Will most asset classes including metals maybe just grind sideways as everyone waits on the November election outcome or will there be some kind of a spark that finally ignites what appears to be a rather tenuous situation on many financial fronts?

David Smith: Mike I will be speaking at the Silver & Gold Summit in San Francisco here in just a couple of weeks and the topic that I'll be discussing will be a lot along the lines of what you and I've been talking about here today. And what I think is that this is a tremendous opportunity for people to get their core position set up and maybe even add a little more if they want because it will be much, much cheaper and much lower risk to do it before the end of the year.

I think with the election cycle coming up, almost anything imaginable could happen and nobody knows including us, what it's going to happen, what the effect is or whatever. But the more that the market and businesses and retail people get convinced that we might have a big change in government in terms of taxation structure and the deficit, and things like this, that's going to increase the fear and that's going to cause people to start realizing that we can't depend on things being like they are today, perhaps.

It could be better or it could be worse, but I need some insurance and anyone that has any sense has to look at this and say, "You know what? I just cannot remain completely in paper. I need to have some physical metal as insurance first and as profit second." And I don't think they're going to be unhappy by making that kind of a choice because for 2020 I think all bets are off.

I think it's going to be a very strong year for the metals. It's going to be unpredictable and the swings, they'll be up and down, big ones. But on balance, I think we're headed into the last big leg, which will take place over several years. It could be three or four years, it could be 10 years, but it's going to take place during that time, which will end up in a public mania for the metals. And why wait until that happens before you add your stash?

Mike Gleason: Yeah, something you said there I think is very key and I'll repeat it. Insurance first, profits second when it comes to the metals and people really should be looking at it as that type of investment or really just insurance, that's really what it is and a lot of people don't necessarily grasp that and I think it's a, it's a very important point.

Well finally, David, as we close today, give us some of the key levels and gold and silver that you think we need to hold on the downside if we see them fall from here and then the overhead resistance levels that you want to see get taken out to the upside that will get you excited about where things are headed in the metals over the long-term… let's hear some of those technical levels as we start to wrap up here today.

David Smith: Well, first of all, I think that looking at HSR levels; horizontal support and resistance, I think if you draw a line across the page, they tend to be more accurate than in triangles and boxes, and all this sort of thing. So, I would say, for example, right now gold is about $1,500 I think $1,380, $1,360 on the downside is where you would want to watch. That's a pretty big range. I don't know that it looked down that far, but I'm just saying that is the support.

The more it digs into that branch where it broke out of six-year highs here earlier this year, the more you're going to find people coming in and buying, either the people that want to buy more to add to their position or the people that didn't get in, so it's going to chew slowly down into that area, and who knows how far to go down.

It might not go much farther. I'm amazed and quite impressed with how gold is hanging right around $1,500. It doesn't like to much below that. We could easily see a stab down to $1,450 or $1,425, but I think that's going to uncover a lot of buy-in. On the upside, if you get above $1,650 it's off to the races. So, $1,650-$1,700 that may not happen until next year, next spring, but I see a predictions from people that are pretty reliable that say could happen before the end of the year. So, it's not so much when it happens but that it is going to happen.

Silver, $17.50 now it's got the belts of support down into $16 if it gets much above $18.50 or so, then it's going to be a breakout in terms of the lines there and you can see it stab up into the $19-$20 area. And I believe that levels just to watch for going forward are most above $26 in silver, and I move above $1,750 to $1,800 in gold. That is really going to ignite the market and it's really going to take off, and increase rapidly in price after that point. It's not going to get up there tomorrow, but it's on the way and it could happen as early as next spring on a lot of this.

And then on platinum, which is about $900 now, you've got support down at about $820 and getting above $1,000 I think would reignite that movement going forward. So, those are pretty well defined, and they can be seen on the chart easily. Everybody else is looking at them. And so, when you see those different levels being tested and hit, that's when you say, "Well, it looks like what's going to happen here is getting ready to go."

Mike Gleason: Eventually there will be a public mania phase in the metals. Obviously, they can't continue to do what they're doing to these fiat currencies around the world. We didn't even get to that and what they're doing here in the repo market and injecting billions and billions of dollars into that market, trying to add liquidity, because they're nervous about exactly what's going on there.

Fiat currencies around the world are all devaluing in tandem, and eventually when that does get out, there is going to be that mania phase. There's going to be a mad scramble into the safe havens like precious metals and like you said earlier, just take advantage of these opportunities. If the market's going to put it on sale, then take a position, add to your position. I'll think you'll be rewarded in the end and we totally agree there.

Well, we'll leave it there, David. Good stuff once again and thanks for the time today. I look forward to catching up with you again soon and we'll always be watching for more of your articles at MoneyMetals.com. Keep up the good work and take care, goodbye for now.

David Smith: You bet. Goodbye. Take care, Mike.

Mike Gleason: Well that will do it for this week, thanks again to David Smith, Senior Analyst at The Morgan Report and a regular columnist for MoneyMetals.com, and the co-author, along with David Morgan, of the book Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave, which is available at MoneyMetals.com and Amazon. Pick up a copy today.

And check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason, with Money Metals Exchange. Thanks for listening and have a great weekend everyone.

","image_selection":0,"primary_keywords":"chairman powell insists fed stimulus not qe featured","secondary_keywords":"","publish_date":"2019-10-11","podcast_url":"http://moneymetals.libsyn.com/latest-inflation-report-gives-fed-cover-to-inject-qe-forever","quick_text":"...","author_id":2,"content_type_id":3,"created_at":"2019-10-11T16:34:08.000000Z","updated_at":"2019-10-11T16:34:08.000000Z","podcast_subject_line":"Audio: Chairman Powell Insists Recent Massive Fed Stimulus Is NOT QE","meta_description":"David Smith joins us for another wonderful conversation on why he thinks the recent correction in metals is creating what may be the last great buying opportunity in the sector, and also why he believes those who do buy should be thinking insurance first ","podcast_duration":"24:31","header_image":"","article_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidsmith.jpg","redirect":"","canonical":"","sort":null,"featured_image":"","facebook_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidsmith-social.jpg","twitter_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidsmith-social.jpg","status":1,"show_guest_author":1,"guest_author_image":"https://www.moneymetals.com/uploads/content/david-smith-xs.jpg","guest_author_name":"David Smith","guest_author_description":"David Smith, senior analyst at The Morgan Report and regular contributor to MoneyMetals.com.","h2_header":"David Smith: Consider precious metals for insurance first, profit second...","image_width":700,"image_height":368,"noindex_flag":0,"podcast_embed":"","added_schema":"","banner_image":null,"full_url":"podcasts/2019/10/11/chairman-powell-insists-fed-stimulus-not-qe-001884","first_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidsmith.jpg","truncated_description":"David Smith joins us for another wonderful conversation on why he thinks the recent correction in me...","pretty_publish_date":"October 11th, 2019"}},{"page_description":"David Smith, Senior Analyst at The Morgan Report and MoneyMetals.com columnist joins us and reviews the key reasons why we ought to own precious metals -- and discusses the risks of NOT acting now when the price of silver is still cheap","page_image_url":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidsmith-social.jpg","page_title":"Rates Fall, Commodities Strengthen; David Smith: Risk/Reward in Silver Favors Buying Now","page_type":"podcast","score":13.900600226040554,"url":"https://www.moneymetals.com/podcasts/2019/03/22/risk-reward-in-silver-favors-buying-now-001738","data":{"id":1738,"title":"Rates Fall, Commodities Strengthen; David Smith: Risk/Reward in Silver Favors Buying Now","description":"David Smith, Senior Analyst at The Morgan Report and MoneyMetals.com columnist joins us and reviews the key reasons why we ought to own precious metals -- and discusses the risks of NOT acting now when the price of silver is still cheap","rss_title":"Rates Fall, Commodities Strengthen; David Smith: Risk/Reward in Silver Favors Buying Now","slug":"risk-reward-in-silver-favors-buying-now","h1_header":"Federal Reserve Cries Uncle as Rates Fall, Commodities Strengthen","content":"

Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up David Smith, Senior Analyst at The Morgan Report and MoneyMetals.com columnist joins me and reviews the key reasons why we ought to own precious metals -- and discusses the risks of NOT acting now when the price of silver is still cheap. He also discusses why he believes the set-up for the next bull leg higher in metals is going to be different than the false breakout we saw back in 2016. Don’t miss a fantastic interview with David Smith, coming up after this week’s market update.

Well, as bulls and bears battle for control of the gold and silver markets, doves have gained full control of monetary policy at the Federal Reserve. On Wednesday, the Fed announced no change in interest rates – a decision which was expected. But policy makers went further and suggested there would be NO rate hikes at all for the REST of the year.

Bloomberg News Anchor: Doves fly, the pause continues, no change in the Fed's target rate and they are done for the year. The Dot Plot now calls for no rate increase in 2019.

Supporting the change, big downward revisions to the economic outlook. The growth median is now 2.1% for this year, that's down from 2.3% in their December forecast. Growth next year will be just 1.9%. The statement notes that the growth of economic activity has "slowed."

So, if Jay Powell and company wanted to reassure investors the doves are in control here, it looks like they have done that.

The newly dovish Fed will also stop shrinking its balance sheet by the end of September. The Fed’s shift back into easy money mode reflects either a dramatic downgrade in the economic data or a craven capitulation to political pressure.

A case can be made that both the data and the politics helped push the Fed to completely abandon its former plans to continue gradually hiking rates this year. We can only speculate as to what words may have been exchanged between Federal Reserve Chairman Jerome Powell and the Donald Trump administration’s Plunge Protection Team late last year when markets were on the verge of crashing. But that period clearly served as an inflection point for monetary policy and the stock market.

Since then, stocks have surged higher. They rallied again following the Fed’s dovish pronouncements this week. In fact, virtually all asset classes got a boost from the Fed – stocks, bonds, commodities, and precious metals to some extent.

Gold prices currently check in at $1,311 per ounce, up 0.6% this week. Silver shows a weekly gain of 0.5% to bring spot prices to $15.43. Platinum is up 1.9% since last Friday’s close to trade at $851. And finally, palladium posted yet another record high this week. The supply constrained metal has pulled back a bit here the last couple of days and currently trades at $1,573 per ounce after advancing 0.8% on the week as of this Friday morning recording.

The move in gold and silver markets following the Fed’s announcement wasn’t as dramatic as bulls had hoped for. The money metals probably won’t accelerate to the upside in a big way until something breaks the uptrend in the S&P 500 and drives more safe-haven demand.

In the near term, momentum could take the major U.S. equity averages back up to test their old record highs. Around there, the markets could see some major technical resistance.

Investors will have to ask themselves whether they want to buy stocks trading near all-time highs when the economy is headed for a slowdown by the Fed’s own admission and the earnings picture is deteriorating.

Yes, a dovish Fed is supportive of higher equity prices – all else being equal. But that doesn’t necessarily mean equities will be the best performing asset class going forward.

Bonds caught a bid this week as interest rates fell and the yield curve flattened. Rates on Treasuries going out 10 years are now all close to 2.5%. There appears to be little room left for bonds to rally from here -- unless the Fed starts cutting rates or investors are willing to accept lower yields on bonds than the short-term rate set by the Fed.

If the yield curve fully inverts and long-term paper yields less than short-term paper, that would represent an ominous sign for the economy. Historically, an inverted yield curve signals a coming recession.

On the other hand, commodity markets are coming back to life. Crude oil has been on fire of late, with West Texas Intermediate climbing above $60 per barrel this week as U.S. imports of Venezuelan oil shrank to zero for the first time in decades.

The plunge in oil prices in the fourth quarter of 2018 had contributed to disinflationary pressures. The Fed, in turn, lowered its inflation outlook. Central bankers now expect the inflation rate to trend slightly below their arbitrary 2% target over the next year. But if inflation pressures rise unexpectedly later this year, the Fed will be handcuffed by its own pronouncement to markets that it’s done raising rates.

While some investors are concerned about the risks of a slowing economy, virtually nobody on Wall Street is paying attention to the potential inflation threat. As a consequence, inflationary assets including energy stocks, mining stocks, and precious metals remain the most heavily discounted assets in an investment universe where good values, or even decent values, are hard to come by.

For the first time in years, U.S. monetary policy is now conducive to higher precious metals prices. The Fed isn’t the only factor that drives these markets, of course. But over time, being on the right side of the Fed usually leads to profitable outcomes.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to welcome back David Smith, Senior Analyst at The Morgan Report and regular contributor to MoneyMetals.com. David, it's been too long. How are you my friend?

David Smith: It's been a while and I'm happy to be back, Mike.

Mike Gleason: Well, David, for metals investors who got started after the 2008 financial crisis, it has not been an easy ride, as we both know. Prices rose sharply between 2008 and 2011, driven by the crisis and the Fed's response to it, 0% interest rates and massive amounts of money creation. Then the metals markets began to flounder. Some of the safe haven demand for metals dried up as the equity markets recovered and fear dissipated. Price rigging and suppression in the futures markets has progressed from conspiracy theory to conspiracy fact. Metals prices are not being set in free or fair markets, so it is not easy for some investors to hang in there. But the reasons to own metal are still there, bigger than ever.

So, now might be a good time to review some of them. You talk a lot about precious metals role as insurance. Would you mind going over how metals act as a form of insurance for our listeners, David, as we start out today?

David Smith: Well, there's several iterations of the insurance piece. As David Morgan of The Morgan Report always talks about, you buy the physical first and you buy that for insurance first and profits second. But if you look back, and a lot of people would not even believe this until they saw the chart. But gold held since 2000, has doubled the appreciation of the stock market, the overall stock market.

So, in spite of the big plans that we've seen, that we saw from $1,900 down to about $1,050 and then the move in 2016, we had, which gave most of it back and gold ended up for the whole process from that point, down about 45%. Silver down about 70% from 2011. In spite of that, the metals are still using their role as insurance of helping you diversify, of helping contradict other price changes in investments you may have and then, providing liquidity for you. So they, historically, have done that very well, that role of insurance and they continue to do so.

Mike Gleason: You talk about metals as a source of liquidity. What do you mean by that?

David Smith: It means that if you need money, if you have some kind of an expense you need to deal with right away, you can sell the gold right now at any gold operation, any salesmanship. Whether it's a jewelry store or an operation like Money Metals and you can get your money for that to pay that expense.

You can't do that with property. You can't do it with real estate, in general and collectibles and things like that. So, it gives you a real good opportunity. I always like to tell people from time to time, when you buy gold and silver, you don't think of it as buying something like a car or a fishing rod or a camera or something like this. You're exchanging one form, of which I would argue is inferior money, fiat money that's not backed by anything… you're exchanging that for a form of historic sound, honest money. You're not making a purchase per se. You're making an acquisition of a greater ability to have a financial element that can do really well for you and offer diversity.

Mike Gleason: Kind of leads me right into my next question. You've described why metals are a good alternative to saving dollars in a bank account. Elaborate on that if you would and why an investment in bullion can be considered a type of savings.

David Smith: Well, one of the advantages over having fiat money, that amount of money in the savings account, is that it's yours. Nobody else has a claim to it. I think even today, most people that have bank accounts in the United States, which is most people, I think they don't realize that when they put that money into their account, the bank really owns that money. Granted you have the FDIC insurance up to $100,000 per calendar, this sort of thing.

But the reality is if they choose to use some of that money because they've gotten in trouble investment wise or for some other reason, they can take that and you can have a hard time getting it back. So the money's in your name in a sense, but it's really not yours, where you can get ahold of it. Not to mention, if you try to take out a significant amount, you go and try to take out $1,000, they ask you what you want to do with it, as though it's any of their business. There shouldn't be an assumption that you're going to do drugs or do something illegal. It's your money and if you want to take it out and give hundred dollar bills out in the street, that should be your business.

Mike Gleason: Yeah. Not to mention if you want $5,000 or $8,000 in cash, good luck. Call a day in advance. Make sure they've got that money there when you come in because often banks don't even have that much of the paper money that they're dealing in. It's kind of scary actually when you think about it, in terms of what could happen if we do get some kind of a crisis and you have a run on the bank, for instance.

David Smith: Not only that Mike, but there's actually a reporting form that banks have to fill out if you try to get out $10,000 or more at one time, or if you take out lesser amounts, such as 2 or $3,000 and then, maybe $4,000 it's called structuring and their assumption is you're guilty until proven innocent and that you must be wanting to do something nefarious for it. This whole idea of standing on the head, the idea that you're innocent until proven guilty, is being turned around and I just don't like that attitude either.

Mike Gleason: Switching gears here a little bit. One of the interesting things about silver as an investment that is very unique and different than other asset classes right now, like stocks or real estate, is that at present value, silver would need to triple in price just to reach the nominal all-time high of around $50 an ounce that we hit both back in 1980 and again, in 2011.

You would have to think that if it did get to $50 again and we could see it break through there, that could be off to the races, like palladium, for instance. That market keeps going higher and higher, now that we're in this uncharted territory. But silver still needs to triple just to get back to that all-time, nominal high. Comment on that if you would, and touch on what a tremendous value proposition there is in silver right now, as a result… because you really can't say the same about other markets and other sectors or investment classes right now.

David Smith: Well, silver is one of the few metals, that has not traded at all-time nominal highs. Granted it hit almost $50 in 2011. But as you've mentioned, it's dropped since then and it hasn't gone to say, $60 or $70 or $80. Whereas gold, which traded at $850 in 1980, hit $1,923 in 2011.

So, that's not an inflation adjusted high, but it is a nominal high, as you were mentioning. And I really think what's going to happen, it's hard to predict the future, but I think there's a real good chance of this happening. I think we're going to see, silver over the next couple of years, move up pretty sharply and at some point it's going to challenge $50. And when that happens it might have to bang his head against that resistance a few times. But when it finally breaks through, I think it will be a lot like palladium.

If you remember palladium when it was trying to go through $1,000, it played around and it did $1,050 and $950 and dropped down to $800, this type of a thing. Then it went up and it just tick, tick, tick, tick against the top and all of a sudden it broke through and it wasn't a $100 move. It was just $5 or $10 and then, it just kept going and going and going. In a very semi gradual. It was not a vertical run at all. It was just a solid movement that was always contained on the downside and moved on up.

If you think about it, if you go back and you look at the move between $1,050 and where it is now over $1,500, it almost takes your breath away, how far it's gone and how quietly it's done it. And people have watched it all the way and who knows how much farther it'll go.

But the point is, I think when silver gets above $50 and builds a bit of a base, I think you'll see $75 or $80 silver very quickly and it's going to be three digits, in my belief. And I believed this since the beginning, we'll see three digit silver at some point in the next few years. And one of the things about waiting for prices to go where you thought they were, is by the time you decide to do something about it, it's already there and the risk is a lot greater. Or it may be inconvenient for you to do it and you don't do it at all and you get to watch the whole darn thing.

Mike Gleason: Getting back to palladium for second here, David. We've talked with you a lot about that metal over the years. Several years ago you were on this very program and telling people that, that was a great investment opportunity. We were still in the triple digits, well below $1,000 at the time and it's been a fantastic play for the people that followed your advice.

Just comment about where we are right now. I mean, how high can it go? I guess, is the first question. Then also, if you would comment about this potential breakdown in the futures market in palladium, this physical shortage that we're seeing and how that potentially could be a precursor to what we might see one day in the gold and silver markets.

David Smith: The palladium breakdown, they really do have very small supplies. Most palladium comes from Russia or from South Africa or from Zimbabwe. And the deficit has been building for several years. It's really pretty interesting because an awful lot of what palladium is used for in catalytic converters, which I believe tends to be a regular (gasoline powered) cars as opposed to diesel engines which platinum is more frequently used for. They can be substituted, but you can't just change it on a dime.

Rick Rule was talking about this not too long ago and he said it could take a couple of years to retool to get back over, so that the palladium that is now being used could all can be utilized as platinum (instead). So, in terms of where the price could go, it could go up another $500 to $1,000. But the risk is absolutely enormous, at this point, to try to buy it now and personally, I wouldn't recommend it.

I think platinum because it usually is $200 or $300 above gold and is now well below it. It's about $850 versus gold at $1,300 and this has persisted for quite a long time. At some point, the bull market in palladium will be over and the platinum market will do catch-up. But I remember when the last time this happened, which is, I think about 10 or 12 years ago… might've been a little farther back… but Ford Motor, they panicked, and they bought a lot of palladium. And they ended up selling and a $1.5 billion loss a few months later. So, whether you're a manufacturer or an investor or whatever, the market is pretty high here and it could go a lot higher. But when it finally turns around, it could be really interesting to watch on the downside.

Mike Gleason: Some of my recent podcast guests have been talking about that very dynamic. I think it was Craig Hemke at TF Metals that pointed out that, back then in the early 2000s, when palladium shot up like it did and Ford Motor Company and the other automotive manufacturers started to hoard the metal, Boris Yeltsin in Russia... of course, Russia controls a lot of that supply and is the main producer of it, like you mentioned… he bailed out the market and supplied a lot of physical palladium, at the time. It seems somewhat unlikely that we're going to get the same type of cooperation from Mr. Putin. So that'll be an interesting market to watch.

How about rhodium, David? We talk even less about that market, but that's another one that has seen some pretty attractive gains. It's not maybe as white hot as palladium, but it's still performing quite well. Any quick comments about rhodium?

David Smith: Well, rhodium is a real esoteric market. It's a very small market, even compared to platinum and palladium. Especially palladium, which are not big markets. It's my understanding that most of the pricing takes place by appointment. I do know that, for example, you can buy a 1-oz rhodium bullion bars.

I think there's about a three or $400 deficit when you sell. So that's a pretty big spread in both directions. But it's used for some of the same things platinum and palladium are. To me, it's fun to watch. But, in terms of getting deeply involved in it, not so much. I'd rather do silver and gold.

By the way, there's so many things that are pointing towards this buildup of a very, very strong gold and silver market over the next several years. One of the things I read just a couple of days ago is that silver purchases in India, not gold, but silver have reached a four year high. That's been almost under the radar screen because people focus on how much gold India buys, which is quite a lot. But silver is absolutely maintaining a very, very strong upward trend in purchases in India. And last year, 30% of the world's production of silver was purchased by the third quarter by India alone. So, we're going to wake up one of these days and we're going to find out that there's a whole lot more buying pressure across the board for both of these metals than we thought was the case.

Mike Gleason: I wanted to ask you about your expectations about how well the metals will work as an investment or its ability to generate returns for investors over time. The metals’ role as insurance and is a better form of money or perhaps more important reasons to own them. We've already discussed those, but let's face it, most people buying gold and silver are anxious to see profits on their investment. That is what they have missed in recent years and it is frustrating.

But there's little reason to think that the next several years will be a repeat of the past. You and I were speaking offline about the potential set up right now, in the metals markets. That we're looking at potentially some good gains over the next few years and maybe instead of, maybe what was a little bit of a false breakout in 2016 when we had a nice rally. It could be a little bit different this time around. Give us your thoughts there.

David Smith: I really believe so. I'm deeply involved in the mining stocks as an analyst for The Morgan Report with David Morgan, I do a lot of work on my own, a lot of investment. I buy a lot of stocks that I don't write about… they're not on our formal allocation table…. something that I happened to get interested in. I hold a couple of stocks, for example, now that they're mining in Japan or exploring in Japan and they've done well lately.

But I think what we're facing here, and I get it when people say, "It's been so depressing the last few years. I bought the metals and they either stayed flat or they declined." And I understand why people have given up, some who've been at it for 30 years. But the thing is, usually before the biggest opportunities is when the day appears to be darkest.

I can tell you honestly, and I've told this to several of my friends, I've been involved in the metal since the mid-70s. In the 1970s, I did mostly physical and futures in the metals. The period between 1980 and about 2002 was 22 years of pretty much an unremitting, bear market in gold and silver and especially silver. It went from $50 to a little under $5.

I can tell you honestly, that the time between 2011 and say last fall, was more difficult for me emotionally, which is a period of about seven years or so, seven a half years… it was more difficult than the 22 years I spent waiting for another silver bull market. So, I understand that what's going on. But I'm telling you, I look at these charts and nothing's ever a guarantee, but I think the probabilities favor a market over the next three to five years, maybe longer, but certainly at least about three years, that I think will absolutely shock people when we end up seeing where things are in just a few years. There are so many things that indicate that the risk-reward, in addition to the probabilities of a very strong, sustained secular move, is right ahead of us.

Mike Gleason: Yeah, we talked about it before, about how this is not a time to lose your nerve. The reason why you bought gold and silver in the first place, that being just a ridiculous amount of debt and credit all over the economy, those reasons are still very much there today, if not even more out sized and more out of control. Golden and silver didn't just become a bad alternative to paper money over the last few months or few years and people need to keep that in mind. You want to continue to hold it as a hedge against what may be coming. And I think we both agree that it's not just a matter of if, but when the wheels finally do come off.

Well David, thanks so much for your time today and for your enlightening comments as always. We always enjoy catching up with you and hope we can do it before long. I hope you enjoy your weekend and we'll talk soon. Thanks very much.

David Smith: Very good Mike. You have a good weekend.

Mike Gleason: Well that will do it for this week, thanks again to David Smith, Senior Analyst at The Morgan Report and a regular columnist for MoneyMetals.com, and the co-author, along with David Morgan of the book Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave, which is available at MoneyMetals.com and Amazon. Pick up a copy today.

And check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason, with Money Metals Exchange. Thanks for listening and have a great weekend everyone.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up David Smith of The Morgan Report and regular contributor to MoneyMetals.com joins me for another enlightening conversation. David tells us how much longer he thinks the upside move will last in the gold and silver markets and also weighs in on Bitcoin and the crypto-currencies. Make sure you stick around for my interview with David Smith, coming up after this week’s market update.

As a massive storm bears down on Florida, concerns about political and financial storms emanating from Washington D.C. are helping drive precious metals markets higher.

This week Democrat leaders convinced President Donald Trump to kick the can down the road another three months on raising the debt ceiling. So, in December Congress will have to come up with another funding scheme that will undoubtedly punt again and add hundreds of billions of dollars more to the national debt.

This current half-baked debt ceiling deal was spurred by bipartisan urgency to pass an aid package for victims of Hurricane Harvey. Of course, the billions in new spending won’t be offset by cuts to programs that are less urgently needed.

No, the extra spending will just be added to the government tab, as Senator Rand Paul noted in a speech berating his fellow lawmakers for their fiscal irresponsibility. Senator Paul introduced an amendment to pay for Harvey aid by cutting foreign aid. Yet even as he championed his “America First” amendment, he knew it wouldn’t go anywhere.

Sen Rand Paul: I will proffer this amendment and in all likelihood, the swamp, the establishment, will vote this down because they never want to cut a dime of spending. They're always compassionate, they have big hearts. They're willing to give away everybody else's money, but they're never, ever willing to pay for it.

We as a country have a $20 trillion debt, we borrow a million dollars every minute, and yet we are putting forward a bill to allocate $15 billion to those who are suffering under Harvey, or from Harvey, without paying for it, without finding the money anywhere. We're just simply adding it to our tab, adding it to our $20 trillion bill. How did we get to $20 trillion in debt? Big hearts, small brains.

The fiscal irresponsibility in Washington is contributing to downward selling pressure on the U.S. dollar. On Thursday, the Dollar Index dropped to a new low for the year, helping to push gold prices to a new high for the year at $1,350 an ounce.

As of this Friday recording, the yellow metal trades at $1,345, up 1.4% on the week. Silver shows a weekly advance of 1.3% to bring spot prices to $18.02.

Owning hard money in the form of gold and silver should certainly be part of everyone’s emergency preparedness. Even if you don’t live anywhere near the path of a hurricane, there are plenty of other disaster scenarios that could disrupt your personal or financial life without warning.

Most people take their credit cards and bank accounts and internet connections for granted. But the digital economy isn’t as reliable or secure as banks and government regulators would like you to believe. Credit bureau Equifax just admitted that hackers broker into its databases on 143 million people. Credit card numbers, Social Security numbers, names, addresses – all now potentially in the hands of digital thieves. 143 million people is basically every American who has applied for credit.

Earlier this week, digital crypto-coin markets were rattled by a new regulatory crackdown in China. Chinese authorities banned markets for so-called “initial coin offerings.” Bitcoin proceeded to plunge 15% in value, with smaller crypto-currencies hit even harder. They could soon face other regulatory threats in Europe and the United States. Some regulators want to see Bitcoin transactions treated like securities transactions on stock exchanges. Others want to go even further and treat all crypto-currency transactions as illegal money laundering.

How far the war on crypto-cash goes remains to be seen. Holders of digital coins will have to be willing to assume heightened risk compared to asset classes that have well-established supply and demand fundamentals and well-established markets for determining price.

Precious metals markets aren’t as free and fair and transparent as they should be. They have often been subject to manipulation. But gold and silver markets do have the advantage of being tied to tangible underlying assets that have been traded for centuries and will continue to be. Gold will always command a dear price that reflects its intrinsic value, regardless of whether it’s quoted in dollars or yuan or bitcoins or something else that comes along.

Nobody knows what a bitcoin will be worth in 10 years. Maybe much more than it’s worth today, maybe much less. With U.S. Federal Reserve notes, we know they’ll lose value in the years ahead. The only question is whether they’ll be worth moderately less a decade from now or much less.

The dollar’s fate will be determined in part by President Trump’s decisions on Federal Reserve appointments in the months ahead.

This week Federal Reserve Vice Chairman Stanley Fischer announced he will resign from the Board of Governors by mid October. That will leave four out of the seven seats on the Board vacant.

President Trump will be able to put his stamp on the central bank in a big way, especially if he chooses to replace Fed chair Janet Yellen after her term expires in February.

On the campaign trail, Trump talked up his support of Rand Paul’s “Audit the Fed” bill. But since assuming office, Trump has surrounded himself mainly with Goldman Sachs and deep state types who are intent on maintaining the current monetary order.

So the chances of Trump charting a new direction for the Fed are slim. The central bank may get some new faces in the months ahead, but it won’t get a new philosophy. The Keynesian philosophy of perpetual credit expansion will continue to enable all spending excesses out of Congress. More spending means more debt…which means more currency supply growth…which means ultimately a weaker dollar.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to welcome back David Smith, senior analyst at The Morgan Report and regular contributor to MoneyMetals.com. David, thanks for joining us again and how are you?

David Smith: I'm just fine, Mike. It's great to be back.

Mike Gleason: Well, David, not too long ago you wrote an article for our site about how gold and silver were getting ready for an historic run you called it. So, before we start discussing some of the market action here recently, fill our listeners in on why you believe things were set up and are set up for us to see a good run in the metals here.

David Smith: Well, we've had a very trying period since 2011 when a lot of people have been really worn out and torn out and left the market because the prices have declined substantially and what is really a normal reaction in a very large bull market, what we call a cyclical reaction within a secular bull market. The prices, if you look at other times in history where this has happened, the prices did not decline more than what you would expect but it's pretty hard when you see prices drop by 40 or 50% over five years.

Last year kind of started to turn things around and then we had a correction from that. And now we're building this very large sideways space, which all sorts of indicators are indicating that we're now ready to launch into the next part of the bull market, which will be as David Morgan has always taught it will be the most profitable part of the whole thing and we're looking at probably three to five years of advancing prices and maybe more in gold and silver as this thing gets under way. So we're building this base. It's moved about $1,300, gold as you know last week and held there. So things are going to be going a very positive way for the bulls going forward here.

Mike Gleason: So the metals have been showing some good signs of life here. We've got gold at its high for the year. Silver is still lagging a bit and hasn't reached its high for the year yet. Now, I'm not sure if you're thinking the same thing, but things are feeling a little bit different this time in terms of the advance that we're seeing and the set up that you just alluded to. Do you think silver will finally start outperforming? And how much of a run do you see in silver prices in the next say six to 12 months?

David Smith: Silver will at some point start outperforming. It's a metal that surprises people. They're looking at it now, and they say well why isn't it stronger in relationship to gold? Over time there's about an 85% correlation. In other words, if gold is moving up, silver will too, but it doesn't do that on a daily basis or even a weekly basis. And what it likes to do is to make people think it's going to stay weak for a long time and then all of a sudden there's a price explosion. So, one of these days, we'll wake up and silver will be up 75 cents on the day and people will go “where did that come from?” When the reality is what's going on under the hood all along and it was taking its time. Then all of a sudden they go into the upside.

These different things that are going on with big money moving in some hedge funds into the metals space and the mining stocks being more strongly supported and the incredible demand, which just keeps on growing and going from China and India and now Turkey. Turkey's become the third largest importer of gold now in the world. All of these things augur very positively for the precious metals. That doesn't even discuss the supply concerns that are starting to accrue.

Mike Gleason: I know it's been maybe a little bit difficult for a lot of the silver bulls out there to see it just kind of go sideways for all this time these last four or five years now. But what is the saying? The bigger the base...

David Smith: The larger the base, the bigger the upside case. It's kind of an old trading truism. You know, the supply issue, the person on the street will say well wait a minute I can still buy gold and silver at Money Metals at a pretty reasonable price and that's true. But what's happening is the supply pipeline is going to be getting thinner and thinner because these projects are not coming online like they used to. The big discoveries aren't being made. The grades are the ones that are being produced in gold, silver, and copper are declining.

There are more issues with country risk. Last week in Indonesia, one of the largest gold, copper projects in the world was almost taken over by the government. The Grasberg Project had been producing for many years. They had about an 85 or 90% ownership. Now, the government has told them you get 49%. So the government has become the majority owner. These things don't augur very well for increased production.

So when the next up surge happens, which is in the way of building now, as people come in and they buy more gold and silver physically, then that pipeline is going to be harder and harder to fill. The price will rise and the premiums will rise as well, too.

Mike Gleason: Speaking of supply, that kind of leads me right into my next question. I wanted to get your thoughts on a very interesting tidbit that I read in one or your other recent articles for MoneyMetals.com where you made the point that even with higher gold prices this year, the scrap or recycling of gold is actually down a pretty good percentage, which is very interesting because you would think that people would be more apt to sell their gold jewelry or whatever gold items they may have when the price is rising. But the data shows the opposite. So to me, that either means that the gold has already been recycled and there is less of it out there for scrap or because people realize that maybe I don't want to get rid of this stuff or perhaps it's a combination of both. So what do you make of all that, David?

David Smith: I think you're right on the mark with that. I don't have a solid statistical figure to prove our view or my view, but I really believe I think first of all I think a big factor is that the supply pipeline from the standpoint of precious metals from jewelry and whatnot and recycling is becoming thinner and thinner. And there's just been so much of it sold into the market, there's not that much left anymore. Then as you say, I think, the sharper people that do have some of these things are saying “wait a minute, maybe I should hang on to this.” So those things are kind of coming together. I really don't expect that recycling will be a huge element going forward in trying to deal with the supply pipeline. I think it'll be less and less of a factor as we go forward.

Mike Gleason: Yeah. Maybe the weak hands, so-to-speak, have already gotten rid of what they have and now it's left in mostly the hands of more convicted folks. We've talked a lot about the PGMs, the platinum group metals, with you before. We had palladium hit nearly a $1,000 earlier this week. It's now almost caught up with the platinum price, something which is extremely unusual. You've been really bullish on palladium for the last three to five years now and you've really nailed it. Does palladium have more room to run? Is it time to play the platinum/palladium ratio and favor platinum here?

David Smith: Historically that would be the case when palladium get “overvalued” compared to platinum. I think things may be a little different this time. I'm not saying that there won't be a realignment in the relationship, but I think palladium will continue to be strong on its own merits because so much of it is produced in Zimbabwe and Russia. And there isn't any indication that that supply pipeline is going to be refilled anytime soon. And it is much rarer than platinum. I still like palladium a lot better. Platinum certainly has some room to move up, but how and when or if it'll go back to its premium over gold is really difficult to say. I think the relationship is really undergoing a fundamental change, and we'll find out all the reasons for that later. But it is something to kind of keep an eye on.

Mike Gleason: Kind of revisiting that palladium conversation that we had, gosh I guess it was two or three years ago, where you favored that as your number one precious metal of the time and, like I said, you've totally nailed it. And the advantage of having palladium or any of these PGMs is really as a portfolio diversifier. They're obviously driven by different fundamentals. Is that fair to say?

David Smith: Both platinum and palladium are primarily used in catalytic converters and then there are other industrial applications, there's a fair amount of jewelry, especially in the far east, that is made from platinum. So they both go on those merits. We hear a lot about the electrical cars and things like that, and those are coming along. How that will affect the PGMs down the line, probably pretty substantially. But I think palladium has got a pretty good run left in it before we have to start worrying too much about that situation.

Mike Gleason: The U.S. Mint is just now announcing that they're going to be introducing a Palladium Eagle, which will be interesting. The first time that they're doing that. We'll see what kind of demand there is for that item here later this year.

How about the miners, David? They finally started to perk up in the last two weeks as gold finally broke above $1,300 again, but they've been in the doldrums for the last year after starting out 2016 with a huge move. Is it time to get into the mining stocks again? And if so, what kind of stocks would you suggest people look at?

David Smith: Well, the very fascinating, to me, change that's taken place and this it's like one of those things it's not 100% confirmed yet, but I'd say it's about 90% confirmed, for up to 20 years the relationship between gold and the mining stocks has been tilted in favor of gold. So in other words, for the last two decades people that bought physical metals did better on a percentage basis with less risk than buying the mining stocks. That is now starting to change. It looks like the mining stocks are going to outperform the metal. They're both going to do very well. They should outperform because there's much more risk.

If somebody comes to you and they buy 10 ounces of gold or a 1,000 ounces of silver, the only risk they have from buying it to you after they hold it is the price of gold and silver. Is it going to go up or down? But if you buy a mining stock, you've got about dozens of risks. You've got nationalization. You've got the cost of production. Are they going to run out of the ore that they thought they had? All sorts of things like this. A mine collapse. So those things necessitate that anyone buying a mining stock has to accept greater risk. The only reason that they'll accept more risk is if there's more rewards. So that has not been in their favor on a consistent basis over the last 20 years. Although as you mentioned, last year they did outperform.

But now, that's starting to change. So there's a lot to be said for a person holding a physical metal as the insurance part and as a profit part, and also holding some very carefully selected mining stocks. I think both are going to do very well going forward over the next few years.

Mike Gleason: Yeah. That's very well put and you illustrate that very well. Obviously, we've said for a long time that mining stocks are not a substitute for owning the physical metal, but it's more of a supplement to a physical holding that you already have.

Let's change gears here and talk for a minute about Bitcoin. You see lots of promise in Bitcoin. It has at least the potential to serve as another form of honest money, but it will need to clear some hurdles. One of the big ones we can see coming is regulation. Governments are increasingly aware of the threat posed by Bitcoin both to the fiat currency monopolies they have been running and to their friends in the banking sector. What is your take on whether or not regulators will be able to succeed in controlling cryptocurrencies, David?

David Smith: Regulators are going to have a direct impact on that currency space, there's no doubt about it. But the blockchain is something that is kind of the genie that's out of the bottle. It's not going away. It's going to fundamentally transform a big chunk of financial exchanges as we know of because it's peer to peer exchange. In other words, there's no middle man. So point A to point B goes straight through on the blockchain. It's a public pronouncement of a transaction and this type of thing.

So the blockchain itself is a fundamental change that will be with us. Which of the cryptocurrencies will be around is anyone’s guess. Of course, right now Bitcoin and Ethereum are a couple of the biggest ones and Ethereum is more of a tool than a currency itself. It was very interesting when China cracked down last week. They outlawed most of the ICOs that have been out there, the initial coin offerings. Some of them are just junk. That's true in the United States as well, too. But when they kind of stopped that market dead in its tracks, Bitcoin dropped $1,000. Well, now it's back up. It's gained 600 of that.

So, I think the cryptocurrencies are going to continue to be a significant factor because they deal with money transfer and preservation in a different way than the metals. But for anyone to go all in on the cryptocurrencies, I think, at this point is a very, very risky move. Now, I trade these myself as well. But I do what I call an asymmetric trade where I put a relatively small amount of money into a particular currency idea and if I lose it all, I've lost a little bit of money. At the same time, I might be up three or four or five times. So this way no one position knocks me out.

There has been, I think, a competition in the last year between buying gold and silver and cryptocurrencies. I think these big swings that we're seeing is causing people that are thinking about what they're doing to be more cautious and say well now would I put my next X amount of money automatically into the cryptocurrencies or would I buy some more gold and silver. And I think from the standpoint of our discussion today, the value proposition in relation to risk and potential improvement in which you buy really rests with the gold and silver and PGMs today for the majority of the new money that you want to put in to either investment or insurance.

Sure, put some money into the cryptocurrencies if you understand them properly and understand that the swings in them. If you think the swings in the mining stocks are profound, it's nothing compared to the cryptocurrencies. They can literally go from 0 overnight to an 800% the next day and then down 600% the day after that. So they're the wild west on steroids. So I just would caution people to be conservative. You should learn how these things operate and understand the blockchain, but don't think that you're going to just come up with your child's education here in the next six months and be able to hang onto it. Just be careful.

Mike Gleason: Yeah. Very good point. It can be a little bit of a speculators game, but obviously there's a lot of value in there. Just the fact that we do have some currency that's not controlled by governments, I guess, is a good thing at the end of the day. We've definitely upped our game when it comes to Bitcoin. We've accepted Bitcoin for a long time now for purchases of metal and soon we're going to be able to pay people in Bitcoin who want to sell their gold and silver back to us.

Well, finally, David, as we begin to wrap up here, talk about some of the key support and resistance levels you're watching here in the metals as we progress towards the end of the year and into next year. Are we poised to take out some of the overhead resistance levels we've seen, especially when it comes to silver or do we still have some work to do before we get too excited about a sustained up move? What are your thoughts there on the technicals as we begin to close?

David Smith: Well, the progressive levels of resistance, in other words the levels of prior selling that kept prices from going higher for quite a while, they're being attacked pretty vigorously. But I think right now we've seen a pretty good run in both metals especially gold and they'll be back and filling going on. Probably stand above $1,300 in gold or if it drops below that, it won't stay there very long. But these levels are going to be increasingly attacked as we go forward. $1,375 is another good-sized level in gold… $1,400, $1,450. Once you get above that round number of $1,400 and moving up toward $1,500, that's going to tell people more and more that hey this gold market is for real. It's not a flash in the pan. It's going to go up.

In terms of silver, $20 is a psychological point that needs to be bested at some point. Then $22 and $26. And once those levels are over, then people are really going to be piling in. So we talked about this topic before, but I think it's important that people remember there's two types of risk when you have an investment or when you buy for any reason. One is the information risk and the other is price risk. So if you buy something that is "low" in price or perceived to be low in price, what you have there is low price risk in relationship to what's going on because we don't have a lot of information as to why the price is at that level.

So when you wait for prices to rise substantially, then more is known about why those prices are going up. And at some point you have lower information risk and you have higher price risk. So there's no getting around it. You're going to pay for it one way or the other. Either accept the information risk or accept the price risk or ideally accept something in the middle. So if people want to wait until silver is $26 an ounce and that'll prove that our thesis is correct, that's fine. But they'll pay $26… actually they'll pay what $27 or $27.50 an ounce or maybe $28 for that metal, whereas now they can pick it up because the price risk is lower and the information risk is higher, they'll pick it up for what $18. So just decide what you're going to do, but be aware of why you're making that decision so that you understand intellectually what you've done and why you're doing it.

Mike Gleason: Yeah. At the end of the day, none of the reasons that made gold and silver worth owning five, six years ago – out of control government debt, fiat currencies being printed all over the world – none of those things have changed at all. The fundamentals are still there and the rationale for why you want to have some financial insurance is very much alive today.

Well, David, thanks so much for your time today and for enlightening us with your wonderful insights once again. Continued success with the book, Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shockwave. We definitely urge everyone to check that out if you haven't already. David Smith and David Morgan do a great job there. Look forward to catching up with you again before long. I hope you have a great weekend. Thanks, David.

David Smith: You too, Mike. People when they look at this book, they're going to find out how to hang on to most of what they make as well, too, which nobody really deals with that very effectively. So, it's one thing to make it and it's another to keep it and I think that's the philosophy that you guys have at Money Metals because you do provide a two-way market where you don't just sell you actually buy back as well, too. So when the time comes that people want to sell some of their metals for a good profit, you'll be there for them unlike some other entities that maybe won't be still standing because of their business practices.

Mike Gleason: Well that will do it for this week. Thanks for again to David Smith, Senior Analyst at The Morgan Report and regular columnist for MoneyMetals.com and co-author, along with David Morgan, of the book Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shockwave, a book which is available at MoneyMetals.com and Amazon, pick up a copy today.

And check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening. Have a great weekend, everybody.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up David Smith of The Morgan Report and MoneyMetals.com columnist joins me to discuss the recent stock market volatility and what the future is likely to hold when it comes to equities, and also lays out three potential market dynamics that may all converge at once in the near future to give gold and silver the long awaiting boost that metals investors have been looking for. Don’t miss another wonderful interview with David Smith, coming up after this week’s market update.

A second week of stock market volatility is helping to stimulate gold’s safe haven appeal. The gold market shows a gain of $10 or 0.8% this week to bring spot prices to $1,228 per ounce.

Silver is once again lagging, with prices moving up a slight 0.3% on the week. Silver now checks in at $14.69 an ounce.

Platinum is posting an 0.7% weekly loss to trade at $838. Its sister metal palladium is faring better, up 1.5% this week to come in at $1,089 an ounce.

Metals markets are facing the headwind of a rising U.S. dollar. The dollar gained against foreign currencies this week as data on retail sales and industrial production confirmed continuing U.S. economic strength. However, the reports did show deceleration taking place.

Former Federal Reserve chairman Alan Greenspan said on Wednesday that he sees the economy now “sagging.”

If economic reports in the weeks ahead show a trend of growth petering out, the Fed may reconsider its plans for further rate hikes. But for now a December hike is still on the table and further tightening in 2019 remains a possibility in spite of President Donald Trump’s protests.

This week President Trump’s attention turned to the incoming migrant caravan making its way to the southern border. Trump vowed to send military troops to seal the border if necessary to prevent illegal crossings.

Over the past few years, Europe has been hit with waves of migration from outside the continent. The government of Germany and the European Union are demanding that all European countries take in quotas of so-called refugees – many of whom are obviously opportunists seeking free housing and other welfare benefits.

Some countries are resisting the EU’s demands on migration, notably Poland and Hungary. Countries in Eastern Europe that suffered under Communism seem to instinctively recognize the threat posed by an external bureaucracy bent on undermining national identity.

Hungary has enacted laws aimed specifically at thwarting billionaire currency manipulator George Soros. His network of far-left and pro-globalist organizations are actively involved in promoting and financing the migrant crisis in Europe.

Both Hungary and Poland have been better able than other European countries to resist globalization in part because they have hung on to their own respective national currencies. Neither is on the euro. And recently the central banks of both countries have been accumulating large quantities of gold.

This month the Hungarian National Bank announced an enormous jump in its monetary gold holdings. Hungary’s central bank purchased 28.4 tonnes of gold – nearly 10 times the total amount it held in reserve as of last month. It is the country’s first major gold purchase since 1986. The purchase comes shortly after the European parliament threatened Hungary with financial penalties for refusing to participate in the trans-continental trafficking of African and Middle Eastern migrants.

Poland is responding similarly. In fact, the Polish central bank has steadily accumulated several tons of gold over the past few months, bringing its total reserves up to 117 tons.

Russia, meanwhile, continues to be the world’s most aggressive gold buyer year to date. The Russians are adding about 20 tons to their reserves every month as they liquidate holdings of U.S. Treasuries.

The U.S. pushed Russia into a corner with heavy economic sanctions, so now the Kremlin is turning to gold as a way of shoring up its standing in international trade. Russia’s economy isn’t big enough by itself to threaten U.S. dollar supremacy. But together in an alliance with China, they could certainly strike a major blow against the prevailing dollar-centric system.

Those countries that are building up their gold monetary reserves are ensuring their long-term economic viability. And for smaller countries that lack military strength, gold helps ensure their ability to continue existing as independent nations. Given the fragile state of the Eurozone and the attendant risk of the euro currency ultimately collapsing, national currencies that have some gold backing them may be the last ones standing.

Well now, without further delay, let’s get right to this week’s exclusive interview.

David Smith: I'm very good. It's been a while since we've spoken Mike, and I'm really looking forward to chatting with you again.

Mike Gleason: Well, David, the volatility in the stock markets is dominating the financial news over the past few days and week or so. Lots of metals investors are wondering when we might get the next big correction in stock prices. They've been waiting for a few years now. We've had some significant selloffs and each time we start wondering if the bears might have the upper hand, but markets seem to recover quickly. What do you make of the recent action in stocks? Are the equity markets in real jeopardy here or this is just another bump in the road?

David Smith: I subscribe to the view that has been very clearly articulated, I think more than by anyone else, by Steve Sjuggerud of Stansberry Research, and this is the way I'm going to play it, even though I have most of my investment money in the resource sector. But his view is that we are going to see a much higher, high before this lengthy bull market is over. And even though we're going to see a lot of volatility and we can see sharply lower prices from where we are here, over the next few weeks or so, but at some point there will be a bottom and then we're going to see new all-time high prices in the Dow and the S&P and the triple Q's. And that will lead to something like a (year) 2000 moment where we really get speculation and people all jumping in because they don't want to miss out, and we'll have a bull market top at some point, perhaps some time next year. Maybe 2020, but very probably I would think, next year.

There will be a high in the market that will last for a number of years, maybe a decade and we'll see a number of years of sub-par performance like we did after 2000, where the markets degrade by several percentage points every year for 8 or 10 years and that will affect a time, accounts and everything else. But before we get to that point there will be a blow off top and if you are a droid enough to get on and then get out in time, you can make quite a bit of money as we go to new all times highs, so that's the view that I've subscribed to in terms of the general market condition.

Mike Gleason: I also wanted to get your take on what we should expect from the Fed in the months ahead. Now they’ve been getting a lot of criticism here recently, especially from the President. We know that our nation’s central bank is anything but altruistic or independent but we don't know whether the officials there will bow to the pressure that is beginning to mount on multiple fronts. It is starting to look like the next few hikes are going to be a lot tougher than the last few.

Markets look ready to start rebelling and that may not be good for Jerome Powell's job security. There is another argument which says the Fed is an integral part of the deep state and if Trump is truly at war with the deep state the official there might be willing to finally let markets correct and see if they can stick the blame on the President. So, we would not be shocked to see the Fed start capitulating pretty soon on rate hikes and try to keep markets juiced nor will we be surprised to see officials stay the course on tightening. How about you care to guess on which way Fed policy might be headed?

David Smith: I think all the above are kind of elements in a mix, which in a lot of ways is a toxic sewage, because the Fed has let rates drop to the point of the last decade or so that has become almost, in some cases, negative interest rates. So they're now draining the punch bowl so to speak and they're pulling money out on a monthly basis. And so that means there is less money sloshing around for investments and speculation and this type of a thing and getting mortgages at 1 or 2 percent and now they are up to 4 or 5 percent. I think this draining of money each month from the Fed is a function, indirectly of rising interest rates, because by definition there is less money to loan out. All those things are going to create warps and weaves.

The Fed has never gotten it right. If you look back through history, they've always done the wrong thing at the wrong time. So whatever they do probably won't be very helpful. I think it will create a lot of uncertainty in the market. And I think that uncertainty will spill over into people saying, you know I think I need to have some precious metals here to bring certainty back and predictability. And that will be just one of many elements that I believe will help people move more forcefully into the metals than they have in the recent years.

Mike Gleason: We don't normally delve too deeply into politics here but in the current era it is getting harder to separate politics and the market. So, we'll put you on the spot and get your predictions about the coming midterms elections. It looks like polling favors the Democrats in a number of races. But the polls have been pretty unreliable of late. You have to account for the clear bias towards the left in the conventional media. So, will Democrats get control of the House and Senate, David, what do you think?

David Smith: You know, Mike, I think it's a coin flip in here. My sense is that it is certainly possible that they could regain House and perhaps even the Senate. I think the odds because it was such a strange 2016 election where hardly anybody believed what happened could happen. I think that could happen again and if that does, for example, the Republicans maintain control of the House and the Senate. I think it's going to create a massive civil issue on the streets because the left is already gone really proleptic about having a couple of Supreme Court Justices nominated that they maybe didn't agree with. That would mean that there would be a third one that would most certainly come during the next couple of years. High probability of that and that's going to cause all sorts of angst on the left. Near where I live in Portland we've seen some really disgusting types of clashes between both sides of the fence here.

On the other hand, if the Republicans lose control of one or both of the House or the Senate, then you're going to see more and more of the same, with the idea that the President's that currently elected is illegitimate, and that he should be impeached, which may or may not involve him leaving office. Probably not. But it's just going to create more and more discord and deepen the division that both sides of the country face. I think either way we're in for a lot more civil issues, more than we've seen the last couple years, and that kind of uncertainty again, is going to cause people to want to have some level of certainty. Especially after the stock market tops, perhaps in the next year.

So, I think the intermediate is a longer-term case for the metals, is becoming brighter than it has been, really since 2011, with the possible exception of that 6-month run we had in January 2016 that ran until that June, which caught most people by surprise, and most people disbelieved it all the way through. So, I think we're looking at that possibility again, something like that only maybe more durable than what we saw in 2016.

Mike Gleason: Expanding the point here a little bit, setting aside the political ramifications, what outcome do you expect would be better for gold investors? It would be easy to say that the Democrats returning to power in Congress would be bad for traditional markets, and good for metals. But we can also see gridlock in Washington, which we might expect given a Republican President, and a Democratic Congress, being good for Wall Street. Stocks, for example, often perform well when agendas are stalled in Washington D.C. As a metals investor, and again setting aside political ideology, which outcome in November do you think will be better for the gold price in the near term?

David Smith: Well, I think that either outcome is going to be reasonably positive for the metals. And there are issues that go far beyond just internal politics, because we have the issues of the potential of the crumbling Saudi Arabian alliance with the petrodollar. There could be an assassination there, which would throw the Kingdom into chaos, and the war is not going well for Saudi Arabia in Yemen, with the problems with Iran. The Iranian government could actually fall. There's all sorts of issues in the wider area of the world that could have effects on the metals, and that's why, I think, one of the reasons we've seen countries like Hungary, that increased their gold holdings by 10 times this month. The first holdings that they've added since 1968, and it takes their holdings back to the level of 1949, in the central bank. They said, this gives us stability, and it's one of the least risky assets you could own. This is the central bank talking. Other countries like Poland are adding to their reserves, or they're repatriating their gold that's been held in New York for them over the years, or in London.

And so, there's this massive shift going on… and Russia and China and India continue to buy more gold than they did the last month. So, we're moving toward a situation where the petrodollar, which is U.S. dollars established outside the U.S., which is about 80 percent of the transaction in the world commerce, I believe now. I think that's going to becomes more questioned, and I believe that the U.S. dollar will always be first among equals for quite a while. But if you look at where we have been, where we could print any number of dollars to finance things that we didn't really pay for, and other countries would soak it up. But if we move from 80 percent of the transactions to 70 or 65 or 60, because of the use of the yuan, and the use of gold, in exchange in the One Belt, One Road in China and India, and Iran… that would mean it would really put us in a crimp in terms of our ability to issue unlimited dollars.

We'd have to become a little bit more fiscally accountable. So, all of those things which are really, in a sense, moving in the same direction of discord that we see for different reasons in the United States, I think is going to create a very, very toxic mix of uncertainty and question on the part of people to hold paper assets, and they want something that's got a backing. And gold, silver, platinum, and palladium are the answer to that. They always have been and I think they're going to continue to be the answer for part of that equation.

Mike Gleason: Dave, switching gears here, I know you've been examining recently the idea of how dollar cost averaging, or buying in tranches can be a great investment strategy, in that you don't absolutely have to luckily catch the bottom of a market in order to win big. Talk about that, if you would, because I know many metals investors might be trying to pick that bottom and holding out for a drop further from here and I know you've got some good advice on that topic. Share that, if you would please.

David Smith: Well you know, it's so easy to see what happened the last couple weeks; gold was up $35 one day, and I think it's down about $10 now altogether, after the last few days, and think "Oh well, I can't afford it now." But if you have the bigger picture and if you believe, as I do, that we're seeing a major change in turn here, and this may be the bottom, or it may not be the bottom. But it's so close in relationship to what's been in recent years, that the risk-reward had really shifted heavily in the favor of people who accumulate precious metals, especially the gold and silver.

I think the big mistake that anybody makes when they finally decide to do it, or they decide "Oh, I should do it now." Is to do what some people call a price plop; where they take every cent that they're going to put into it, and they buy today. Well, maybe that'll work out, if tomorrow gold is up a hundred dollars, you'll be a hero. But the odds are that we're going to see backing and filling, and after strong days like we saw, we're going to see the markets give back half of it. If you buy in tranches or portions, I have found it's the easiest way to turn the psychology of fear and greed on their head.

So what happens is, if you buy a third or a fourth of what you want to buy right now, if you've decided to do that. Or if you're going to make an addition, you add a fourth to it. Then you say, “Well, if it goes up tomorrow I'll wish I had bought a little more. But if it down tomorrow, I'm actually hoping for this so I can buy another quarter of it. Or I'll buy it next week when it's lower.” And you keep cheering for lower prices so that your goal is to get the whole thing filled at progressively lower prices, because you've decided this is a good value place to do it. But if you buy at higher prices, or you buy too much at one time, you get scared and you get knocked out of the market, and you start reading all these negative things and go "I shouldn't have bought it, it's going to make new lows. We're going to see a thousand dollar gold. And you get out, and it turns right around just the day you get out.

That, to me, is such a simple way to deal with the fear and greed that we all have to deal with. It doesn't make it a sleep walk, but it does make it so much easier that I really recommend it. I do it myself, and when I don't do it, when I get too carried away, if I buy mining stocks; if I buy too much of one particular one, sure enough it's down for a couple of days, and it kind of frightens me too. I just have to remind myself of what I talk about. And you know they say that the path to excellence is followed by repetition of the basics. I know I've written about this more times than once, you've talked about it, and people say "Well, I've heard that before.", but you know what? If you bring it back into you consciousness and follow it, you will find, I think, it will give you much greater success, and much greater peace of mind than almost any other approach that I can think of.

Mike Gleason: Extremely well put, yes. Very, very good advice. Very valuable advice for people who are going to make any sort of investments. Just take the emotion out of it, too. Like you said, just make your decision about what you're going to do, and proceed with it, and don't let the waves take you and toss you from here to there, it's very valuable.

Now we often talk about the different drivers for precious metals demand, and how those drivers are not necessarily the same depending on which part of the world you're in. For instance, in Asian cultures; China and India, etc., they call it the love trade because there is a generations old cultural affinity for gold. Meanwhile, in the western world, talking about Europe or the Unites States, it's the fear trade that drives precious metals buying; people seeking safety in gold and silver.

There are often other drivers too, such as it being an inflation hedge and so forth. And it seems like we've got the potential, David, to have all of these key drivers going full tilt at the same time. Talk about that, because it could be there perfect storm here, that we've been looking for to finally drive prices higher. Give us your thoughts there.

David Smith: I totally agree with what you're saying, Mike. And if you look back at the beginning of this bull market, going back to 2000, after we had 20 years of declining prices from the 1980 peak. When that started driving, part of that was the fear trade, and then part of it was the love trade, but the inflation trade hardly existed at all. And now we have a situation where we really have a fairly substantial amount of inflation going on, not only officially, but unofficially too. We all know that when we go to the store and just about everything is going up.

In fact, I've read just a couple days ago that the Social Security, which indexes the payments out to the inflation of the preceding year, I believe is going to give out the largest one next year… and I don't know when that cuts in, but at the beginning of the year, or halfway through or whatever… it's going to be the largest Social Security payout, inflation adjusted, in about 7 years. We know officially then, that there's quite a bit of inflation going on. In fact, the Fed actually wants it, but they want to keep it under control. But there's also a lot more that doesn't register as well too. Now we’re nearing the strong season for buying in India and in China for, like you say "the love trade", so that's going on pretty strong.

And the we have the fear trade with all the stuff we just talked about over the last ten minutes, in the Middle East, and civil unrest in the United States, problems in the Eurozone. And I think all three of these are clicking right now, and they’re not going full tilt, but they're going pretty strongly so, it's almost like the tide is reversed, and all the riblets are running in the same direction. There's no tide that's right in the middle, and there's a little bit of current going left and right, and you don't know which way it's going. I think the tide is showing itself to be moving in a very pronounced direction, and I expect all 3 of those elements that we're talking about here to move, demonstrably and visibly, in the same direction going forward for here on in for quite a while.

Mike Gleason: That's certainly going to be very interesting to see, and it could be what we've finally been looking for in terms of higher metals prices if we do in fact get a convergence of all of those things, the love trade, fear trade and inflation hedging all working in unison, that would really boost the metals you would have to think.

Well, finally David, as we begin to wrap up, share with us any final thoughts on the metals that you may have… maybe what you're looking for during the balance of the year and then comment on anything else that perhaps we didn't cover, that you think ought to be on people's minds.

David Smith: I do think that if people wait until what you and I are talking about are front page in the New York Times, if it ever does occur there, when they're on the talk shows and all this, where everybody's kind of agreeing with us, which a lot of people don't right now. Right now we have information risk. We don't have price risk because prices are relatively stable but if you wait until what we believe happens, comes to pass, which I think it will, and we see $1,400 gold next year and $25 silver, you're now going to have price risk. You're going to have the information that's in the market, but you pay for that by paying a much higher price. I think there's a lot to be said for people, if they kind of agree with what we're saying, to start a reasonable acquisition program or add, if they've been waiting. And not wait until the coast is clear because then the coast will be a lot more expensive. So, that's one thing I'd really like to share with people.

Mike Gleason: Yeah, very well put. It's always fun to get your thoughts on these matters because you do have a different perspective, and I love getting that and having you share that with our audience. Thanks so much for your time today, and for enlightening us, I look forward to catching up with you again before long. I hope you have a great weekend, and we'll talk to you soon. Take care, David.

David Smith: Very good, Mike. Thank you and I wish everyone in our listening audience the very same.

Mike Gleason: Well that will do it for this week, thanks again to David Smith, Senior Analyst at The Morgan Report and a regular columnist for MoneyMetals.com, and the co-author, along with David Morgan of the book Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave, which is available at MoneyMetals.com and Amazon. Pick up a copy today.

And check back here next Friday for our nextWeekly Market Wrap Podcast. Until then, this has been Mike Gleason, with Money Metals Exchange. Thanks for listening and have a great weekend everyone.

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Dear Reader,

I have some very good news for you today…

Something I think will enrich, educate, and empower you – along with the rest of my readers and customers.

And you need only dedicate a few minutes each month with an open mind.

This morning, I'm pleased to announce an exciting new arrangement between Money Metals Exchange and investment analyst David Smith.

In the past, David has shared his insights on an occasional Money Metals podcast. Or perhaps you've seen his writings in The Morgan Report, a fantastic subscription newsletter hosted at Silver-Investor.com.

NewMoney Metals Columnist,
David Smith

Well, David has just agreed to pen a monthly column for Money Metals, specifically focused on the physical precious metals market!

David Smith's credentials as a writer and analyst are impeccable. For the last 15 years, he's investigated precious metals mines and exploration sites all over Argentina, Chile, Mexico, China, Canada, and the U.S. and shared his findings with audiences at dozens of investment conferences in North America.

I've followed David's work for the last decade and have benefited greatly from his knowledge and insights. But the thing that has struck me the most about David is the wisdom in his investment philosophy.

He's a teacher.

So I asked David to begin his work for our customers by sharing his insights on the “Investor Mind.” And I'm giving you access to this special report right now FOR FREE!

It's titled, Fast-Forward Your Profits with This “Secret Investment Tool.”

If you are invested in precious metals – indeed, if you are invested in ANYTHING – you absolutely must read this free report.

Yours Sincerely,

Stefan Gleason Signature
Stefan Gleason, President
Money Metals Exchange

P.S. This free report is exclusive to Money Metals and new. Frankly, if you ignore its lessons, you could live out your life as a pauper. But if you master its contents, I can almost guarantee you will enjoy greater wealth and happiness in your life.

I know these are big claims, but you'll see what I mean in a moment... Access the report here.

","image_selection":0,"primary_keywords":"David H. Smith","secondary_keywords":"davis smith, david morgan, silver-investor.com, themorganreport.com, investment analyst,","publish_date":"2014-04-25","podcast_url":"","quick_text":"","author_id":1,"content_type_id":1,"created_at":"2014-05-12T18:16:55.000000Z","updated_at":"2023-08-02T13:33:18.000000Z","podcast_subject_line":"","meta_description":"David Smith's credentials as a writer and analyst are impeccable. For the last 15 years, he's investigated precious metals mines and exploration sites all over Argentina, Chile, Mexico, China, Canada, and the U.S. and shared his findings with audienc","podcast_duration":"","header_image":"","article_image":"https://www.moneymetals.com/uploads/content/david-smith.jpg","redirect":"","canonical":"","sort":null,"featured_image":"","facebook_image":"https://www.moneymetals.com/uploads/content/introducing-new-money-metals-columnist-david-smith-social.png","twitter_image":"https://www.moneymetals.com/uploads/content/introducing-new-money-metals-columnist-david-smith-social.png","status":1,"show_guest_author":0,"guest_author_image":"","guest_author_name":"","guest_author_description":"","h2_header":null,"image_width":700,"image_height":368,"noindex_flag":0,"podcast_embed":"","added_schema":"","banner_image":null,"full_url":"news/2014/04/25/introducing-new-ilb-columnist-david-smith-000527","first_image":"https://www.moneymetals.com/uploads/content/david-smith.jpg","truncated_description":"David Smith’s credentials as a writer and analyst are impeccable. For the last 15 years, he’s invest...","pretty_publish_date":"April 25th, 2014"}},{"page_description":"You'll notice that since 1925, a few years before the Great Depression, up until the current day, financial assets (paper) - bonds, large cap stocks, and derivatives - have never been more overvalued in relation to metals and minerals, than they are now.","page_image_url":"https://www.moneymetals.com/uploads/content/must-own-precious-metals-social.jpg","page_title":"David Smith Explains Why You MUST Own Precious Metals","page_type":"news","score":13.051029855187217,"url":"https://www.moneymetals.com/news/2017/03/02/why-own-precious-metals-001019","data":{"id":1019,"title":"David Smith Explains Why You MUST Own Precious Metals","description":"You'll notice that since 1925, a few years before the Great Depression, up until the current day, financial assets (paper) - bonds, large cap stocks, and derivatives - have never been more overvalued in relation to metals and minerals, than they are now. What you must realize, is that if you truly desire to "insure" some of your own financial assets against a major turn of events with the potential to heavily damage their value, then it is imperative to seriously consider a position in the asset class which above all others, tends to move in direct opposition to them.","rss_title":"David Smith Explains Why You MUST Own Precious Metals","slug":"why-own-precious-metals","h1_header":"Let's Get Real: Why You Must Own Precious Metals","content":"

It can be difficult, even for dyed-in-the-wool perma-bulls to hold onto precious metals, let alone buy more. We see the Dow trading above 20,000 (placing this into perspective, is that since 2000, the Dow is up around 65% versus gold's 300%), gold and silver currently languishing below multiple "resistance" points; suspended just above a couple of "support" lines. For long-suffering holders, it feels like the fabled Sword of Damocles dangling over their heads, suspended by that proverbial single strand of hair.

If you fit the above description, the following chart should provide good cheer. You'll notice that since 1925, a few years before the Great Depression, up until the current day, financial assets (paper) - bonds, large-cap stocks, and derivatives - have never been more overvalued in relation to metals and minerals, than they are now.

Real Assets at all-time lows relative to Financial Assets

Financial (Paper) Assets vs. Real (Metals/Minerals)Assets (Courtesy Sources Listed)

What you must realize, is that if you truly desire to "insure" some of your financial assets against a major turn of events with the potential to heavily damage their value, then it is imperative to seriously consider a position in the asset class that above all others, tends to move in direct opposition to them.

The "kicker" is that, at such undervalued rates, when - not if- the metals return to the norm, that movement, plus the almost inevitable overshoot, makes it close to a lead pipe cinch that you'll be looking at a big profit on your purchase as well. The metaphorical rubber band stretches just so far, then reverses. And that class has at its apex, gold and silver.

It's not just an article of faith, but rather a proven fact that the more out of favor a category is, the less downside risk and the greater upside appreciation potential there will be. Markets move up on sustained buying - in the earliest stages rising on a so-called "wall of worry" - wherein despite all the naysayers' protestations, the price of the item in question continues to move higher. Later as the trend matures, you'll see stronger upward movement with less and less objection from observers, and more writers agreeing with the move. This signals that "more people are joining the parade", with less watching. Finally, almost everyone is "all-in" with lines around the block as late-comers frantically try to buy what little remains of gold and silver in retail hands - but we are far from that situation today. Sure it's "easy" to buy the Dow above 20,000, and as it rises on reduced volume, large numbers of IRA investors are doing just that. But big money is seldom made this way.

The five categories of a gold miner's ore body

Whether in production, or on a path toward it, a mining company needs to determine via expensive drilling, magnetic testing, laboratory sampling, and computer modeling programs, how much gold-bearing ore they have, and how likely what they possess - or think they hold - can be produced at a profit. The most well-known formal reporting method is the Canadian resource classification reporting methodology called the (National Instrument) NI 43- 101 Report.

The two categories - and within them, five sub-categories, in order of descending likelihood of being recovered and sold at a profit are Reserves: Proven and Probable; Resources: Measured, Indicated, and Inferred. A company will not generally undertake to build a mine/mill unless they have identified reserves that should grant them a 7-10 year production life. Resources sound great, but they may or may not ever "pan out". The following chart shows that for the past 7 years, even as exploration expenditures increased, success in locating gold in "unreported discoveries" languished. In the millions of ounces (Moz) "reported category" - the amount has cratered.

Gold Discovered Chart

Less than a year ago, industry CEOs were talking about world gold production peaking "sometime during the next 10 years." Now we're seeing that Reserves - the most accurate estimate of economically-recoverable gold, have declined 40% since 2011, and stand at levels not much higher than was the case in 2005, when the gold price was moving into the first solid phase of its long-term advance. A recent Bloomberg chart shows that recoverable (newly-discovered) gold has dropped fully 85% since 2006!

Keep in mind that a gold mine is a "wasting asset." Every ounce produced that is not replaced by the discovery of another economically-profitable ounce, takes the operation one step closer to the end of its productive life. Looking again at the discovery and expenditure chart demonstrates that as things now stand, the drop in Reserves - ounces most likely to be recovered at a profit - is taking place at warp speed. The much less-reliable Resources category - has also fallen sharply. Indeed, Indicated/Inferred figures themselves often end up being little more than hope and hype. And you can't "take that to the bank."

Xetra Gold EFT Ounces Chart

The European trading venue Xetra (Deutsche Börse AG)

In Europe, one week made a huge difference in gold demand

Recently, during one week, the European trading venue, Xetra Gold ETF (Deutsche Börse AG) saw an inflow of over one-half billion dollars, the largest such movement in 5 years! This amount was 10 times more than GLD, the U.S. ETF equivalent registered during that same week. Other European metals' ETFs saw increased activity as well.

In this space a year ago, I discussed Rich Dad Robert Kiyosaki's way of looking at things, using his analogy of a gold coin. Whereas most people see just the front (obverse) and back (reverse), Kiyosaki sees a third side - the edge. Only by looking at an issue from the vantage point of the edge, will you be able to "see both sides of the coin".

Mr. Market alone can predict the future, but viewing the concept of gold and silver ownership from the edge brings great clarity as to what's going on and how you might respond. This year is shaping up to be a replay of 2016, with the metals possibly being even stronger to mining stocks on a relative basis than was the case last year. My perspective from the edge is that the time to take action and claim your physical precious metals stake is growing short. I can't tell you exactly when "it's too late" is going to be, but whenever that inflection moment comes, the window of opportunity we now have is going to be visible only in the rearview mirror.

David Morgan at The Morgan Report puts it short and sweet. Be Real. Get Real. Buy Real. So "get on the edge." Check out the view... and then do something about it.

","image_selection":0,"primary_keywords":"","secondary_keywords":"","publish_date":"2017-03-02","podcast_url":"","quick_text":"...","author_id":3,"content_type_id":1,"created_at":"2017-03-02T17:13:37.000000Z","updated_at":"2023-08-01T18:18:41.000000Z","podcast_subject_line":"","meta_description":"You'll notice that since 1925, a few years before the Great Depression, up until the current day, financial assets (paper) - bonds, large cap stocks, and derivatives - have never been more overvalued in relation to metals and minerals, than they are now.","podcast_duration":"","header_image":"","article_image":"https://www.moneymetals.com/uploads/content/must-own-precious-metals.jpg","redirect":"","canonical":"","sort":null,"featured_image":"https://www.moneymetals.com/uploads/content/must-own-precious-metals.jpg","facebook_image":"https://www.moneymetals.com/uploads/content/must-own-precious-metals-social.jpg","twitter_image":"https://www.moneymetals.com/uploads/content/must-own-precious-metals-social.jpg","status":1,"show_guest_author":0,"guest_author_image":"","guest_author_name":"","guest_author_description":"","h2_header":"","image_width":700,"image_height":368,"noindex_flag":0,"podcast_embed":"","added_schema":"","banner_image":null,"full_url":"news/2017/03/02/why-own-precious-metals-001019","first_image":"https://www.moneymetals.com/uploads/content/must-own-precious-metals.jpg","truncated_description":"You'll notice that since 1925, a few years before the Great Depression, up until the current day, fi...","pretty_publish_date":"March 2nd, 2017"}},{"page_description":"Many precious metals investors over the years have closely followed the writings of David H. Smith, the beloved Senior Analyst at The Morgan Report and monthly columnist for Money Metals Exchange. I am saddened to report today that my friend… our friend…","page_image_url":"https://www.moneymetals.com/uploads/content/rip-david-h-smith-precious-metals-investing-philosopher-social.jpg","page_title":"R.I.P. -- David H. Smith, Precious Metals Investing Philosopher","page_type":"news","score":10.107515620821628,"url":"https://www.moneymetals.com/news/2022/09/07/rip-david-h-smith-precious-metals-investing-philosopher-002587","data":{"id":2587,"title":"R.I.P. -- David H. Smith, Precious Metals Investing Philosopher","description":"Many precious metals investors over the years have closely followed the writings of David H. Smith, the beloved Senior Analyst at The Morgan Report and monthly columnist for Money Metals Exchange. I am saddened to report today that my friend… our friend… David Smith lost his battle with cancer last weekend.","rss_title":"R.I.P. -- David H. Smith, Precious Metals Investing Philosopher","slug":"rip-david-h-smith-precious-metals-investing-philosopher","h1_header":"R.I.P. -- David H. Smith, Precious Metals Investing Philosopher","content":"

Dear Friend,

Many precious metals investors over the years have closely followed the writings of David H. Smith, the beloved Senior Analyst at The Morgan Report and monthly columnist for Money Metals Exchange.

I am saddened to report today that my friend… our friend… David Smith lost his battle with cancer last weekend.

David Smith

David H. Smith,
Money Metals columnist

David was a phenomenal yet humble man. He was a teacher, a student, and a philosopher.

I have rarely met a more optimistic, thoughtful, and wise person.

He was not just a pithy writer who informed and guided his readers; he was a trusted advisor to me personally.

I sought and received David’s feedback and counsel all along the way as I strived to build Money Metals Exchange into the top precious metals dealer in the United States.

Born in West Virginia, David H. Smith grew up on the Olympic Peninsula in Washington State where he developed his love for martial arts, fishing, and the outdoors.

After retiring from a 29-year career teaching 7th graders, he focused on precious metals and investing. David investigated precious metals mines and exploration sites in Argentina, Chile, Peru, Mexico, Bolivia, China, Canada, and the U.S.

He also fished the great rivers of North America and Patagonia, where he felt most at home. He is survived by his two children Rachel and Steven.

Silver Manifesto / Second Chance Books

David recently snapped this
photo of his book Second Chance
and other valued items.

David was deeply knowledgeable about the precious metals markets and the mining sector, and for the past 10 years, he shared his insights with our Money Metals readers – and 20 years for subscribers of The Morgan Report published by the great David Morgan.

David was able to pen his last column just two months ago. Some of you may have noticed that it read like a goodbye.

His writings will live on at MoneyMetals.com. In particular, I invite you to read what may be the most profound, timeless, and useful article David Smith ever wrote for us. It begins with the excerpt below.

Stefan Gleason Signature

Stefan Gleason, President
Money Metals Exchange

Fast-Forward Your Profits with This "Secret Investment Tool"

By David H. Smith

I'll bet you'd like to know upfront just what this "investment tool" really is. So that you could immediately put it to work in the markets to begin growing your investment nest egg.

Indeed, it is so powerful that if you become skilled in its use, you may one day find yourself at the pinnacle of financial success.

The "greens" on your portfolio can start outnumbering the "reds" several times over. You may even become an investing legend – writing a book about your success, standing the test of time, that people for generations will want to read.

A few people like Jesse Livermore (Reminiscences of a Stock Operator), Sir John Templeton (Golden Nuggets), Charles Mackay (Extraordinary Popular Delusions and the Madness of Crowds), and Jim Rogers (Investment Biker: Around the World with Jim Rogers) have done just that.

On the other hand, what if you use this device carelessly, get overconfident, and let some "really good trades" make you think you've found the "perfect system" to outsmart Mr. Market?

In reverse, it has the power to ruin your investment results and create enough stress to bend out of shape the really important things in your life.

This "secret investment tool" is explosive, both literally and figuratively. It's a concept similar to what Mike Tyson's trainer once said about fear: "It's like fire. It can cook for you. It can heat your house. Or it can burn you down!"

Given where we are now in the resource sector bull market mega-cycle, especially about the "Precious Metals Four" – Gold, Silver, Platinum, and Palladium – the timing of getting this information into your hands to think about and perhaps act upon could not be more important.

The Secret Investment Tool Is… Your MIND

Believe it or not, how a person develops, controls, and uses their mind will be the biggest determinant in whether or not they ever become, let alone continue to be, a successful investor.

In this report you will learn some very important things involving the markets, the outside world, and what drives everything related to them – but most important, about yourself – and something about me as well.

You see, despite all the years I've been investing and trading the markets – futures, physical metals, mining stocks, the general stock market, real estate, and other forms of investments – I have not "perfected" the handling of this tool. And I never will!

But I've come a long way on my journey. As a life-long learner, I will continue to shape, mold, and seek to control this tool to improve my investing success for as long as I choose to "play the game."

Understanding, reflecting upon, and applying certain skills will help you attain a much higher level of investing success than you now think is possible.

In the process, you can start making better buy, hold – and sell decisions than most other investors in today's volatile markets.

Don't think for a minute when you take a position, whether it's in a mining stock, an Exchange Traded Fund (ETF), the physical precious metals, or another type of investment, that you are involved in some kind of playful activity with gentleman's rules where people "just get along."

No, my friend, the truth is much, much different... [Read more here…]

","image_selection":0,"primary_keywords":"rip-david-h-smith-precious-metals-investing-philosopher-featured","secondary_keywords":"","publish_date":"2022-09-07","podcast_url":"","quick_text":"...","author_id":3,"content_type_id":1,"created_at":"2022-09-07T16:15:17.000000Z","updated_at":"2024-03-26T19:59:31.000000Z","podcast_subject_line":"","meta_description":"Many precious metals investors over the years have closely followed the writings of David H. Smith, the beloved Senior Analyst at The Morgan Report and monthly columnist for Money Metals Exchange. I am saddened to report today that my friend… our friend…","podcast_duration":"","header_image":"","article_image":"https://www.moneymetals.com/uploads/content/rip-david-h-smith-precious-metals-investing-philosopher.jpg","redirect":"","canonical":"","sort":null,"featured_image":"https://www.moneymetals.com/uploads/content/rip-david-h-smith-precious-metals-investing-philosopher.jpg","facebook_image":"https://www.moneymetals.com/uploads/content/rip-david-h-smith-precious-metals-investing-philosopher-social.jpg","twitter_image":"https://www.moneymetals.com/uploads/content/rip-david-h-smith-precious-metals-investing-philosopher-social.jpg","status":1,"show_guest_author":0,"guest_author_image":"","guest_author_name":"","guest_author_description":"","h2_header":"","image_width":700,"image_height":268,"noindex_flag":0,"podcast_embed":"","added_schema":"","banner_image":null,"full_url":"news/2022/09/07/rip-david-h-smith-precious-metals-investing-philosopher-002587","first_image":"https://www.moneymetals.com/uploads/content/rip-david-h-smith-precious-metals-investing-philosopher.jpg","truncated_description":"Many precious metals investors over the years have closely followed the writings of David H. Smith, ...","pretty_publish_date":"September 7th, 2022"}},{"page_description":"This week David Morgan of The Morgan Report joins us for a terrific interview on counterparty risk & other dangers in today’s markets. He also shares his thoughts on when he expects the metals to turn & what the smart money is already doing.","page_image_url":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan-social.jpg","page_title":"Trump Unscathed by Comey Testimony; David Morgan: Gold and Silver at Breakout Point","page_type":"podcast","score":8.135841902084417,"url":"https://www.moneymetals.com/podcasts/2017/06/09/trump-unscathed-by-comey-testimony-001090","data":{"id":1090,"title":"Trump Unscathed by Comey Testimony; David Morgan: Gold and Silver at Breakout Point","description":"This week David Morgan of The Morgan Report joins us for a terrific interview on counterparty risk & other dangers in today’s markets. He also shares his thoughts on when he expects the metals to turn & what the smart money is already doing.","rss_title":"Trump Unscathed by Comey Testimony; David Morgan: Gold and Silver at Breakout Point","slug":"trump-unscathed-by-comey-testimony","h1_header":"Comey Testimony Fails to Live Up to Media Hype","content":"

Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up David Morgan of The Morgan Report joins me for a terrific interview on counterparty risk and other dangers in today’s markets and also shares his thoughts on when he expects the metals to turn and what the smart money is already doing. Don’t miss a tremendous interview with the Silver Guru, David Morgan, coming up after this week’s market update.

Gold and silver markets extended their month-long rally earlier this week before giving back gains as former FBI Director James Comey testified on Thursday.

The Comey testimony largely failed to live up to the media hype. He called President Donald Trump a liar but didn’t drop any major bombshells that would enable Democrats to make the case for impeachment. The biggest impact of Comey’s remarks may have been that they refuted a barrage of conspiracy theories and fake news about President Donald Trump’s supposed Russia connections.

Impeachment is off the table, at least for now. But a future political crisis emanating from this White House can’t be ruled out – particularly given the nastiness and intensity of its opponents.

What would it mean for Wall Street and, more importantly, main street? Consider the recent history of presidents who have gotten themselves into trouble. Neither the resignation of Richard Nixon nor the impeachment of Bill Clinton caused the stock market to crash. Precious metals markets didn’t move much around these momentous political events, either.

President Nixon resigned on August 8, 1974 with gold trading at $152/oz. Gold began the year at $117 and finished at $195/oz. Nixon’s resignation occurred within a major year-long rally and doesn’t seem to have altered its trajectory.

Far more significant than Nixon handing over the keys of the White House to Gerald Ford was Nixon’s fateful decision on August 15, 1971 to close the gold window.

Previously, U.S. dollars had been redeemable in gold by foreign countries. But the Nixon administration feared a run on U.S. gold reserves.

Henceforth, the U.S. dollar would be a fiat currency with no formal link to gold. As a consequence, inflation fears began to build – slowly at first, but then manically by 1980 with gold prices spiking to $850/oz.

The Watergate scandal that made Nixon infamous didn’t really have anything to do with what unfolded in markets in those ensuing years.

The real Nixon legacy is what happened to the dollar after he ended its redeemability in gold. The consequences of the dollar’s lost status as a hard currency are still playing out.

Perhaps now that it’s pretty clear Trump won’t suffer the same political fate as Nixon – much to the chagrin of his Washington Establishment detractors -- Congress will be able to get into gear on tax reform, infrastructure, and other legislation investors have been patiently waiting for.

Five months into his presidency, Donald Trump still hasn’t been able to achieve much on the legislative front. His budget proposals have been declared dead on arrival by members of his own party. And the closely divided U.S. Senate will struggle to pass even a watered down version of healthcare reform. Any tax cuts that finally do get taken up can also be expected to come up far short of what the White House wants.

On Thursday, the House of Representatives passed a bill to repeal Dodd-Frank regulations that put enormous compliance burdens on banks. This bill also repeals the so-called Volcker rule, which bars banks from engaging in many types of speculative trading.

Supporters of the Volcker rule are warning that giving banks free rein to speculate could invite abuses and raise systemic risk levels in the financial system. They have a point. Too big to fail banks that blow up their derivatives books with excessive leverage, then demand to get bailed out by taxpayers, need to be reined in somehow.

In recent years, big banks have repeatedly been caught manipulating markets, including gold and silver markets. Just last week a Deutsche Bank trader named David Liew pleaded guilty in U.S. court to manipulating gold, silver, platinum, and palladium futures. The scheme involved spoofing, or putting in fake orders that don’t get filled, in order to move prices.

The rogue trader admitted to conspiring with others at Deutsche Bank and other institutions. In documents produced in court, he alluded to learning his tricks from a mysterious individual called “the master” and “the legend.”

Deutsche Bank had previously been fined a record $2.5 billion for rigging interest rate markets and nearly $100 million for rigging gold and silver markets. Apparently, though, a culture of trying to game the system still persists within many of the world’s most powerful banks.

The forces of price suppression were on display this week in the gold market as prices neared $1,300 an ounce. Large institutional futures traders commenced selling at the resistance level to prevent the rally from continuing.

As of this Friday recording, gold comes in at $1,267 and registers a 0.9% weekly loss. Silver prices are lower by 2.2% this week and now come in at $17.26 per ounce. Platinum is off by 1.5% to trade at $944, while palladium is up 5.0% since last Friday’s close to trade at $885 an ounce after having eclipsed $900 earlier today for just the second time since 2001 before pulling back.

Looking ahead to next week, the Federal Reserve is expected to announce a quarter point rate hike as it meets on Tuesday and Wednesday. This, despite the fact that economic growth came in weak for the first quarter and is likely to disappoint for the second quarter.

It will be interesting to see how the bond market acts over the summer. If the yield curve flattens – meaning rates come down on longer-term bonds to narrow the spread over short-term debt – that could signal the economy is weakening. That, in turn, would crimp the Fed’s ambitions of continuing to hike rates.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to welcome in our good friend David Morgan of The Morgan Report. David, it's always a real pleasure to have you on with us and I'm especially excited to talk with you about some of the topics we've got on tap today. How are you?

David Morgan: I'm doing well Mike, thank you very much.

Mike Gleason: Well, as we begin here David, I want to talk to you about the danger of complacency because I think it's a very appropriate topic for the times we're in right now. To you and me and to many others in our space with a similar world view, we see a whole slew of reasons to own precious metals. We have threats of war in many places throughout the globe. We have a president here in the U.S. who the establishment hates and is hoping to oust if they get the chance. We have nation central banks printing new fiat currency at unprecedented levels all throughout the world.

An entire continent over there in Europe that appears to be potentially at risk of seeing their political and currency union falling apart, terror threats all over the place, the refugee crisis, the list goes on and on. But all the while we have this stock market continuing to make all-time highs with most people seeming to believe that everything is hunky dory while completely ignoring all of those geopolitical and monetary headwinds, or for those who seem to grasp all of that, all that's going on, maybe starting to believe that it doesn't matter. Because, after all, the feds and the central planners are going to be able to manage this thing forever.

So, talk about complacency here David, why aren't we seeing more flock to safe havens, at least not here in the Western world, and discuss the dangers that exist if we let ourselves fall into the complacency or the “nothing is ever going to change” type of mindset.

David Morgan: Well, that's a tough one. I would say first is eternal vigilance, I mean freedom depends it, so my idea or ideal from the beginning has been that all fiat currency will eventually fail. And I also believe that it would happen within my lifetime and I'm certainly older than I was when I held that belief, yet I still hold it. So, really there’s a mandate to hold some portion of your wealth in a savings, in other words, the way capitalism is supposed to work you build from a savings base and that savings is put into a capital formation, which means you construct something be it software, hardware, a building, automobile, whatever, and that becomes a benefit to society at large and they vote in the marketplace with their dollars to further the projects so to speak. Make a profit, which returns to the initial investors and on it goes. So that's the ideal.

My statement was that in times like these rather than be a true capitalist – which is what I just outlined – it requires further savings because there's too many uncertainties out there with one certainty: every fiat currency on planet Earth in all of recorded history has always failed. So, to say that the dollar won't is a misstatement, at least based on past history. Is it going to, for this time, be different? Eh, I guess it's possible. But if we look at it objectively and we state, well, let’s really see what's gone on with the U.S. dollar, if you look at the Federal Reserve Board’s own website, they will freely admit that the 1913 dollar is worth about three cents today. So you have a 97% loss when their mandate was to basically keep the currency stable. They have failed miserably.

Most people that follow what you do, what I do, what the hard money camp, the gold/silver guys talk about, they understand this, but they are very tired out, worn out. I mean I coined the phrase a long time ago that “the silver market would either scare you out or wear you out.” We are definitely at the wear you out phase. And this is where complacency sits, in where they've manipulated the market, we even have proof Deutsche Bank admits it, there is a new CFTC ruling that's gone on, that they've singled out an individual that's going to turn over evidence and probably bring others into the mix on spoofing the market in the silver market, and yet we don't really see any real significant price change.

So, the complacency (mindset) is, look, I know what's going on but it doesn't matter because these guys have got control and they are always going to have control. You know, it brings to mind, the adage, the dark comes before the dawn, the big struggle for seed to germinate, that last little oomph that is required and I think we are very close to the tipping point and I'll add onto that.

First of all, I want to back up a second Mike. As you know, and you're on my service, I put an alert early in the morning about the second week of May and I said I think this is it. Meaning, the fundamental significant shift between paper assets and hard assets, I think, we don't know yet, that gold and silver had turned to the up-side and stocks to the down-side. Now, since I made that statement, stocks have made a new high, so let me get that on the record. However, it looks to me as if we are getting a confirmation on that with gold right now. Because gold is right at the breakout point from a six year down trend and it's mostly safe haven buying, but it's not the people that I just referred to, it's basically the smart money, which means big investors, large hedge funds, and China primarily.

China's gold demand is set to surge about 50% to about 1,000 metric tons this year. Their demand for gold bars are on track to make a 50% move in 2017. The geopolitical risk internationally is probably at an all-time high and this is leading to safe haven demand again, for smart money, nation states, people in the know, people that have basically sold off their stocks quite some time ago near the highs, that have capital sitting on the side lines and that is starting to filter into the gold market. And then you've got of course, a lot to do with the U.K. election, terrorism, the risking tensions in the middle east, and all of this is supportive of the gold, especially after the attacks in London that took place recently.

And the other fact, is that gold is 12% higher for the year and it's actually out performing stocks. Yet, if you stopped the average investor on the street and asked them what's doing better this year, I'd say about 90%, probably higher than that, probably 98% would say, well stocks are doing better than gold.

Mike Gleason: Yeah, it's a very valid point. As a follow up here, and this is kind of an open ended and very broad topic, but comment on counterparty risk, because I know that is something that you've been covering in The Morgan Report recently. Take it wherever you want, but share your thoughts there, because part of this complacency is failing to recognize the tremendous amount of counterparty risks that exist in the world today, give us your thoughts there David.

David Morgan: Yeah, I could go on, I'll try to be succinct. First of all, the belief system is so strong, and yet the truth is sometimes actually opposite of a very, very strongly held belief. The belief globally for all of the establishment economic system, which means all nation states, big hedge funds, all banks, etcetera, believe that the safest place that you can be in is the United States bond market, be it a treasury bill, a T-note, a long bond, anything in between. If you own the full faith and credit of the United States debt, you are buying something extremely safe. And the truth is, it's the exact opposite. It is probably the once place that at some point in time, everybody is going to want to get out of it, perhaps at the same time or close to it.

How can I say that? Well, going back to what I stated, all fiat currencies eventually fail, so this is proven time and time again, yet the belief system has yet to shift in a dramatic way. However, the cryptocurrencies are a bit of a tip off that somebody understands what is going on, and I admit, the best place that you could have possibly been over the last 30 years, for a long term buy, hold and forget it trade, would have been the U.S. bond market, this is true. But nothing grows to the moon. I mean, all trees grow as high as they grow and then they stop. It's the same thing with the bond market.

So, there is a huge debt bomb that we talked about in The Silver Manifesto, that's waiting to go off and when that happens, and it doesn't necessarily mean one day, boom it goes, and everybody understands it. It's more likely to take place slowly, slowly, slowly and then all of a sudden. Which means that a lot of savvy people will be exiting the dollar, which we have seen for years now. We've seen a lot of nation states that have basically abandoned the dollar slowly, sometimes fairly quickly: China, Russia settling their payments between each other in their own currencies. A lot to move from the AIIB (Asian Infrastructure Investment Bank). I mean there is a lot of periphery situations that savvy people are aware of that have been a way for, not only individuals through the cryptocurrency situation, but nation states to exit exposure or much exposure, or to mitigate their exposure to the U.S. dollar. And this is a harbinger for what will take place at some time in the future. So, these things always end, the longer you add, to coin (a phrase) and give credit to Jim Sinclair, "pretend and extend," you pretend that everything is okay and these guys pretend they can manipulate it forever and extend the problem, the worse it becomes, and this is the state that we're in right now.

Mike Gleason: A follow up there on cryptocurrencies, David we've seen a real boom in those lately. Now, I think we would probably both see value in owning some Bitcoin or one of the alternatives, but one thing that we should say is that digital currencies are not and should not be viewed as a substitute for owning gold and silver, which have stood the test of time as money and have been money all throughout history, comment on that if you would.

David Morgan: Well, there's two theories on money. One is that money is whatever the government says it is, which is a legal fiction, and of course you could be the argument that it's salt, or it's cow hides or it's sheep or it's whatever. Well, certainly that's been tried throughout history, but the argument is either it is a legal fiction or it's specie: it's something of value that has value in and of itself and I would argue silver actually has more value than gold, because you can use silver for medicinal purposes, you can use it for electronics, you can use it as money or barter, and it fulfills actually more services to whoever owns it than gold does. But regardless of my thoughts on the two metals, gold and silver from time in memorial all of recorded history have been chosen by the free market as money of substance. And this is where you can't get around the argument, I mean, a lot of people have been brainwashed into believing that gold and silver have no purpose today, they really aren't money, and on and on it goes. So, the idea that you can create something out of nothing and it has value has been tested time and time again, and again they always fail.

On the cryptocurrencies, I'm not against them first of all, in fact I just gave a lecture about them. I talked about gold, silver and the blockchain, of course I mentioned Bitcoin primarily because it's the leader, bitcoin is unusual, I mean let me again back up slightly Mike.

First of all, to be intellectually honest, would a cured fiat system work in theory, and the answer is probably yes, to be intellectually honest. If and only if you had a limited supply of dollars and they only grew as the economy grew, you would have in theory, a pretty good paper system.

However, that has never been the case, even when the gold-standard-basher's bash gold, they've said well, the gold standard has never worked. Well, yes and no. The gold standard would work because what gold's purpose is, is to keep that money supply growing basically at 2% a year, which is probably what a lot of the people on the left side would like, which is sustainable growth. And in a real, true economic system that is backed by physical reality rather than a make believe set of derivatives that is unimaginable at this time, you have an economic system where each dollar over time becomes more and more valuable. But that is not where we're at. So, we’re in a situation where there is a challenge to the system, and the main challenge really isn't coming from the precious metals, the main challenge is coming from the cryptocurrencies.

Bitcoin is obviously the leader, I look at it Mike, right now with 750 different cryptocurrencies out there, being similar to what happened in the tech wreck, where a lot of these domain names were getting huge valuations for a very short time and a lot of people were piling in. And yet today we still have Yahoo.com, Amazon is a big leader, there are certainly companies out there that were the real deal, stood the test of time, and a lot of these dogs and cats went away very rapidly. I think the same thing will take place in the cryptocurrencies. I do think that some of them are here to stay, I think Ethereum is really not a coin, I think it's a platform. I think few people really understand it's potential. I think it's one I'm favorable to. Bitcoin, it's hard to argue against, I mean, the markets certainly voting very strong for that one. Dash is an interesting one, I certainly don't know them all, I don't claim to be an expert.

But one place I really do have some concerns is security. And I gave that main concern at this lecture I did in Vancouver recently, and of course I got some blow back on it and people were telling me, you can take your account and write it down on a piece of paper and hide it under your desk and that type of thing, I get that, I understand that. But there's already been security issues with Bitcoin and a lot of people won't do that. I mean, just because you have the potential to make it more secure doesn't necessarily mean that most people will. So there is some vulnerabilities out there and this is not me speaking, these are someones at a recent tech conference, and these were high level people that were talking about the internet of things and how vulnerable all this internet of things model is with this, what's called big data, that is taking place before us right now, has security issues. And they do, so that's something to bear in mind.

Now, as far as, how much to put into Bitcoin or whatever, certainly I'm free market, you decide for yourself, but I think Bitcoin's got a long ways to go and I say that based on technical work. I mean, I looked at the chart before I did my presentation because I work pretty hard on these presentations as you know, and the volume was tremendously large in Bitcoin over the last couple months, which means it's got a lot higher to go, there's no question about it. And momentum feeds on momentum, especially when you're making new highs, there is nothing more bullish to the market than a new high because everyone that owns it wants to hold it, because they don't know how high is high, so there is very little that sells back. There will be some profit taking, but not much, because everyone is concerned with, “wow, I made this much percentage today, I wonder how much I'll make tomorrow.” So, there's not much selling pressure. And it will continue to go up. Very interesting market, from a couple places, the main one I would emphasize, which is a probably a different view point from many, is it is a competing currency to the present system and obviously it's taking off rapidly.

Mike Gleason: You've always focused primarily on the silver market throughout your career and I know part of why you're such a big believer in the white metal over the long run – and feel that it could really outperform gold and all other hard assets for that matter – is that fact that the moves can be so explosive because it's such a small market, something like 1/10th the size of the gold market I believe. So, talk about that dynamic and then remind folks about the need to recognize that the moves can be pretty substantial in the silver market and not just to the down side but also to the up side.

David Morgan: Well, exactly. What I just outlined earlier was China's buying more gold this year, and the last, and the smart money can move into gold, I mean, gold is a small market relative to the total financial markets. But they can protect themselves with gold. It's impossible for really big money to move into the silver market, it's just too small a market. And what will happen, is once gold breaks free, whatever that means, actually we’re at the cusp of breaking through a 6-year down trend, and it's not going to be the next day, David. It's going to be in a time frame, probably 2018 when we're going to really see some momentum in both of these markets.

But if you look at the total asset base of the world, physical gold makes up about 1%, but silver makes up .02%, and there is a lot of people that at some point will want to turn some of their Bitcoin profits into hard metal. I'm not saying everyone, I'm saying some percentage, but there will be a move into the metals, and once the move into the metals starts in earnest, like we saw in 2011, you will see a lot of money, "money", moving into the precious metals because it will be apparent at some point in time, that what I started this interview with, that the dollars demise is upon us and no one is going to trust it. It's a confidence issue, it's a trust issue. And what's trusted more than anything else, even more than Bitcoin, at least history shows, is the precious metals.

So, there will be people that will be exchanging some of their Bitcoin profits for metal, there will be people on other currencies doing the same, there will be people that have huge bond holdings that will want to get out and move into the metal. And once gold starts moving to a level that a lot of people question if they can afford it or not, that will spill over into the silver market. But the silver market is so tiny, that it will take it much higher, because people really won't care too much about the price, they'll care about protection at that point. And that means, that “while I can afford silver it's only, we'll think of a number, $50, and gold is at $5000, its a 100 to 1 ratio, I can buy silver, I can afford it so I'm going to buy it.”

We will see, this is what happened in the 1980's model, and this is what basically some Arabs and the Hunts taking a large position in silver early, before it made its big move. It was actually retail buying that took it to the height, it wasn't Hunt, he was already positioned. It will be similar, I think, this time, except it's a global based market, and we have the internet. Which means, that people that have never bought a silver or gold coin in their lives can almost instantly google how to buy silver, look it up and see how to do it and do it within a matter of a few minutes on the internet, so this is going to put huge pressure on the markets that they've never experienced in the past.

Mike Gleason: As an aside, we have been seeing a big uptake in the Bitcoin orders that we have been taking on our website MoneyMetals.com, we have accepted bitcoin for a good two years now and it's really starting to actually move the needle, believe it or not.

Well, David as we begin to close here, the metals markets of course are a major focus for you, but we've also come to value your insights when it comes to broader issues such as, honest money and personal freedom.

Now, the Liberty Movement got an enormous boost in 2008, the financial crisis and Ron Paul's rise to prominence were among the major catalysts. A whole lot of people were confronted with the problems in our governments and our monetary system. However, nearly 10 years have gone by since the financial crisis and precious little has been fixed, but people have gotten tired or complacent like we talked about at the top of the interview. Take an issue like Audit the Fed for instance, college kids chanted that slogan at rallies a few years back, but the establishment fended off the effort and the momentum appears to have faded there. Now, a good argument can be made about that effort being a waste of energy because beating Congress and Wall Street in their own rigged game is never going to happen, but what are your thoughts on the state of the Liberty Movement today. What efforts do you see working and where are the challenges?

David Morgan: Oh, well that's a real tough one. First off, I'll start from the bottom up. Number one is take care of your personal self and your family, I mean, you want to be healthy, wealthy, and wise to coin Ben Franklin. So, really change what you can, make sure that you're eating right, make sure that you're exercising, make sure that your health is number one. When I sign off the Morgan Report, from day one, I always sign it off “wishing you health above wealth.” There is a reason for that. Wisdom beyond knowledge. Having the knowledge of something doesn't mean much unless you implement it. Being wise is meaning you know how the world works and working with it and that's working with the truth. So that's the bottom line, I think control what you can.

Moving up from there, what can you do. Well I'm more or less a pacifist, so I think for example, what Ted Butler did over all these years, to give a shout out to Ted, I mean he was instrumental and spearheaded this whole idea of what was going on in the CFTC and it's been pretty thankless for him for a long time, yet he has maintained his position and asked people to help him write to the CFTC and investigate the manipulation of the silver market, and for years nothing really happened. But this little guy that is being held up as someone spoofing the market and then building a case against him, is probably due to some of the efforts that Ted did, in fact most recently.

So, you can make your voice heard, you certainly don't want to give up. Congress does respond to the populous, it really, really does. So a phone call is much better than an email, and a written correspondence carries a lot more weight than an email and it doesn't have to be a lengthy manifesto, it can just be simply, “I support freedom and you aren't,” or something even better from my politically, perhaps questionable point of view, but it's spot-on legally, is “you took an oath to defend the constitution from all enemies, foreign and domestic and I'm starting to question whether or not you are upholding that oath, write me back.” Something along those lines will wake them up, whether or not you'll get a response I doubt it, there's probably a computer form letter that has anything with the word Constitution in it that will probably pop out a form letter and send it back to you.

But regardless of that, you certainly can make it. And I'm for peaceful protest, the problem we have now is this "anarchy" with what's going on from a certain political belief system, where burning things up and bashing windows, that doesn't solve anything and it's deconstructive, not constructive. Yet, there seems to be an element that actually relishes making that kind of a statement, which is very sad indeed, and it falls back on us as a society on what's really being taught to the population at large and what are the moral values and what does make us great. What makes us great is we have high integrity, we were telling the truth. That's what made America great, it wasn't the financial system. If the financial system was honest, that helps a great deal. But as I've said many times, but probably bear repeating one more time Mike, as I close out, is there is a direct correlation between the integrity of the money system and the moral integrity of the population at large. The more the monetary system deteriorates, the more the moral society deteriorates with the population. They go hand in hand and we are witnessing that as we speak.

Mike Gleason: Very well put, we’ll leave it there. Well, as we wrap up here David, talk about some of the things you're working on there at the Morgan Report, maybe mention the recent book and let people know how they can get their hands on that if they haven't already, and anything else you want to leave our listeners with today.

David Morgan: Yeah, just go to the main website, TheMorganReport.com. I just wrote weeks ago, the silver forecast for 2017. If you're already on the email list, you can go ahead and download that for free. The system is smart enough to know if we already have your email. And then if you're interested in the book, just pull down the books tab on the website, you can order either book, The Silver Manifesto or Second Chance. And Mike I appreciate you mentioning that for me.

Mike Gleason: Well, outstanding insights as usual David, it's wonderful stuff to hear and we're very grateful for your time and for giving us your thoughts on these important matters. We appreciate talking to you today and we wish you an enjoyable summer and look forward to catching up with you before long. Take care my friend.

David Morgan: Thank you very much.

Mike Gleason: Well, that will do it for this week. Thanks again to David Morgan, publisher of The Morgan Report. To follow David just visit TheMorganReport.com. We urge everyone at the very least to go ahead and sign up for the free e-mail list and start getting some of his commentary on a regular basis. And if you haven't already, check out The Silver Manifesto and/or his new book, co-written with our mutual friend David Smith, titled Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave. Both of which are available on the MoneyMetals.com and other places where books are sold. Be sure to check those out.

And don't forget to check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this have been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.

","image_selection":0,"primary_keywords":"","secondary_keywords":"","publish_date":"2017-06-09","podcast_url":"http://traffic.libsyn.com/moneymetals/ILB-170609-WeeklyMarketWrap.mp3","quick_text":"...","author_id":2,"content_type_id":3,"created_at":"2017-06-09T16:09:39.000000Z","updated_at":"2019-07-12T17:08:59.000000Z","podcast_subject_line":"Audio: Trump Largely Unscathed after Comey Testimony, Metals Slip","meta_description":"This week David Morgan of The Morgan Report joins us for a terrific interview on counterparty risk & other dangers in today’s markets. He also shares his thoughts on when he expects the metals to turn & what the smart money is already doing.","podcast_duration":"34:32","header_image":"","article_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan.jpg","redirect":"","canonical":"","sort":null,"featured_image":"","facebook_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan-social.jpg","twitter_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan-social.jpg","status":1,"show_guest_author":1,"guest_author_image":"https://www.moneymetals.com/uploads/content/david-morgan-xs.jpg","guest_author_name":"David Morgan","guest_author_description":"David Morgan, the Silver Guru and publisher of The Morgan Report. David holds degrees in finance and economics as well as engineering.","h2_header":"David Morgan Exclusive: Gold and Silver at Breakout Point from 6-Year Downtrend","image_width":700,"image_height":368,"noindex_flag":0,"podcast_embed":"","added_schema":"","banner_image":null,"full_url":"podcasts/2017/06/09/trump-unscathed-by-comey-testimony-001090","first_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan.jpg","truncated_description":"This week David Morgan of The Morgan Report joins us for a terrific interview on counterparty risk &...","pretty_publish_date":"June 9th, 2017"}},{"page_description":"David Morgan of The Morgan Report joins us for a wonderful discussion on the metals and the markets. He’ll share his insights on what the smart money is already doing, the dangers of complacency and the importance of limited counter party risk.","page_image_url":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan-social.jpg","page_title":"Gold & Silver Strengthen; David Morgan: Metals at Breakout Point from 6-Year Downtrend","page_type":"podcast","score":8.09838795157157,"url":"https://www.moneymetals.com/podcasts/2017/07/21/dollar-sliding-metals-strengthening-001118","data":{"id":1118,"title":"Gold & Silver Strengthen; David Morgan: Metals at Breakout Point from 6-Year Downtrend","description":"David Morgan of The Morgan Report joins us for a wonderful discussion on the metals and the markets. He’ll share his insights on what the smart money is already doing, the dangers of complacency and the importance of limited counter party risk.","rss_title":"Gold & Silver Strengthen; David Morgan: Metals at Breakout Point from 6-Year Downtrend","slug":"dollar-sliding-metals-strengthening","h1_header":"Gold & Silver Strengthen as Confidence in Washington Withers","content":"

Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up David Morgan of The Morgan Report joins me for a wonderful discussion on the metals and the markets. He’ll share his insights on what the smart money is already doing, the dangers of complacency and the importance of limited counter party risk. Back by popular demand, don’t miss our recent interview with the Silver Guru, David Morgan, coming up after this week’s market update.

Well, gold and silver markets are advancing for a second straight week as the U.S. dollar continues to slide.

The Dollar Index dropped to a fresh new low for the year on Thursday following the European Central Bank’s policy meeting. The ECB left its quantitative easing program in place and kept its benchmark interest rate at zero.

Despite Europe’s dovish monetary policies, the euro has been steadily gaining ground against the greenback this year. Perhaps currency traders see the U.S. Federal Reserve’s tightening campaign coming up short of expectations – while at the same time, the Trump administration seems to prefer a weaker dollar.

The opportunity for precious metals investors is that gold and silver ought to be seen as fundamentally more attractive alternatives to the dollar than European currencies that yield nothing.

It’s hard to believe that anyone trading the euro on the long side actually believes that euros will be a superior long-term store of value. Of course, currency speculators don’t care whether the euro goes completely kaput in 10 years. All they care about is whether it’s a viable day trade.

The same could be said for stock market speculators. Yes, the Dow notched another new all-time this week. But at this point U.S. equity valuations are so lofty that even blue-chip stocks may only be suitable for short-term speculators who have stop loss orders in place.

The real long-term value these days is to be found in hard assets, including precious metals. Gold and silver still sell at bargain prices despite rallying over the past few days. Gold is up 1.8% this week to bring spot prices to $1,252 an ounce as of this Friday recording. Its less glitzy counterpart silver now trades at $16.52 per ounce and registers a weekly gain of 3.0%.

Both metals are now trading back above the respective support levels that got broken to the downside earlier this month. The technical damage has been mostly repaired. Of course, we still need to see if it stays repaired in the trading days ahead. You can never take anything for granted in the day-to-day gyrations of these markets.

What you can be confident of as a bullion buyer is that you’re obtaining real wealth that will hold value forever. And there’s a good chance precious metals will gain value in the years ahead. As long as the national debt keeps exploding and the currency supply that services it keeps rising, the prospects are good for gold and silver prices to ultimately rise to new highs.

$19.9 trillion and counting. And we’re soon to blow past the current $20 trillion debt ceiling.

The correlation between the national debt and metals prices is a positive one, even though it’s not always evident in any given year. Analyst Gary Christenson posted an article to MoneyMetals.com this week showing the recent history of silver’s ratio to the national debt. Over the past 30 years, the price of an ounce of silver has ranged from 0.7 to 2.9 times the national debt expressed in trillions of dollars. Silver currently sits on the low end of that average.

History suggests silver will eventually revert back up toward the mean and possibly higher. And political realities suggest that the national debt will continue soaring.

Although there are a few conservatives in Congress who are insisting on spending cuts and a balanced budget, they can only hope to win small concessions from leadership. There will be no actual reductions in what the federal government spends. No, the national debt will continue growing by hundreds of billions of dollars a year.

Senate Majority Leader Mitch McConnell wants to raise the debt ceiling before the August recess. It might get delayed by protests from fiscal conservatives, but, rest assured, the debt ceiling WILL ultimately get raised – just like it always does.

You may not be able to count on establishment Republicans to keep their word on replacing Obamacare or cutting our taxes. But when it comes to saddling us with more debt, you can absolutely, 100% count on them to come through each and every time! That is one thing that the majority of BOTH parties agree on wholeheartedly.

Perhaps when the national debt officially crosses the $20 trillion mark, it will signal investors to reassess the risks of holding too much of their wealth in dollars and dollar-denominated IOUs.

And now, back by popular demand, here’s our recent interview with a long-time friend of Money Metals Exchange and precious metals investors in general…

David Morgan: I'm doing well Mike, thank you very much.

David Morgan: Well, that's a tough one. I would say first is eternal vigilance, I mean freedom depends on it, so my idea or ideal from the beginning has been that all fiat currency will eventually fail. And I also believe that it would happen within my lifetime and I'm certainly older than I was when I held that belief, yet I still hold it. So, really there’s a mandate to hold some portion of your wealth in a savings, in other words, the way capitalism is supposed to work you build from a savings base and that savings is put into a capital formation, which means you construct something be it software, hardware, a building, automobile, whatever, and that becomes a benefit to society at large and they vote in the marketplace with their dollars to further the projects so to speak. Make a profit, which returns to the initial investors and on it goes. So that's the ideal.

Mike Gleason: As an aside, we have been seeing a big uptick in the Bitcoin orders that we have been taking on our website MoneyMetals.com, we have accepted bitcoin for a good two years now and it's really starting to actually move the needle, believe it or not.

David Morgan: Thank you very much.

","image_selection":0,"primary_keywords":"","secondary_keywords":"","publish_date":"2017-07-21","podcast_url":"http://traffic.libsyn.com/moneymetals/ILB-170721-WeeklyMarketWrap.mp3","quick_text":"...","author_id":2,"content_type_id":3,"created_at":"2017-07-21T15:47:02.000000Z","updated_at":"2019-07-12T16:43:02.000000Z","podcast_subject_line":"Audio: Dollar Sliding and Metals Strengthening. Here’s why…","meta_description":"David Morgan of The Morgan Report joins us for a wonderful discussion on the metals and the markets. He’ll share his insights on what the smart money is already doing, the dangers of complacency and the importance of limited counter party risk.","podcast_duration":"33:12","header_image":"","article_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan.jpg","redirect":"","canonical":"","sort":null,"featured_image":"","facebook_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan-social.jpg","twitter_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan-social.jpg","status":1,"show_guest_author":1,"guest_author_image":"https://www.moneymetals.com/uploads/content/david-morgan-xs.jpg","guest_author_name":"David Morgan","guest_author_description":"David Morgan, the Silver Guru and publisher of The Morgan Report. David holds degrees in finance and economics as well as engineering.","h2_header":"David Morgan: Gold and Silver at Breakout Point from 6-Year Downtrend","image_width":700,"image_height":368,"noindex_flag":0,"podcast_embed":"","added_schema":"","banner_image":null,"full_url":"podcasts/2017/07/21/dollar-sliding-metals-strengthening-001118","first_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan.jpg","truncated_description":"David Morgan of The Morgan Report joins us for a wonderful discussion on the metals and the markets....","pretty_publish_date":"July 21st, 2017"}},{"page_description":"David Morgan of The Morgan Report joins us for a conversation on a range of topics, including his 2019 outlook for a number of different asset classes, most notably gold and silver.","page_image_url":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan-social.jpg","page_title":"Gold & Silver Are Loving the Gov't Shutdown Conflict; David Morgan: Expect Stagflation and Silver Outperformance in 2019","page_type":"podcast","score":8.076470962101812,"url":"https://www.moneymetals.com/podcasts/2019/01/18/govt-shutdown-boosts-gold-and-silver-001696","data":{"id":1696,"title":"Gold & Silver Are Loving the Gov't Shutdown Conflict; David Morgan: Expect Stagflation and Silver Outperformance in 2019","description":"David Morgan of The Morgan Report joins us for a conversation on a range of topics, including his 2019 outlook for a number of different asset classes, most notably gold and silver.","rss_title":"Gold & Silver Are Loving the Gov't Shutdown Conflict; David Morgan: Expect Stagflation and Silver Outperformance in 2019","slug":"govt-shutdown-boosts-gold-and-silver","h1_header":"Gold & Silver Are Loving the Gov't Shutdown Conflict, Stock Volatility","content":"

Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

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.

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.

When the government does finally reopen, the nation will be back on track… the track toward trillion-dollar deficits. Conservatives argue that spending a few billion more dollars on border fencing would save the government money in the long run. An effective physical deterrent to illegal immigration could certainly reduce costs for border patrols, apprehensions, and judicial proceedings.

But of course, this government shutdown fight isn’t really about the money. For Democrats, it’s all about denying President Trump a political victory. For Republicans who have failed to deliver on fiscal responsibility, it’s perhaps their last chance to deliver on something of great symbolic importance to the voters who elected them.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to welcome in our good friend, David Morgan, of The Morgan Report. David, it's always a real pleasure to have you on, Happy New Year to you and welcome back. How are you?

David Morgan: Mike, I am well, and thank you for inviting me. It's great to start the New Year with you.

Mike Gleason: Well, David, I'm excited to do a bit of a market preview for 2019 with you today and we'll get your thoughts on a number of different markets. Now, we managed to finish 2018 relatively strong in gold and silver. Volatility in stocks and a more dovish posture from the Fed helped create a bid for metals in December. We're now two plus weeks into the New Year, stocks have rallied off the bottom put in on Christmas Eve. We know Treasury Secretary, Steven Mnuchin, had a conference call with other members of the Plunge Protection Team. He spoke personally with the CEOs at the nation's largest banks.

It looks to us like he got the response he was looking for. Somebody is buying stocks again and we aren't too sure natural forces are behind it. At least metals prices are holding up okay. What is your take? Does the rally we've seen in stocks have legs and what are you expecting for gold and silver and how they might respond here?

David Morgan: Great question. It's a very typical question and I certainly am going to answer it. I just want to preface it with this, Mike, that we all get a lot of criticism and I'm subject to it, as well. Rightfully so in a lot of cases. What most people don't understand, that aren't paid members, is that anything in life you've got to correct and continue. So, if I make a call today and it sounds great and people make a decision based on that, doesn't mean that three days from now I'm not going to correct and continue. In other words, something I say long-term may not hold but, believe me, as long as I've been in these markets, when I'm wrong I promptly admit it and make an adjustment.

Having said that, I really don't like the trading action in the last week or so. Gold just can't seem to get through that $1,300 ceiling. Silver is trading as, for the last month, roughly outperforms gold two to one. Roughly, gold's been up about five percent in the timeframe that you mentioned at the beginning and silver was up almost 10 percent in that same time frame. At this point in time, as we're doing the interview, they're both languishing here. They don't seem to have much momentum. So, I actually expect somewhat of a pullback. I was hoping for a strong January all the way through, could be wrong. If I am, I'll adjust. I think we're going to have to see a little bit of a downside.

It did accelerate pretty strongly, as you mentioned. Maybe they got a bit ahead of themselves. Having said that, I want to be emphatic about the next statement. Longer term this year, gold and silver will do better and they're likely to outperform the stock market this year.

Mike Gleason: Like many of us in the precious metals space, you have been paying attention to the developments of Bitcoin and cryptocurrencies. Our take is that crypto offers some real promise as honest money if developers can solve the problem of scale, if it can approve itself to be beyond the reach of governments and regulators and if one these coins can get widespread adoption, the world would have a medium of exchange that not can be inflated or controlled. That would be a wonderful innovation for the cause of liberty but, those remain pretty big ifs. In the meantime, people are finding out that Bitcoin was massively oversold as a store of value, perhaps. Prices have fallen about 80 percent from a year ago. That is our take, but we'd like to get yours. Where is crypto headed from here in your view, David?

David Morgan: Yeah, I'll preface it here with, I'm certainly not an expert but I study all markets. Market behavior is market behavior, whether it's soybeans, cryptocurrency, silver, or the financials. There's certain patterns and certain things that are basically natural law to markets. Having said that, Bitcoin's got a struggle ahead of it to get back to its former glory. I think there's a possibility that it will. I doubt it will be this year. There's massive overhead resistance at certain levels and those will have to be overcome. I do hold a very biased view that it's possible, not probable but possible, that the next leg up cryptocurrencies could be, not would be but could be, led by the gold and silver asset backed cryptocurrencies.

I think there really is a direct tie between honest money, free money, sovereign money, and blockchain. So, this combination has been married by several innovators that are taking that idea and moving it forward by having an asset backed or money backed with gold and silver backing. I think, again, it's possible that you might see that in the next leg up. And if they were constructed correctly, then what you could see is a lot of demand coming into those as a store value and money itself, meaning a means of exchange. I know that's a big statement and you prefaced it the same way, Mike, which I'm grateful you did. But, let's not hold out weakness. Let's come from a position of strength, which means that the possibility exists, which means that the market, itself, if it likes and adopts the idea, it could go a lot further than perhaps we are, at this point in time, thinking about.

Mike Gleason: You've got an interesting point. When it comes to the privacy of crypto versus precious metals, will someone planning a transaction find more privacy at a Bitcoin exchange or at a precious metals exchange?

David Morgan: Well, I’m fairly studied on this and my study comes from the guys at the top, people who are most aware, astute, and knowledgeable about Bitcoin. There's a lot of people at the Anarchapulco Conference that are much better versed in cryptocurrencies than I am and I'm a life-long learner. I love to learn and I've learned a lot from these people. Based off that and some, I won't name ... I was going to put some names out there but, some of the top people basically have said in all honesty that, if you think that these cryptos are absolutely anonymous, think again. Now that doesn't mean there isn't some anonymity to it with keeping your wallet offline and all this other stuff but, it's still on the blockchain.

So, if some agency really wanted to find out what was going on, pretty much most of the time it could be done. Whereas, if you take a gold coin, a silver coin, or coins, and you make a transaction with your neighbor for an automobile or a piece of fruit or what have you, that's pretty much an anonymous exchange. From an absolute objective perspective, really trading money coins for some goods or service is a lot less traceable, than something that's done on the blockchain, at least at this point in time as far as I've studied.

Mike Gleason: Switching gears here a bit, obviously, the environment for the metals and miners hasn't been too great over the past few years and the miners have really had a tough run. You've got to think we'll continue to see more mergers happening in the space in the coming months as some of the stronger companies look to capitalize on the soft environment and look to acquire more mining operations on the cheap. Now we've recently been hearing about a big merger between Newmont and Goldcorp and I wanted to get your thoughts on that. What did that say to you and what do you make of that deal, David?

David Morgan: Mike, I hate to throw another name at you but I know you're pretty forgiving. I did an interview with Kitco on that exact question. People that are interested on an in-depth take might check Kitco News from a day or two ago and they'll see my exact response. But overall, Mike, I am not favorable to it. I'm not sure that the Goldcorp shareholders are getting the best deal available. And even if they are, my broader view is this, it's like the banking sector, which means the more and more power that's put into fewer and fewer hands, the less flexibility the system has, so it becomes more fragile. And it's also got more control.

It's sort of like going from a bi-metallic standard where the bankers had to honor both gold and silver as means of final payment, to a gold-only standard where they had a lot more control. So, I don't really like it from the perspective. The other part is that, once you're that big, it's extremely difficult to continue at that size, at least in the gold industry because, barring a breakthrough in technology, which I don't rule out ... in fact, I'm quite aware it could happen …. I think we're really at peak gold. It's going to be more and more difficult for these huge conglomerates in the gold industry to continue to find deposits that they need to continue the production rate.

In other words, the rate of gold coming out at an annual basis will be very difficult to achieve year over year over year, just going out a few years.

Mike Gleason: Oil has appeared to have finally bottomed out in late December and it's had a really nice run since then and has gone from roughly $42 a barrel to $52, or so, over the last three weeks, roughly. Is this the start of a new, bold market in commodities led by crude oil, David, or is this just a dead cat bounce? Basically, what do you see ahead for oil here?

David Morgan: Very tough call. There's not enough data. I'm neutral to positive in oil this year. My big picture is that we're having slow down, economically, on a global basis, which means, as energy moves everything, there'll be less demand for energy. However, there'll be exceptions to that. Also, we don't really know what can take place geopolitically. Oil is quite volatile when you factor in tensions in the Middle East and the geopolitical climate that we're all under, where there's all these problems out there regarding, not only, the Middle East but China and the saber rattling between their islands after they built where there's conflict or potential conflict. And they're bringing Taiwan back into China.

There's all kinds of red flags out there. Oil will react to that if there's any disruption or any geopolitical situation or a war that's unwinding flares up again. Very tough call, but as it stands today, I'm neutral to positive. I do like the energy sector a great deal. It's the most important sector we have as commodities, as you eluded to, Mike. When you see a strong oil market, you usually see it pull up most of the other commodities. Copper's been pretty weak. I don't like the copper chart and copper is not as good an indicator of global health as it used to be, in my opinion.

I really think oil is a better barometer but, if you do use copper, what it's signaling right now is so far correct, meaning stagflation, which is higher prices, especially for things we need like food, but, slower economic activity. So a slowdown in the amount of production but a higher cost to get those things.

Mike Gleason: Obviously, when you talk about oil you also have to talk about the dollar. What's your outlook for “king” dollar in 2019?

David Morgan: Another tough call. It looks like it topped out. It looks like it's going to get somewhat weaker, overall. But you've got to remember the dollar has a lot going for it still, not only as a reserve currency but, it's one of the currencies with the biggest bond market and it's got a positive yield and the yield's being increased because the Fed's increasing interest rates. So, there's a lot of appeal to the dollar still. I'm basically neutral on the dollar and I'll make another call as things change.

Mike Gleason: Then, how about gold and, more importantly, silver in 2019? Will we finally get some tailwinds with these other markets, stocks, the dollar, oil, and might that help the money metals catch a bid this year?

David Morgan: Absolutely. If I'm correct in my overall analysis that stagflation is basically the meme for the year, and that means a lower stock market from this point to the end of the year and it'll go up and down and fluctuate, all markets do. That will put more impetus into the commodity sector but, again, if we have a global slowdown, then the top-tier of the commodity sector, which is money, gold and silver will be the best assets to hold. I think we had a pretty good prelude in December and, I know I'm rehashing old ground to make this point… silver outperformed gold almost two to one in the four-week, five-week time frame. That's a pretty good clue that, going forward this year, that we'll see something similar, which means the gold/silver ratio will finally come off that peak of 85, 86 and maybe move down to the 70, 72 level or better. It's hard to say at this point in time, over the year.

That means silver will outperform gold this year, and that is a very, very prime indicator that we are back in a precious metals bull market.

Mike Gleason: Yeah, you always say that you like to see silver lead when the metals are moving up. Now, how about palladium? Gosh, we talked a lot about palladium here on this podcast over the last month or so. It's this amazing outlier that just continues to go up and up. Obviously, there's lots of issues there when it comes to supply and the lease rates have been exploding in the futures market. We talked last week with David Jensen about it and how that could potentially, maybe, break the exchanges as people start to realize that there's just so much unbacked paper here in these exchanges.

What do you have to say about palladium? What might that mean for the other metals markets?

David Morgan: Well, I'm going to pat myself on the back and then slap my face at the same time. I got all of our, the paid members in The Morgan Report, in palladium at the right time. I, unfortunately, got out in January last year around the thousand, $1,100, mark. Obviously, with 20/20 hindsight, I wish I slapped my face that we had held another year. I did a write-up in a current issue and as far as disrupting the markets, it already did. It's an absolute fact, and people can look this up, that when Ford Motor Company switched their automobile line for their catalytic converters from platinum to palladium, and they work in both Diesel and gas, believe it or not … there's some tweaking that goes on, I don't have time to explain that.

So, Ford just basically made this massive order for physical palladium and it basically disrupted the market to the point where they had to, for all intents and purposes, close it down. And palladium, if you look at the chart, went off from the hundreds of dollars to $1,100, almost straight up. And that shows you, one, what a small market palladium is and, two, that physical demand can absolutely take control of the market and it did. So, this could be a replay. I haven't listened to David Jensen's latest interview. I think I listened to one a while back. I think he's pretty spot on. I don't want to vouch for him but, the idea is correct.

If you had a physical demand in one of these commodities, to me, it's always been absolutely ridiculous that platinum and palladium are even on a futures exchange. I'm going to digress a little bit further, Mike, if you allow me. I've been through some of the depository that are COMES approved and one such facility I had a really great tour. And one of the caverns within this huge vault was basically held for palladium. The owner opened up and showed me the shelf holding these palladium plates. And that was the end of the tour. I started thinking about it at lunch and I started to do some calculations in my head. What I realized in just that rather sizable vault, the amount of palladium that I've looked at was probably 50 percent of the physical palladium on the planet.

Think about how small a city is relative to the world itself. I digress. It kind of stunned me when I thought about how small these markets really are and how important that metal is. That metal and platinum, they're both very important metals. I digress. I've come back, Mike. Go ahead and shoot me another question.

Mike Gleason: Yeah, that's quite an amazing market and very small. You think gold and silver markets are small, gosh, the platinum group metal markets are even small. As we begin to wrap-up here, David, give us your outlook for the economy, as a whole, maybe touch on some of the other key events or storylines that we haven't touched on today that you're going to be watching, whether that be Fed policy, the government shutdown perhaps, possible reversal of Brexit maybe, strife in France and other Euro nations.

Basically, what are you watching and give us an idea of how you see some of these stories unfolding here in 2019 or mention anything else you want to touch on as we close here today.

David Morgan: That left me wide open and thank you. I think I want to do more from a philosophical standpoint. We are in a vast sea of change right now, globally. We have huge geopolitical forces and they've both come to extremes, at least in the United States. The two ideologies are vastly opposed. And all this is leading to a vast change that's taking place. I think we're going to see a change, maybe not in this year but going forward, on the economic system, on how nation states interact with each other, maybe even on the monetary system, and politics in general. We're basically seeing a shift from top-down command control back to sovereignty of individual nation states. This is what Brexit's about, this is about nationalism, all the stuff you hear.

There's numbers of people and ideologies opposed to that. That will continue and that means more and more change, probably more and more rapidly, and more and more disgruntled and unhappy populace. So, I expect to see more of what we've already seen, and I expect to see, probably, more disruptions than anyone really wants. And this is, to put in a metaphorical slant, more like burping pains. This is a painful thing for a lot of individuals, and I'm not talking U.S. only. I'm talking on a global basis. China seems to have the most command and control and their citizenry, for the large part, seems to be accepting it. For the most part, there is of course resistance. You don't hear about it because, if you say too much, you get a lower social credit rating and you're penalized.

They have implemented a system that's basically totalitarianism at its finest, meaning that they have absolute control. And it isn't quite absolute, but pretty close. Lots of things that concern me greatly, Mike, a lot of people that are still kind of unaware of this big picture of what this means in the new term, meaning the next five years or so. Most are unaware of there's something going on well beyond the political back and forth between the left and right paradigm, which is more meaningful and people are more or less asleep about it. You've got the 5G network, which disrupts DNA. You've got climate situations, which are unnatural to put it in polite terms.

You've got GMO foods, which are disruptive, again, to the human biological system. You have a never-ending, ceaseless, invasion of your privacy through different means, primarily your smartphone. You have a lot of things that are absolutely, in my studied opinion, more important than just this political back and forth that we're continually inundated with. So, what I would leave with this 2019 is, look at what you can control. Look at your health, what you're putting in you body, what's healthy. Look at your mental state. Keep a good attitude and try to focus on something that you're grateful for at least once a day. Look at what you really have because, when I was in China, I picked up a phrase that I still continue to say to myself almost on a daily basis. And that is, “the emperor is very far away.” Which means, at least which means to me, even though the political system may not be to your liking or whatever, how much does it really affect your day?

You get to make your day or create your day in some way. People that are working for the man, or whatever, obviously you've got a job and you don't like and you've got to attend it blah, blah, blah, blah. There's still things you can do. You can make a lot of choices during that day that improve your lifestyle. I do want to go a bit into that philosophical mind because we're in very, very stressful times. People that don't understand it, feel it. That's a strong belief of mine. A lot is going on and I've outlined, from the top down, what I think is important to focus on. That doesn't mean it is but, what I am suggesting is a lot of people that may be blind to the overall bigger picture sense just the same that something isn't right with what's going on.

The last comment I'll make is, I'm not much of a TV watcher but, I specifically tune into 60 Minutes and listened to this Chinese gentleman. I've already forgot his name but he talked about AI. He's an expert in AI and how over the next, I think he said 20 years or 10 years, you'll see 40 percent of the jobs right now will be taken over by AI. Primarily, the one he mentioned that, and I think he's correct, is anybody that drives for a living, long-haul truckers, people driving water trucks or gasoline or florist delivery or any of that stuff. That alone is huge. So, lots to change ahead of us, keep a good attitude, stay healthy, have a strong faith, whatever that is. I'll close it out there, Mike.

Mike Gleason: Very well summarized. Yeah, a lot to digest there, and well said. Well, outstanding. It's nice, as usual, David. It's shaping up to a be an incredibly interesting year in the market. I look forward to following it with people like you here on our weekly podcasts.

Now, before we let you go, please let people know how they can learn more about The Morgan Report and what it is that they'll get if they want to sign up to become a member, if they want to hear and read what you and your team have to say about all these market events as things play out here in 2019 and beyond.

David Morgan: Well, right now, the easiest thing is to get on the free Morgan Report newsletter and that means just go to TheMorganReport.com and give us a first name and an email. I do have Twitter feed, it's SilverGuru22. I have a YouTube channel, it's called The Morgan Report. And if you’re on the free email list, we're making a change this year in 2019, Mike. We do base some offers in there. Sometimes it's from dealers like you do that do a great job of providing silver at a lower premium. Sometimes, there are other competitors in the newsletter industry and that type of thing. We're not done and we're changing is that, every time I do a market update like this, we're going to put it out that day or the next day.

If you sign up for the free report, you're not only going to get my weekly summary that comes out every weekend, which is a wrap-up and save you a massive amount of time for what's important in the financial system. But, you're also going to get every interview I do as they become available. So, you'll not only get offers that you may or may not like. You'll be getting updated information as quickly as we can make a turnaround from an interview or a podcast or something that I write or some video that I make or something like that. So, you should be getting more information from me in a more timely manner in 2019 than we've done in the past.

Mike Gleason: Very good. That's something that everybody should take advantage of. Thanks very much for your time, as always. All the best to you in the New Year and appreciate it. Thanks very much, David.

David Morgan: My pleasure, Mike, thank you.

Mike Gleason: Well, that will do it for this week. Thanks, again, to David Morgan, publisher of The Morgan Report. To follow David just visit TheMorganReport.com. We urge everyone to, at the very least, go ahead and sign up for the free email list as David was talking about there, start getting some of his great commentary on a regular basis. And if you haven't already, be sure to check out David's recent book co-authored with another good friend of ours, David Smith, titled Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave, which is available at MoneyMetals.com and other places where books are sold. Be sure to check those out.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up we’ll welcome back our good friend David Morgan of the The Morgan Report. David has some interesting things to say about the dollar, shares his research on the inverse correlation between stocks and metals and gives us his thoughts on when he expects to see gold and silver finally breakout. Don’t miss another wonderful interview with the Silver Guru, David Morgan, coming up after this week’s market update.

As trading for the third quarter winds down today, investors should prepare to face some new headwinds in the fourth quarter.

Beginning in October, the Federal Reserve will engage in so-called Quantitative Tightening. The Fed will allow some of its bond holdings to leave its balance sheet as they mature.

It may not sound too dramatic. But over the next year hundreds of billions of dollars will effectively be pulled out of the financial system. That could have dramatic consequences.

Nobody knows for sure what level of stimulus withdrawal will finally cause the stock market to break down from its long uptrend. But there’s no doubt that Fed stimulus has been a big contributor to its rise since 2009. Take away the punch bowl and the party can’t be expected to last much longer.

The S&P 500 index did close Thursday at yet another slight new record high. So in spite of the coming threats of Quantitative Tightening and a likely rate hike in December, stock market investors are as complacent as ever.

They will eventually pay a price for their complacency. Bull market gains that take years to accumulate can be wiped out in a fraction of that time during a stock market crash.

Major crashes tend to occur every few years. The last one was the financial crisis of 2008. Before that we had the tech wreck of 2002. In 1998, long-term capital management triggered a mini crash that nearly got out of hand. And of course in October 1987, the market crashed seemingly in an instant, without warning or reason.

It’s prudent to get defensive in your investments, even if you’re too early. Better to miss out on a few more points of upside in an overextended market than to be caught unprepared and undiversified when it finally takes a big plunge.

Plus, when you diversify into alternative assets such as physical precious metals, you aren’t just sitting on the sidelines. You are invested in markets that have tremendous upside potential in their own right, regardless of which direction the stock market heads. On that note, be sure to stick around for my interview with David Morgan coming up shortly as he will shed some light on what happens to metals when we get those corrections in the equity markets.

Over the past three weeks, metals markets have pulled back. Gold prices currently check in at $1,285 per ounce, down 1.0% for the week. Silver shows a weekly drop of 1.2% to bring spot prices to $16.84. Platinum is down 1.7% to trade at $921, while palladium is up 1.4% to $938 an ounce as of this Friday morning recording.

Yes, this week the per ounce price of palladium surpassed platinum for the first time in 16 years. Congratulations to Money Metals writer and regular podcast guest David Smith, who predicted palladium would return to a 1:1 ratio with platinum way back when palladium was trading at about half the price of its sister metal.

It remains to be seen if platinum will return to a 1:1 ratio with gold and eventually get back to a more historically normal premium. Platinum prices have traded at a discount to gold for going on three years now. That’s very abnormal and David Morgan will have some comments on that as well in my interview with him this week.

We can’t rule out the possibility that platinum may be down for the count, never to return to its glory days. But it’s probably still too early to bet against several decades of cyclical history.

Silver bugs might argue that even if platinum prices recover to historic norms, silver has superior upside potential and has more utility as money. They have a point. Silver is a money metal while platinum and palladium are niche industrial metals used mostly in the automotive industry.

We have always urged precious metals investors to first acquire a foundational position in gold and silver bullion before venturing into platinum or more speculative metals such as rhodium. There’s a time and a place in life for speculation, whether in metals or in stocks. But there’s never a good time to completely abandon a long-term diversified investment strategy in favor of chasing a hot market.

Regardless of what October and the rest of the fourth quarter bring, don’t let market movements tempt you out, or scare you out, of your core positions.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now, to welcome back our good friend David Morgan, of The Morgan Report. David, it's always a real pleasure to have you on with us. How are you, sir?

David Morgan: Mike, I'm doing well. Thank you for having me.

Mike Gleason: Well, first off, let's discuss what's been driving the recent pullback in your view. Gold was over $1,350 not too long ago and is now is decisively back under $1,300, as we're talking here on Wednesday afternoon. Silver has pulled back, and is moving toward the lower end of its year-long trading range, and has a 16 handle, once again. So what do you make of the recent market action, and what's behind it David?

David Morgan: Well, it's a lot of, algorithms that trade all these markets. You can't get around that fact. The second thing is, a lot of people are -- in my view -- been on the lazy side, which means they just generally off the technical analysis doesn't work, because it's a manipulated market. Well, actually it works fine, if you ever took the time to read The Silver Manifesto, with my co-author, Chris Marchese, you would definitely find out that technical analysis is a tool. It's not perfect, but it's something to pay attention to.

So, when we have a support or resistance level, it normally takes three tries to get through that level, either from the upside or the downside. Recent times, $1,300 was the level that had to be tested three times, for gold to have that $1,300 breakout. It did it. Third try it went through. It got up to $1,350. I warned my members at that time that normally, a breakout level is tested at least one time, and forecast it would see $1,300 or below. And it was moving higher, higher, higher, and there were a lot of articles about gold is at a 11-month high, gold is at a 12-month high.

And I don't want to say I get it right every time. I'm not trying to imply that. What I'm trying to imply is that technical analysis does have some benefit, and that there are some general principles that work most of the time, this being one of them. The last one that cinched it for me, and this is one that you've got to combine as much knowledge as you can, and throw out the junk and keep the diamonds, then that is what the Commitment of Traders look like. And the Commitment of Traders look very unsatisfactory at the time that gold was getting in this 11-month, 12-month high area.

It looked to me like, based on the COT, that it was also due to come back. So, that's the reason ... I mean as trite as it sounds, it's absolutely the most honest and truthful thing you can say about why a market was up or down, it's because there's more sellers than buyers, that's why the market goes down, or there's more buyers than sellers and that's why the market moves up. I don't care if it's wheat. I don't care if it's rice. I don't care if it's a stock or an ETF, gold or silver. It does not matter.

If there's buying pressure, it goes higher. If there's selling pressure, it moves lower. It's that simple. What everyone wants to know is why, and that is too difficult to announce, because there could be individual reasons. Someone might have an emergency and they sell a bag of silver because that's all the savings they have, or whatever. So I don't want to go down this rabbit hole too far, Mike, but I want to state, is you can generally say, "Oh, yes. The Fed announced they're going to raise rates and they're going taper back on their balance sheet," and all this stuff, and everyone says, "Well, that's the reason."

Well that's a reason, and it may be one of the major reasons, but it's not necessarily all reasons. So I'll leave it at that.

Mike Gleason: Well, I know you don't want to thump your chest too hard, but I'll sing your praises a little bit, here. You've been very good at calling both short term tops and long-term tops, and people that follow you will know that as well.

I'm curious to get your read on sentiment in the broader precious metals community, because while we're definitely still seeing more retail customers buying than selling, we are seeing an increase in people selling metal than we're accustomed to. Around the world, though, particularly in Asia, physical demand is strong and may even be increasing.

Now, you interact with traders and investors in the futures markets, and you talk regularly with mining industry executives and shareholders, which gives you an even broader perspective. You often talk about how these markets tend to either wear you out or scare you out. Is that happening, or are you seeing some optimism, here?

David Morgan: Too much optimism. Sentiment really changed from ... and especially in the silver market. There's a small market. It seems as if, from my experience, which is 40 years, that the silver folks are a little more volatile than the gold folks, just like the metals themselves. And so you can go from extreme pessimism to extreme optimism in silver, very rapidly. And that's what took place, generally speaking, over the last few months. We saw, gold unable to breach the $1,300 level. Once it did, it was a quick trade, if you were nimble enough. And if you could only capture $50, then so be it.

Regardless of that setup, sentiment got very, very high, very, very quickly once the mainstream press came out there with the, gold setting these 11-month highs. And normally, in a real free market, if you get a new high that's pretty bullish. The problem with a long trending market like gold or whatever, some stocks, is there's a lot of overhead resistance.

I mean, there are people out there bought at $1,400, people out there bought at $1,500, people are out there that bought at $1,600. And that's many months and months ago. I know that. Nonetheless, some are sitting there, just waiting for it to hit those levels, just to sell it and get rid of it, because they're very unsatisfied with what the gold market has done for the last several years. And the same thing holds true with the silver market.

So, sentiment swang really broadly. And the other thing, I'd like to ask my own question and answer it, if you don't mind, Mike, because this is one that I get quite a bit. I had a gentleman that I admire. He's very close to the mining sector. And I’d consider him highly intelligent, and he knows quite a bit about the silver market, and he said “I just don't understand why silver's at this price. It's been in a deficit,” and on and on. So what he was implying was that we have this continuous deficit in the silver market. And a lot of people, even some very well established people that are good friends of mine, do produce factual, verbatim quotes from major silver studies, that claim that silver's at a deficit.

However, even though that's true and a fact, you have to be very careful with that word, because the word deficit, by definition of some of these silver studies, refer to the fact that there is a difference between the amount of silver mined, and the amount of silver that's requested for all investment, be it monetary investment or industrial demand. What they don't talk about is the 165 million ounces of silver, roughly speaking, that comes through in recycling, every year.

So the easiest, most straightforward, most commonsense way to look at, "Where's all the silver coming from? We're in a deficit. Where's all the silver coming from?" is to look at the facts. And the facts are simply this. From 1999 to 2006 we were in a silver deficit, and all the silver that was required for whatever demand, industrial or monetary, came from the aboveground stockpile, which went from 2 billion ounces to 500 million ounces, in those 15, 16 years. Roughly 100 million ounces a year is what was eaten away at the aboveground stockpile.

Now, from 2006 to present day, roughly 10, 11 years, the silver aboveground supply has continued to grow, year over year over year over year. Which means that we're now basically where we started in 1999, which is roughly 2 to 2.2 billion ounces of silver, aboveground. Which means we have built, on an average basis, about 100 million ounces of fine silver, aboveground, year over year. The word deficit just means the definition I gave you.

Well, there's a couple definitions of deficit. Excuse me, I wanted to backtrack that statement. What I'm trying to say is, deficit, in the dictionary, means that there's a shortage, quote-unquote. But the way deficit is used in some of these financial articles means that the demand, the investment demand, is bigger than mine supply. Well, that could be true, but you could still have a greater supply, if you factor in the recycling of the product like silver.

So, hopefully I made that very clear. We had a deficit that drew the stockpiles down. We've had a surplus build over the last 10, 11 years, and that's where the silver is coming from. There is not enough total demand to take all that build out. Now, this is where it gets finer and, it’s in my reports and everything else. I mean, how much is the float? And the answer is, there's very little silver unaccounted for.

I want to be clear. I don't want to scare people. I realize there's massive amounts of silver just sitting there, that nobody wants. You know, almost every ounce, to an ounce, is accounted for, one way or another. But, it's just like a float in a stock market investment -- and I hope I'm not getting too complex or, I want to keep it simple -- but just, the idea that you have to be in a deficit, for silver to be a good investment is ludicrous.

Because, one, you never buy gold. The aboveground stockpiled gold grows every single year, bar none. Every year there's a bigger gold supply than there was the previous year. And secondly, there's so many derivatives and other things out there, that really obfuscate the exact amount of silver demand and gold demand that's out there, and I think everybody that listens to Money Metals Exchange in these podcasts knows exactly what I'm talking about, so I'll stop there.

Mike Gleason: David, let's talk a little bit about market correlations. You pointed out something in the most recent issue of The Morgan Report that most metals investors will not be aware of. Gold and silver prices are correlated with the U.S. dollar, of course. So, if the dollar weakens, metals tend to move higher. But metals prices are even more closely correlated with the stock markets. If the equity markets are moving higher, that is bad news for metals, and if share prices fall, gold and silver typically move higher.

Of course, if we get a major liquidity crisis, a la 2008, then all bets are off, but this correlation would certainly explain some of the lackluster performance we've seen in the metals. The dollar's had a terrible year, but that really hasn't helped gold and silver all that much. Talk a bit about those correlations, if you would, and then give us your thoughts on where things stand with the equity markets, in general.

David Morgan: Well, thank you for that. A lot of these people, and they're good friends of mine, and some are very technically savvy, nonetheless, a fact is a fact. Now, one is Ian McAvity, and Ian has passed away. God bless him, he was a wonderful guy and I got to know him on a personal level, on a cursory basis, but I've known him for years. But he would make the argument that, gold is the anti-dollar and he would show his chart work, of which he did a massive amount. His letter, basically, was nothing but a technical report, which was a good one.

Anyway, he would take a dollar chart, he would flip it upside-down and say that's a gold chart. Then he'd lay a gold chart on top of it, and it correlated pretty darn well. So, that's saying it's not dollar correlated. But if you look at the math, and you're objective, the correlation is even better if you use the stock markets. And to me, that makes more sense, because the stock market is basically, and purportedly these days, because the financialization of everything that's taken place in the last decade or longer really has distorted what the financial markets are, versus what the underlying assets are, which is basically every business that's a public entity in the country, or world, if you go to the world stock markets. We're talking U.S., for right now.

So it's really distorted. It doesn't, however, negate the fact that the most negatively correlated asset class to gold is the stock market. It's pure fact if you objectively look at the numbers. If you run the data, that's what it tells you. So, why I did that was, one, to just lay it on the line. And secondly, to give a bit of comfort, maybe, to other analysts or deep thinkers, or people that really pay attention to these markets, or have a lot invested in these markets, and want to get the best information they can obtain, that this is part of the reason.

You see this new, higher and higher and higher stock market, that would imply a lower and lower and lower gold price, which are not correlated 100 percent. The only thing correlated to 100 percent would be the same thing, you know, the stock market correlating to itself. Regardless, gold is actually fighting the good fight, meaning it's broken out into a one-year high. It's pulled back from that level, but that's against an ever increasing, higher and higher and higher stock market, which means, if you keep your emotions in check and just look at it, what it’s telling us is that gold is actually doing pretty darn well, in view of all that it's correlated against, and how much headwinds it has to fight.

Mike Gleason: Yeah, despite the recent pullback, it's still up 11 percent for the year. I was just running those numbers this morning. So yeah, absolutely, that's a very good point. It is fighting the good fight.

Now, cryptocurrencies have been getting a lot of headlines this year, and they have been stealing some of the thunder from gold and silver, at least some new money is going into those, instead of the precious metals. At the end of the day, the surge in the cryptos are a vote against government fiat money.

Now we can debate that cryptocurrencies are really not backed by anything, and that gold and silver have stood the test of time as money, throughout history, and are really a better alternative. But let's talk about the movement that's taking place, of people seeking dollar alternatives, here for a minute, and what it might mean for the central planners and the governments throughout the world.

What's your take on all of this, and what does it say about the confidence in the system, David, or lack thereof?

David Morgan: Well I'll try to answer this from the top, down. First of all, I'm really free market, that means anyone, anywhere is really able to make their own decision, have their own motives and these cryptos are not, I mean, I'm pretty neutral on them. But, to answer your question more specifically, it is an alternative. There's no doubt about that. There is some debate about whether or not these are truly exempt from, let's say government interference.

I would take the viewpoint --- and it's somewhat studied, it's not my expertise, believe me -- that some of the small ones are definitely outside the purview of any government. They're just too small. No one's going to bother with them. On the other hand, some of the larger ones could be, and some are, under let's say, more interference or potential interference, than you might think. For example, on the Bitcoin thing, and I'm not anti-bitcoin, I think Bitcoin's here to stay. I think Ethereum is here to stay. I think some of the major ones are here to stay. I think the crypto world is going to definitely change the financial landscape, if it hasn't already. It probably has.

But I also want to be a realist, and there's ups and downs to any market, and the Bitcoin, and there’s some people have gone to prison for what they've done in the bitcoin world, and there's also some potential tax issues, depending on what jurisdiction someone is in. So, it's not the alternative to government fiat that some people may have either been led to believe, still believe, or don't understand properly. So, that's a caveat.

The other part of it is ... (that they’re) un-backed, well, some are, some are not. I mean, this gets a little bit muddled because, for example, there was this ACC chain that's still talked about quite a bit. The first block was really based on tea. And tea is really revered in China. I mean, it's a pretty highly traded commodity. There's different grades of it, and there's all this stuff that goes along with it. But this block chain used tea. It's a tangible, I mean, it's a foodstuff, if you will, or at least it's a beverage.

And so, these ideas of being able to digitize real assets, I think, is definitely something people need to pay attention to. Regardless of your philosophical bent, and mine's more towards specie money, gold and silver… what's been in history, what works, what works about power and that type of thing. That's a bias of mine.

The reality is that the crypto space is going somewhere. You've got to be extremely careful, as far as just buying at a cheap price and watching something go up doesn't mean it's a good investment. It means that the market is extremely hot, which it is. So you want to be careful. But I am neutral to positive on it. Of course, full disclosure, I am involved at, more in a cursory level, but not at a high level, on a silver-only backed crypto that would monetize it. And even there, let me just say that, even though I've got skin in the game, and I could win or lose on this investment, that I would recommend it only for disposable income.

In other words, if you have X amount of silver, I would say just as a suggestion, no more than one-tenth X would be used in a format like this, where you can really spend it. I mean, let's face it. If silver starts to move well, and you've bought in, your average price is, let's say, $20, and it's sitting at $30. And you've got this in a crypto platform and you're familiar with that and how it works. You know, you want to buy your gas, groceries, go out to dinner, whatever, you know, it's kind of a convenient thing to do. And that's one thing that kind of holds the silver market back, somewhat. And that is, some of the older investors are like, "Well, how do I sell it?" Well, as James Turk has always said, from Gold Money, "Well, you can spend it."

Mike Gleason: Let's change gears here a bit and talk about the platinum group metals. Palladium has been a huge outperformer, but platinum is lagging. Now, the two metals share significant demand from the automotive industry, so it's worth breaking down for our listeners why the two metals are performing so differently. Address that, if you would. And then also, talk about maybe, the potential impact on electric vehicles that that might have on the platinum group metals, in terms of demand for catalytic converters.

David Morgan: Sure. Platinum is used as a catalytic converter for diesel engines. And with the Volkswagen revelation that took place several months ago, about them fudging the software for their EPA requirements in the U.S., this took a lot of wind out of the diesel bandwagon. So that's one headwind. Platinum is also used as jewelry in Japan, mostly. It isn't used in jewelry many other places. Yes, it's everywhere on the planet, but I mean, primarily platinum is pretty well known in Japan as jewelry.

Palladium has basically all the attributes of platinum and, at one time, sold at a pretty steep discount to platinum. Right now, they're almost par. But, if you look at what the in-the-ground amount of platinum and palladium are, platinum and palladium are basically about the same. I used to say that palladium was actually less than platinum. I went back and bought the studies, and there aren't many, on the PGMs, and I studied those studies.

It's pretty apparent to me, from the best research that I can get ahold of, that they pretty much mine about the same amount, but palladium is far more used, because there's a lot more gas catalytic converters that are demanded, than diesel catalytic converters. So that's a bigger demand, and they sell for the same price, and they mine at the same amount, that would put a push on the palladium.

Electric vehicles certainly will impact both those markets to the negative, but they're such thin markets, and there's not a huge aboveground surplus of either one, that that dynamic could change pretty quickly. And the one space I hold out for, and this is basically with quotation marks around it, because I have not looked at it in a long time, was years ago the cold fusion meme that was going around, using palladium. Whether that's true or false I really can't see at this point, but we never know whether our new technologies available to some of these metals that are more exotic than, let's say, just the precious metals.

So, I am still pretty bullish on palladium, not so much on platinum. But overall, those are two metals that you really don't need to get into. You're better served by gold and silver. But if you have a high net worth, or you really like them for whatever reason or other. Last comment, Mike, and I'll hand it back to you.

It was a pretty easy trade for years, and I've done it several times. Whenever platinum sold at a discount to gold, you could just do a spread trade, which is easier on the pocketbook, and you can be pretty patient with them. So, you would just go the reverse, you would go long platinum and short gold, and as the spread narrowed you'd make money. For some reason or another, I did not do it this time, and I've very grateful for that, because the spread between gold and platinum has continued to favor gold, and whether this will invert like it has historically remains to be determined. So that's a trade I haven't done, and I'm shying away from. I don't see that as an opportunity anymore, and it just kind of shows you that there isn't a lot of monetary demand for either of the platinum group metals.

Mike Gleason: Well, as we begin to wrap up here, David, give us your thoughts on the events you're going to be watching most closely, in the months ahead, when it comes to the metals markets. We spoke earlier about the stock markets as a potential catalyst for metals … there are plenty of geopolitical events with the potential to move markets. North Korea and Trump's tax cuts, to name a couple. What do you think metals investors should focus on? Where do you see them going here, towards the end of the year? And what are people likely to be talking about, in the coming months?

David Morgan: Well, the stock market's key, as we discussed earlier. So, if the stock market does a big ho-hum nothing for the whole month of October, then obviously – and at that point I would say obviously – the favored move would be for the metals to continue down to the end of the year, not up. On the other hand, if we get a correction, meaning 10 percent or more move down in a general equities market like the DJI or the S&P, that would be very much favorable to the metals, and you would expect to see gold and silver trade up, into the end of the year. So, the stock market is key, so watch it for the month of October.

If nothing happens, going forward I still think that we cannot get through all of 2018 without a breakout in the metals, and I think that if we don't get a pullback in October, we probably will in the spring of 2018. This stock market is, as I'm almost remiss to say, I've said it so many times, but it's overvalued. It's been that way for a long time. At some point, it's got to give. And now the Fed's sort of pushing it a bit, with their idea that they're going to take care of their balance sheet, and maybe even increase interest rates.

They're putting a lot of pressure on the markets, and whether or not they know what they are doing, and that could be argued, nonetheless they make these announcements and they take them back. And they hint, and then do this, and then they don't. And I understand all that. But what I also understand is, they are in a box. They are painted into a corner. There's not a whole lot they can do. So, sooner or later, they're going to have to do the one and only thing that they really can do, which means you know, another Quantitative Easing type of situation, regardless of what they name it, or what kind of program.

And, when you see Mr. Fischer that left the Fed, who was one of the, what I would call “truth-tellers,” at least, he knows what's coming. He's not going to say much publicly, but he basically wants to distance himself, before this thing starts to unravel further.

And one last thought, and I'll sign off, Mike. And that's, this increase in interest rates. There's lots of thoughts regarding the increase in interest rates. Historically, classically, increasing the interest rates is to cool off the economy. You brought interest rates down, the economy recovers, there's more jobs, there's more velocity of money, people are happier, they're spending, that type of thing. So that's a real recovery, which we haven't ever seen, since 2008, but that's the idea.

So once you get that reviving of the economy, then it starts to overheat and then you have to start increasing interest rates, which cools off the economy. Well, why are they increasing interest rates? Certainly not because the economy is robust, no matter how many times they say it on national television. The reason they're doing it is that everybody's escaping the U.S. dollar. So much of the external to the United States debt markets are in negative interest rates, which means you have to pay a bank to hold your money. A positive interest rate of any currency looks really good, even if it's a dollar.

So this is really one the reasons that very few even suggest to think about, is that the dollar is being held up, quote-unquote, by the fact that it's a positive rate of return, versus other currencies that you're offering a negative rate of return.

Mike Gleason: Well, outstanding insights as usual, David. We always appreciate having you on, and getting your thoughts on these important matters. Now, before we let you go, let people know how they can learn more about The Morgan Report, and what it is that they'll get if they sign up to become a member. And, by the way, we just re-upped our own membership with you, this week.

David Morgan: I actually saw that. Thank you. Well, basically I want to make sure everyone knows that we cover all minerals. I mean, we do cobalt, lithium, vanadium. We've done the rare earth elements, we've done uranium, we've done some of the energy metals. We don't focus on oil or gas, but we do the energy metals, exotics, everything and the precious metals. And yes, we spend a lot of time on the precious metals. We look at a unique sector that makes money, regardless of what the price of gold and silver are. Those are the very lucrative investments, especially in the top tier of the portfolio.

And our success is your success. I mean, people want to know how I invest. Well, that's how I invest. You get The Morgan Report, you pretty much see a breakdown. I do have a bit of a -- I won't say tout, I don't like the word -- but there is a speculation that you know about, Mike, that could be a game changer. Certainly performed pretty well, it's got a long ways to go.

And there was an announcement made by a major Fortune 500 company that's very interested in technology and it was a very big boost to the holders of this particular special situation that's in The Morgan Report, and I think it's only going to get better. But that's just a future-looking statement based on the fact that I own it and I've studied it. That doesn't mean it will necessarily manifest.

Mike Gleason: Yeah, that is an exciting technology, and a good tease there. Well, that will do it for this week. Thanks again to David Morgan, publisher of The Morgan Report. To follow David, just visit TheMorganReport.com. We urge everyone to, at the very least, go ahead and sign up for the free email list and start getting some of his great commentary on a regular basis.

And, if you haven't already, be sure to check out either The Silver Manifesto or Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave, both of which are available at MoneyMetals.com and other places where books are sold. Be sure to check those out. Thanks so much David, look forward to catching up with you again, very soon.

David Morgan: Thank you, Mike. I appreciate you having me.

Don't forget to check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this have been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up we’ll hear from David Morgan of The Morgan Report. David gives his insights on current industry sentiment following a few rough months for the metals, tells us what to expect with the upcoming price action for gold and silver, and gives us his predictions on how the financial markets will react to Donald Trump’s presidency – and his outlook may surprise you. Don’t miss another fantastic interview with the Silver Guru, David Morgan, coming up after this week’s market update.

Precious metals markets continue to show signs of basing out and recovering into a potential rally, with the white metals leading the way.

The silver market registers a positive gain for the second straight week, albeit a small one. Spot silver is up 0.7% since last Friday’s close to trade at $16.97 an ounce. Platinum prices come in at $922 per ounce, and due to a 2% drop here today is now down 1.3% for the week. Palladium, which had been white hot in November, cooled off a bit this week, falling 0.4% to $744.

Gold, meanwhile, has been probing lower levels for the past few weeks. The yellow metal currently comes in at $1,163 an ounce, down 1.4% on the week.

Gold continues to be overshadowed by the resurgent stock market. The Dow Jones Industrials rose to another record this week. The blue chip average could soon hit 20,000 on strong post-election momentum.

The Dow to gold ratio is also on the verge of setting a new multi-year high. The Dow currently equals 16.7 times the price of gold. The ratio comes in higher than where it was at the start of the year. But it’s still a long way away from the 45 to 1 ratio seen at the peak in 1999. It’s also miles away from the 1:1 ratio seen at the 1980 low.

Gold and silver have been hurt in recent weeks by a strengthening U.S. dollar index. Currency traders are pricing in a rate hike at next week’s Federal Reserve meeting.

The European Central Bank met this Thursday and left interest rates unchanged. That was expected. But the ECB surprised markets by announcing that it would trim its quantitative easing program starting next April. It’s not really a tapering, though. The ECB extended its bond buying program through the end of 2017 and expanded the range of securities it would buy. In response, currency markets whipsawed, with traders ultimately deciding to dump euros and bid up the U.S. dollar.

Unless the Fed comes out with policies or language to arrest the rise in the dollar, it could continue to gain versus the euro in the months ahead. That doesn’t necessarily mean gold can’t gain in dollar terms. But it will need a catalyst to overcome headwinds in the currency markets as well as the price suppression schemes of institutional sellers in the futures markets.

Yes, believe it or not, the gold market is subject to being manipulated from time to time. Sometimes by some of the world’s biggest banks. Last Friday, we found out that Deutsche Bank will pay $60 million to settle claims of gold price rigging.

Documents released as part of the lawsuit reveal that the rigging runs deeper and extends beyond the gold market. According to a Bloomberg report that came out on Wednesday, traders with multiple large international banks, including UBS, allegedly conspired to rig the silver market.

Bloomberg Anchor: Today we're talking about gold and silver market rigging. I'm just curious, has there been an uptick? Even though some of this is a couple years old, has there been an uptick? Is it just that it's newly discovered? I mean, what's going on here? It seems like there's an awful lot of rigging going on in various different kinds of markets.

Market Analyst: Right. As you mentioned, a lot of this stuff is from several years ago, but it does raise the questions of whether it wasn't just LIBOR. You had the LIBOR rigging scandals, and then you had currency markets, now you have allegations in the silver market.

The new smoking gun evidence shows that some of the biggest market makers in the silver exchanges haven’t been playing fair. They have been colluding to control spreads, slam down silver prices in coordinated midnight raids, and cheat their own customers. Chat logs between Deutsche Bank and HSBC traders that have now been made public reveal one particular exchange where one trader says he really wants to sell silver. To which the other responds, "Let's go and smash it together."

The Commodity Futures Trading Commission supposedly spent five years investigating allegations of silver market manipulation. In 2013, CFTC officials basically said they couldn’t find any wrongdoing. Maybe they just didn’t WANT to find any wrongdoing.

In any event, the paper markets for gold and silver are neither free nor fair. Individual investors should avoid trying to swim with the sharks – which means avoiding futures, options, and other derivative products that are controlled by big institutional traders. Stick with physical bullion products and know that in the end, the real supply and demand fundamentals in the physical markets will ultimately override the artificial games that are being played in the paper markets.

Well now, for more on the future of gold and silver and one insider’s take on the likelihood of some serious financial turmoil breaking out during Trump’s first term, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to welcome back our good friend David Morgan of The Morgan Report and co-author of both The Silver Manifesto and now Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shockwave.

David, it's always great to have you on, and how are you?

David Morgan: Mike thank you and honestly I'm not a hundred percent, I got a little bit of a cold still hanging on but I'm just about over it and had a little dental work, but I'm doing good. Thank you.

Mike Gleason: Well I'm sure with all of your travels here it's probably easy to pick something up and that's kind of where I wanted to start first. I'd like to have you tell us about some of those recent travels because I know you've been quite the jet setter here of late. Just in the past month alone I know you've been to the Silver Summit in San Francisco and then last week you were telling me you were in Sweden, so you've been traveling around to various conferences and meetings in the precious metals community and I'm sure you've gathered some valuable information as a result that you may want to share with our audience here today.

So what have you learned, and what is the sentiment out there right now? Because there are few that have their finger on the pulse of the industry better than you, so what can you tell us there David, and then give us some highlights of these conferences as we start out.

David Morgan: Well thank you for that. First of all I think if we go back to roughly the last four or five weeks or so, I made a trip to the Edelmetall Show, which is the Precious Metals and Commodities Show in Munich. This is a show that I've done many, many times, and one of the people that is one of the principles of that show actually translates and has translated The Morgan Report into German for years and years and years. And Jan asked me if Bill Holter would be amenable to coming over and speaking as well, and I said, "Yes, I'm sure he would," and they invited Bill Holter along with myself and many others of course. Most of them are Europeans but they're from all over the world.

And the sentiment in Germany is still very positive to metals. They are big bullion buyers. They are very much believers in what I've taught from the beginning, which is you have to own the real metal first before you go in the mining companies. They're also large shareholders into mining companies across the board, meaning speculative juniors to mid-tier producers to top grade cash rich unhedged mining companies which we kind of stress in our reports.

What's interesting is the amount of the sentiment. The sentiment in my main part of the industry is the U.S. and Canada, and our subscriber base dropped off probably 60% or more from the top of the silver market in April 2011 up until the end of last year. It's built back somewhat, but Germany it never faltered. I mean it's hard to believe that Mike, but basically the subscriber base in Germany held through basically thick and thin.

So the main takeaway is that they understand the metals. It's in their consciousness because of what their parents or grandparents went through with the Weimer Republic. They believe in the real metal first, but the main concern wasn't really economic as much as it was fear of an outbreak of war. Now this was pre the election. I left I think the day before the election, so it was November 7th when I left Germany.

A great deal of concern revolved around the fact that these missiles have been placed upon the German border, which is NATO obviously, facing in toward Russia. Of course the Germans, probably more than many, the population at least is very upset about any war activities. I mean they've been through enough, you know World War I, World War II, you know all that's gone on. The Cold War, the Berlin Wall and on and on, and these people really just want to live their lives and be left alone, but they're part of NATO and they see this.

So I think that's calmed down somewhat. I don't follow that type of news as adamantly as I probably could, but it's not ... I have to spend my time where I'm required to do so and my main interest of course is currency crisis. The upcoming reset and everything that deals with the precious metals and beyond. So that would be Germany.

As far as the Silver Summit in San Francisco, it's been renamed the last few years. It's now the Silver and Gold Summit. They still feature silver first which we're very grateful for. I'm glad that they never dropped the conference. Well attended. Great speakers. Sentiment was good but not great. By that time silver and gold had already sold off fairly sharply. A lot of people were asking if the rally was over, if it was just a fake rally within the context of an overall bear market. Where do we go from here and that type of thing.

I would say we all had our own opinions but most of us were (saying) that this is a correction within the new phase of the bull market. Better times are ahead. This is the time to look for value and buy value. I'd like to point out on the mining side is that how many of your listeners missed the move of silver to $50? And I say that with my tongue in my cheek and I really want to explain it. Because a lot of these companies that we feature in The Morgan Report and others have done the equivalent of silver going from these lows in the $14 range all the way to $50 as far as the percentage return is concerned.

That's something that you get when you invest in a mining company or a natural resource stock, is leverage to the upside and the downside. I'll be honest about that though, I saw this thing topping and I warned our members that they should really take some profits of partial profits or hedge. Take something off the table. I was early which is always good. You want to sell in the strength. You want it to be topping. You don't need to get the exact last tick. I took a little flack from some of the Twitter folks, but that's fine.

And lo and behold you know that hundred dollar moved down in gold, a lot of my folks booked some profits. Having said that, even some of these stocks in the top tier. I mean if you bought in 2012 one of our main feature stock in the top tier, I mean that stock was a $38 stock and today it's at $75. So what I like to point out is that some of these companies can do moderately well to very well even in a down trending market if you pick the right kind of companies. And of course we don't get them all right, but believe me, we get most of them right and that's the reason when I started The Morgan Report I emphasized the top tier cash rich unhedged mining companies and then the mid-tiers. Speculations are just that, and I love to speculate. I think everybody does, but it's an art not a science and that's where you have to be careful.

Mike Gleason: David, in your most recent newsletter you addressed some of the market action following the election. We've seen commodity prices move higher, driven in part by Donald Trump's plan to spend a trillion dollars on infrastructure, but you advised some caution. The action in the bond market should give investors some reason to pause. People are selling bonds. They anticipate the Fed will be hiking the funds rate here next week and they recognize Trump's proposal to cut taxes and increase spending on infrastructure will likely mean a massive new wave of government borrowing.

These rising borrowing costs are going to provide some headwinds to economic growth given our addiction to debt, so the question is, how strong will those headwinds be and what do you expect for the bond market and interest rates over the next year or so?

David Morgan: I think the pressure's on for interest rates to rise. The Fed is not all powerful like most believe. I'm almost certain we'll see a raise in this month. And that's because the fed almost has to because the market's already spoken. The market's already raised interest rates on a 10-year note rather significantly on a percentage basis, and there will be more pressure. Because everybody knows that lower taxes and increased spending means a wider deficit not a narrower deficit.

It's baked into the cake Mike. I think this is very bullish for the metals. I think there will be a sentiment change in the country for the most part. I think the sentiment will be “better times are here, more jobs are available… you know we're doing something worthwhile” and that type of thing, but the real structural problems that are pervasive throughout the global economic system led by the Federal Reserve and let's say the European banking systems are so pervasive. They're so interconnected nation state to nation state. Of course the BRICS have tried their best and maybe have moved off somewhat where they might be able to side step some type of the financial calamity but not all of it.

As we progress forward bear in mind that nothing structurally has really been fixed. It's kind of like having a foundation that's rotting and then starting to put some new fascia on there. It starts to look good and the neighbors are happy. It's looking better but unless you fix the foundational problems you're not going to really make a solution.

Mike Gleason: I don't know about you David but I've been rather encouraged the way silver has hung in there over the last week or so since we saw that last leg down right before Thanksgiving. We've been seeing gold drift lower but silver is actually outperformed something we generally don't see when gold is falling. What do you make of that? Is that a function of silver being aided by its status as an industrial metal during a time that many believe industrials may do well in? And is that maybe a good sign of a short term bottom in the metals? What your thoughts there?

David Morgan: Well my thoughts Mike are slightly different to the what the mainstream banking system would tell you, that with the infrastructure build out it's going to be more industrial use for silver and therefore it's strong. My take is being in this market for several decades, is that silver leads gold when we're in a bull phase. And I still think we are in a bull phase. I think we've had a pretty nasty correction and I think it's going to continue for a short time longer.

But when silver starts to pull away from gold or is neutral and gold continues down, in other words the gold/silver ratio starts to decline, that to me is just another sign that we are in a bull market, so this is fully expected by me. Another thing that is fully expected is the strength of the U.S. dollar. This is something that a lot of people have a hard time wrapping their heads around but in an uncertain market people seek safety and they seek what's certain. For most people that means cash.

Mike Gleason: That leads me right into my next question here. The metals market really do seem to need a catalyst for higher prices and right now we're fighting a stronger dollar as you mentioned, and rising interest rates in an environment where many investors seem to be in a risk on mood. Safe haven investments including metals are less in vogue right now. But of course the reasons to own the metals haven't simply vanished as we just spoke about, so how long are you expecting the risk on mood to last and do you see any specific event or events that are likely to derail the strength in the dollar or put a bid back under safe haven assets?

David Morgan: Great question. Whenever you get these types of questions it's best not to answer them. I don't know would be the best. I mean the market knows more than anyone and I look for queues or signs from the market and then based on that do a pretty decent job. Better than most actually on short to intermediate term calls. I think that we're going to see a neutral market probably up until Donald Trump actually is sworn into office. There's a lot of news sites out there, and I'm not talking fake news, real news that are concerned about what's going on with this vote recount and all that's going on.

I've been paying attention to it but not a whole lot. I think Trump will be sworn in. I think once it settles in, you know, a new president is there and the programs that he's enacted, the cabinet he's surrounding himself with, all of that, will play into the gold market. Because as we already discussed, we're going to see lower taxes and more spending and that's inflationary. And that will not only be a mode for people in the United States, it will be global. Because a lot of other Europeans and Asians will be concerned with the bond market, the debt markets getting worse not better which means rising interest rates.

Most people think rising interest rates are negative for gold, but actually gold did great during rising interest rates until the rate got well above the nominal inflation rate, so let me explain that briefly. In 1980 the true inflation rate by government stats was about 13%. So as interest rates started coming up during the last final phase, the last weeks of the silver and gold bull market, interest rates were rising rather rapidly and gold continued to rise just as rapidly until (Fed Chair Paul) Volker went ballistic and set interest rates at like 18% ... 18 to 20 actually.

That was like 5% above the inflation rate, so when you have a real rate of return of like 5%, 4%, in that range, then that usually quells the metals. There's nothing to fear about rising interest rates or a falling bond market. In fact the bond market is of course the big problem and you know we've talked about that numerous times, and if you really want to delve into it there's lots of information you can Google on the internet. If you want our take, it took a lot of time and effort, you can read the Debt Bomb in The Silver Manifesto.

Mike Gleason: Yeah, that's well put. It's definitely all about the real interest rate environment, not the nominal interest rate environment and it's sort of laziness to think that higher interest rates automatically mean lower precious metals prices. It's all about where they are on that curve with the inflation rate. Now one thing that's a bit interesting here are the rumors emerging out of India that may result in a ban on gold imports again. As many know, Indian citizens are pretty much the biggest gold buyers on the planet. It certainly wouldn't surprise us as the government has already cancelled two of the most common rupee bank notes suddenly, causing a bit of chaos.

Now the last time they banned gold in India it mainly just raised its domestic price as smuggling emerged, but silver demand benefited in particular. Any thoughts on this unfolding situation David?

David Morgan: Well going back to the beginning of our conversation, you now, when I was in Germany, Mark O’Bryne of GoldCore was at that conference as well and I've had many Skype calls with Mark and I've known him for years and I like what he does. I like what he writes. He was at the conference so I got to meet him. And we did get to hang out together. He just wrote an article I think yesterday, talking about is silver the new gold for India. Which means that the government's putting all of these screws down on a population for owning gold, or proving they owned it or if they inherited it or how they bought it or all this stuff.

And this is in the rumor mill. I haven't had time to determine what's fact from fiction, but that's what swirling around the internet right now. And his article went on to say well that's fine. The Indians will just move back to silver. What a lot of people don't know really is India's always had a propensity for precious metals, but it was primarily silver for decade after decade after decade because silver was much more affordable to the population than gold. Not that they weren't big gold buyers, but it wasn't as pervasive as silver.

Now that so much work has been off-shored to India for software in particular, and other things, the population as a whole has gotten even wealthier, and because they've gotten wealthier they've moved more into gold and other investments… I mean there's a middle class developing in India and they're becoming more Westernized and their thinking is becoming more Westernized and rather than just because dad and mom and grandma and grandpa always bought precious metals I'm thinking about mutual fund or whatever.

That's all part of the scene but going back to what Mark's article said, it's like, okay if the government is really putting the clamps down on gold ownership you'll see a push into silver in India and silver's move in India has been rather robust the last couple of years. It got not only a large investment demand that's carried through but also their solar industry, government sponsored, is rather robust.

Mike Gleason: As we start to wrap up here David give us your thoughts on the remainder of the year when it comes to what you're expecting in terms of the price action in the metals because I recall in years past you were predicting a price raid in the metals over the last week or so of December which is exactly what we've gotten several times now over the last few years. Are you looking for something similar there this year? And then also talk about what you're working on in the Morgan Reports and if there's anything new there that you want to cover before we close.

David Morgan: Yeah Mike I do think we're going to see probably a push down into the last few trading days of the year. It's been pretty easy to forecast. It doesn't necessarily mean it will happen this year, but any market that's small is easy to move. Any market that has a very tight float and very low volume, if somebody comes in and buys a whole lot it's going to shoot the price really high or conversely a small float, no volume, and someone comes in and sells a ton, it's going to drive the price down.

That's what will take place, I think, going into the end of the year. Does it mean we shouldn't load on some good silver and gold for Christmas gifts or all that? I think it's an amateurs game to try to pick the exact bottom. I think we're pretty close right now anyway. Could it go lower? Yes. Do I expect it to go lower? Yes. Substantially lower? No.

As far as what we're working on Mike, it's one of the most interesting things I've seen in a long time. I made what I call an emergency trip to Vancouver B.C. to witness two things. One is… and I'll call it a modernized ball mill, and I met with the engineer and being an engineer at one time we got along famously and had a nice chit chat about his design and how truly beneficial it will be as a mill.

Then there is another aspect to this company, and this is a company that's in the speculative section of The Morgan Report. This process that I witnessed with a solvent, I guess you could call it a solvent, because water is the best solvent on the planet and we drink it. It's similar from the aspect that it's non toxic. You could actually drink it, it wouldn't harm the body. And yet it precipitates out almost any metal.

So I went into the lab and witnessed this, filmed it myself and I'll be putting this out as soon as I'm able. There are certain rules that I have to adhere to and I do, which means I can hand tout it like I'm doing with you Mike, but I can't really say too much without it being publicly disclosed. I do think it's going to be publicly disclosed within a week or two. This is something that anyone that's a website member of The Morgan Report, the page site, of the website. They will probably, if they own most of the spec stocks, they'll already have an in on this company because what I've been told right now is there will probably be a spin out of a holding that we've already put into our subscriber's hands.

This happened to us once before but it wasn't a new technology. It wasn't as exciting as what I just described but as far as the mechanics of what I just described... we had a coal company and they had a platinum project and people that owned that company were spun off a share in this new platinum company. So basically you got kind of a two for one. That company's gone on to get one of the best silver deposits on the planet and it's very undervalued. I'll be doing an interview with the CEO, probably in the next week for our website members.

That's the last thing I want to mention Mike, and it hit my brain. As I said I'm still getting over this cold. One thing that we do that no one else in the industry does to my knowledge, is when we go to the Gold and Silver Summit, we interview almost every company there. I do the interviews, or my staff, one of the three of us, interviewed almost every silver and gold company that was attending the conference. We have about four speculative companies that are like high risk, high reward, but they've got interesting stories.

We provide all that in a video format for the website members so they can log in and watch these things at their leisure. Take notes, pause it, write down things. Let's say you call up the IR department at one of these companies (and say) "I'm a Morgan Report subscriber and I heard so and so talk about such an such and I'm interested in getting with the IR department and learn more information," and that type of thing.

You know it's a service that those that are aware of it and subscribe are very, very happy with it. But I do want to get the message out that we just finished compiling all of the videos that shot at the Silver Summit and they will be going up on the website for our website members probably today.

Mike Gleason: Yeah that's great stuff. Very fascinating information there on that new technology. I'm sure people are going to want to check that out. There's another great reason to get The Morgan Report and then obviously what you're talking about there with the Silver Summit interviews. That will be great stuff as well I'm sure.

David, we always appreciate your thoughtful analysis here on the Money Metals Podcast and I'm sure we'll be talking again real soon. Now before we let you go, just please tell people how they can get information about The Morgan Report and how they get involved with that. Then also mention the new book you and David Smith just came out titled, Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shockwave. Tell us more about that as well.

David Morgan: Certainly. The best way to get on our free email list, free list, is just go to TheMorganReport.com. There's a little video there. You can click it twice and I’ll stop talking, and just give me a first name and a primary email address. It's a double opt in which means that we will mail your email address that you gave us and say you are really who you say you are. Once you do that you will be on the list. You will get a weekly update from me or one of my staff on a general outlook of the metals markets. There is some advertising on that. I mean I have to pay for those lists and the servers and everything else, so I'll let you know that right up front.

We send it out usually twice a week or something along those lines. The weekend one is the one that is the free analysis or question of the week or we do have some videos of kind of hitting the high spots in the currency markets and the precious metals every week. So that's the way to get familiar with our work.

As far as the Second Chance book is concerned, this is something that I wish I had the first time that silver went from $5 to $50. I might have been a little better at taking profits, although I did fairly well in gold. I mean I actually got in my biggest position at $300 gold and got out about $700, so I did pretty well and it was leveraged position, so I was pretty happy about that.

A lot of people don't understand that everything is undervalued, fair valued and overvalued. These metals will get over valued. Right now they are very undervalued. They are not even fair valued. But once they get to an overvalued situation you don't want to be married to these things. You need to take some profits and where do you take profits. Well we'll try to help you if you're a subscriber to The Morgan Report.

You know I'm a pretty giving guy. If I do an interview like this I'll probably make some suggestions for the public domain as well. I don't have any problem with that, but the idea is when these metals get to a point where they are so over valued and everybody wants in, you should be looking to get out or at least get out of part of your position if not maybe the entire thing, at least some of it.

Those days are ahead of us Mike. I don't think they're too far off. I actually, and I don't like giving dates. I’ve certainly have had my share of hits and misses, but I really doubt that this four year term of Trump will go without some kind of financial conundrum, where we are in a 2008 type of situation. It won't be exactly the same but it'll be similar. It may even be worse. I just don't see us going four more years with the debt situation that we have, with the tensions surrounding Europe, with the euro and people wanting to exit the euro. What's going on in their political mainstream between Italy recently and of course Brexit.

The general shift of the idea that the bankers are the problem. You know this is something that I knew many, many years ago but very few would even agree with me, and it would be considered fake news and extremist. I've been studying this for years and the main problem is how money works… as Michael Rupert has so famously said, "Unless we change the way money works we haven't changed anything."

You can change the politics. You can change the politicians. You can change the ideology or the sentiment, but unless we change the way money works we really haven't changed much. And unfortunately we haven't yet. However, I do think, as I said, within this next four years there will be some type of reset and some type of monetary change and hopefully it's for the better.

Mike Gleason: Well very well put David. We'll leave it there. Thanks so much and we really appreciate your time as always. I hope you have a great weekend, a Merry Christmas, and all the best with the new book, and we'll look forward to catching up with you again after the New Year.

David Morgan: Thank you Mike. Appreciate it.

Mike Gleason: Well that will do it for this week. Thanks again to David Morgan, publisher of The Morgan Report. To follow David, just visit TheMorganReport.com. We urge everyone to at the very least to go ahead and sign up for the free email list and start getting some of his great commentary on a regular basis and if you haven't already, be sure to check out The Silver Manifesto, and now his new book as well titled, Second Chace: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave... both of which are available at MoneyMetals.com and other places where books are sold. Either one would make a fantastic gift this holiday season for anyone investing in or thinking about investing in precious metals.

And don't forget to check back here next Friday for our next Weekly Market Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening and have a great weekend everybody.

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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up David Morgan of The Morgan Report joins me for a replay of one of the very best interviews we did in 2017. David talks about the metals and the markets and shares his insights on what the smart money is already doing, the dangers of complacency and the importance of limiting counter party risk. Back by popular demand, don’t miss this wonderful interview with the Silver Guru, David Morgan, coming up after this week’s market update.

As markets close out their final trading day of 2017, it’s a good time to review the year that was in precious metals and look forward to the year that might be in 2018.

Even though gold and silver markets spent most of 2017 mired in unremarkable trading ranges, they are each managing to post decent gains for the year. Of course, those gains are being overshadowed by the relentless push higher in the stock market and the explosive spike in digital crypto-currencies. Overheated markets can stay overheated for some time. But the longer they go without shaking out leveraged speculators and late comers, the greater the risk of an eventual crash.

The stock market will enter 2018 with record levels of margin debt and cyclically adjusted valuations at their highest since the 2000 bubble. By contrast, gold and silver markets will enter the New Year with open interest on the futures exchanges at relatively low levels and retail bullion demand also on the low side.

The hot money isn’t betting on metals – at least not at this point in time. From a contrarian perspective, that suggests the precious metals space has lots of room to run on the upside after it finds the catalyst it needs to spark renewed investor interest.

Turning to this week’s market action, gold prices are up 2.2% since last Friday’s to come in at $1,303 an ounce. The yellow metal will finish 2017 close to 13% higher for the year. Gold outperformed silver again this year. The white metal is now up about 6% for 2017 after rising 3.2% this week to bring spot prices to $16.98 per ounce as of this Friday morning recording.

The best and worst performing precious metals of 2017 are palladium and platinum, respectively. Palladium prices surged more than 55% this year and currently come in at $1,059. Upside momentum could take palladium to new all-time highs in the first few trading days of 2018.

If the momentum is with palladium, then the value may be with its sister metal platinum. Platinum finds itself in the extremely rare position of trading at a discount to BOTH palladium and gold. Platinum prices currently check in at $936 per ounce, higher by 1.7% for the week and 3.5% for the year.

So which metals will perform the best in 2018? It depends largely on whether the economic growth story has legs. If the economy heats up due to tax and regulatory reform, then industrial metals including copper and perhaps silver as well could see impressive gains. If the economy falters and the stock market rolls over, then the safe-haven metal of gold will be the place to be.

Of course, we recommend keeping both gold and silver bullion as core holdings. But we do see more long-term upside potential in silver at these levels. By long-term, we’re looking further out than just the next 12 months. The silver to gold ratio has been depressed for the past few years. We expect a strong move in favor of silver to put the ratio back at more historically normal levels, a ratio which currently stands at a whopping 76.7 to 1.

We can’t guarantee the big move in silver will happen next year. But as long as the silver-to-gold ratio remains relatively depressed, it’s a relatively favorable time for long-term investors to be accumulating silver.

There is a very real chance that inflation could reemerge as a concern for investors in the coming year. Inflation – at least as it’s reported officially – has been nearly dormant for the past few years. In 2018, the combination of higher economic growth and higher federal deficits could reawaken inflationary fears.

Yes, the Federal Reserve stands ready to raise interest rates a few more times, or so they say. Precious metals naysayers will cite that as a reason why the U.S. dollar should gain versus other currencies.

For now, though, monetary policy is taking a back seat to fiscal policy. The tax cutting, de-regulating, spending, and borrowing policies of the Trump White House have the potential to be highly stimulative. Big on Donald Trump’s agenda in 2018 will be a push for new infrastructure spending. Infrastructure programs would directly stimulate the real economy and boost demand for raw materials.

An uptick in inflation in 2018 may well be in the cards. It may even be the catalyst that drives investors back into precious metals in big numbers.

Before we move on, I want to thank each and every one of you for tuning into the Money Metals podcast this year, and we hope 2018 brings you financial prosperity, good health, and happiness. For our part, we’ll be there again for you in 2018 – providing more great interviews and news content, plus top-notch service as we work to meet ALL your needs in the precious metals markets.

Now let’s get right to our Money Metals exclusive interview.

David Morgan: I'm doing well Mike, thank you very much.

David Morgan: Yeah, just go to the main website, TheMorganReport.com. If you're already on the email list, you can go ahead and download that for free. The system is smart enough to know if we already have your email. And then if you're interested in the book, just pull down the books tab on the website, you can order either book, The Silver Manifesto or Second Chance. And Mike I appreciate you mentioning that for me.

Mike Gleason: Well, outstanding insights as usual David, it's wonderful stuff to hear and we're very grateful for your time and for giving us your thoughts on these important matters. We appreciate talking to you today and look forward to catching up with you before long. Take care my friend.

David Morgan: Thank you very much.

Mike Gleason: Well, that will do it for this week. Thanks again to David Morgan, publisher of The Morgan Report. To follow David just visit TheMorganReport.com. We urge everyone at the very least to go ahead and sign up for the free e-mail list and start getting some of his commentary on a regular basis. And if you haven't already, check out The Silver Manifesto and his new book, co-written with our mutual friend David Smith, titled Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave. Both of which are available on MoneyMetals.com and other places where books are sold. Be sure to check those out.

And don't forget to check back here next Friday for our first Market Wrap Podcast of 2018. Until then, this have been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend, and Happy New Year everyone.

","image_selection":0,"primary_keywords":"","secondary_keywords":"","publish_date":"2017-12-29","podcast_url":"http://traffic.libsyn.com/moneymetals/ILB-171229-WeeklyMarketWrap.mp3","quick_text":"...","author_id":2,"content_type_id":3,"created_at":"2017-12-29T17:31:04.000000Z","updated_at":"2024-03-26T19:21:09.000000Z","podcast_subject_line":"Audio: Metals Finish Year Strong; Silver Meltup in 2018?","meta_description":"David Morgan of The Morgan Report joins me for a replay of one of the very best interviews we did in 2017. David talks about the metals and the markets and shares his insights on what the smart money is already doing, the dangers of complacency and the i","podcast_duration":"33:13","header_image":"","article_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan.jpg","redirect":"","canonical":"","sort":null,"featured_image":"","facebook_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan-social.jpg","twitter_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan-social.jpg","status":1,"show_guest_author":1,"guest_author_image":"https://www.moneymetals.com/uploads/content/david-morgan-xs.jpg","guest_author_name":"David Morgan","guest_author_description":"David Morgan, the Silver Guru and publisher of The Morgan Report. David holds degrees in finance and economics as well as engineering.","h2_header":"David Morgan: What the Smart Money Is Doing & Dangers of Complacency","image_width":700,"image_height":368,"noindex_flag":0,"podcast_embed":"","added_schema":"","banner_image":null,"full_url":"podcasts/2017/12/29/investors-eye-silver-in-2018-001342","first_image":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidmorgan.jpg","truncated_description":"David Morgan of The Morgan Report joins me for a replay of one of the very best interviews we did in...","pretty_publish_date":"December 29th, 2017"}},{"page_description":"In the original (1960) classic movie The Magnificent Seven, a Western adaptation of Kurosawa's The Seven Samurai, Vin (Steve McQueen), tells the wry tale of a man who fell off a ten-story building. Passing each floor people heard him say, "So far, so good","page_image_url":"https://www.moneymetals.com/uploads/content/when-to-buy-gold-silver-social.jpg","page_title":"When to Buy Gold & Silver (Is it a Good Time to Invest in Gold & Silver?)","page_type":"news","score":6.126532085109079,"url":"https://www.moneymetals.com/news/2019/02/21/when-to-buy-gold-silver-001719","data":{"id":1719,"title":"When to Buy Gold & Silver (Is it a Good Time to Invest in Gold & Silver?)","description":"In the original (1960) classic movie The Magnificent Seven, a Western adaptation of Kurosawa's The Seven Samurai, Vin (Steve McQueen), tells the wry tale of a man who fell off a ten-story building. Passing each floor people heard him say, "So far, so good!" This strange little tale is an excellent metaphor for many of today's citizens around the globe.","rss_title":"No Gold and Silver? So Far, So Good...","slug":"when-to-buy-gold-silver","h1_header":"No Gold and Silver? So Far, So Good...","content":"

In the original (1960) classic movie The Magnificent Seven, a Western adaptation of Kurosawa's The Seven Samurai, Vin (Steve McQueen), tells the wry tale of a man who fell off a ten-story building. Passing each floor people heard him say, "So far, so good!"

This strange little tale is an excellent metaphor for many of today's citizens around the globe.

Through the multiple lens of news reporting, political commentary, and social media, they see what's going on yet remain transfixed in the moment, because things are well, so far, so good.

Venezuelans have done so even as adults there have lost an average of 20 pounds, while their "leader" may have gained even more!

So far, so good... until it isn't.

On November 20, 2016, Indian Prime Minister Narendra Modi banned 500 and 1,000-rupee notes (worth respectively about $7 and $15). His edict – supposedly to crack down on untaxed, criminal-used "black money" – instantly nullified as legal tender, 85% of all cash in circulation. People died standing in massive bank access lines.

Price of Gold in India vs U.S.

Courtesy Manward Press

And what happened to gold because of this? Overnight, the domestic Indian price almost doubled!

These things (like FDR's surprise gold ban and Nixon's defaulting on the final link to a gold standard), tend to be preceded by an official government denial.

And it's usually over the weekend, when markets, banks, and local coin dealers are closed.

In an ad for the advisory letter, Manward, Andy Snyder makes the case for something similar happening in the U.S., saying:

... if you prepare well for the inevitable death of cash in America, you can set yourself up to avoid the pain and collect a hefty sum of money. Very soon, I expect the Federal Reserve will make the historic move away from cash and toward electronic money. It will accelerate the shift to a cashless America at light speed. Some investors will get killed; some will get very rich.

He then discusses electronic gold, but the key takeaway for us is that holding physical gold has always been – and will continue to be – a way to backstop the value of your other "assets," even if they are ground away because of government negligence or societal unrest.

Among the roles gold plays are:

A way to mitigate underperformance in other asset classes.
A fiat currency outperformer par excellence, with no credit risk.
A non-correlated asset, in a "risk-off" financial environment.
A way to exchange fiat paper promises for sound, "honest money."
A "top 'o the crop" insurance vehicle for a variety of scenarios.

Maybe you feel lucky - but how much would you pay?

Plata o Plomo

Plata o Plomo?

How much would you pay for a tank of gas for your car? How much for a box of handgun ammo? For a water filter? A tube of silver rounds? For a quarter ounce of gold? You should of course already have all these items on hand – just in case.

Less than two years ago, a Venezuelan citizen with a few ounces of silver could have exchanged it for 6 months of food. With an ounce of gold – a house.

Today, after 1,000,000 % inflation in 2018 alone – for a grocery store (assuming it still has groceries!) and a housing subdivision?

Just about every other country in the world continues to experience inflationary effects which cut the purchasing price – every year – of each and every "paper promise" (kudos to David Morgan for popularizing this term) in their wallet or "savings" account.

Even in the U.S. with an "official" 2% inflation rate (actually closer to 9%) the effects become devastating.

Plata Pura 'Fistful of Silver'

Plata Pura. A "fistful of silver"

And poor Canada, which just a few years ago boasted an exchange rate of USD $1.05, now sits at just 0.75 cents – meaning our Northern friends must now pay 30% more to purchase their own Gold and Silver Maple Leafs!

Analyst Clive Maund's long-term chart is starting to look interesting. Silver has formed a technical double bottom with a 3-year separation hinge.

A series of "resistance" points sit above current price levels. Long-suffering investors will sell into them to "take a profit" or "get back to even."

Once $22 is cleared on the upside, especially with 3 closes above that round number – one of David Morgan's favorite indicators – it could be blue sky for prices up to $34. It's unlikely to happen by tomorrow, but it could be a lot sooner and more dynamic than most people expect.

Silver (Charts)

How to avoid "a mess of cactus"

Near the end of The Magnificent Seven, Mexican Bandit Calvera, (played by born and raised in Brooklyn, Eli Wallach) asks Vin why he took the job of keeping outlaws away from the small community.

Vin recounts the story of someone he knew in El Paso. "One day, he just took all his clothes off and jumped in a mess of cactus. I asked him that same question, 'Why'? He said, 'It seemed to be a good idea at the time."'

Perhaps it "seems like a good idea" now to wait until you think it's time to start laying away some gold, silver, and platinum. Or maybe you feel that you'll be able to spot things unraveling far enough ahead so you can purchase some metal "just in time." Maybe...

But if you want to beat the odds of someday, perhaps rather soon, finding yourself in "a mess of cactus," it would be a good idea to get up off the couch and exchange a fistful of fiat paper for some metal – now.

","image_selection":0,"primary_keywords":"when to buy gold silver featured","secondary_keywords":"","publish_date":"2019-02-21","podcast_url":"","quick_text":"...","author_id":3,"content_type_id":1,"created_at":"2019-02-21T16:02:40.000000Z","updated_at":"2024-04-10T20:06:32.000000Z","podcast_subject_line":"","meta_description":"In the original (1960) classic movie The Magnificent Seven, a Western adaptation of Kurosawa's The Seven Samurai, Vin (Steve McQueen), tells the wry tale of a man who fell off a ten-story building. Passing each floor people heard him say, "So far, so good","podcast_duration":"","header_image":"","article_image":"https://www.moneymetals.com/uploads/content/when-to-buy-gold-silver.jpg","redirect":"","canonical":"","sort":null,"featured_image":"https://www.moneymetals.com/uploads/content/when-to-buy-gold-silver.jpg","facebook_image":"https://www.moneymetals.com/uploads/content/when-to-buy-gold-silver-social.jpg","twitter_image":"https://www.moneymetals.com/uploads/content/when-to-buy-gold-silver-social.jpg","status":1,"show_guest_author":0,"guest_author_image":"","guest_author_name":"","guest_author_description":"","h2_header":"","image_width":700,"image_height":368,"noindex_flag":0,"podcast_embed":"","added_schema":"","banner_image":null,"full_url":"news/2019/02/21/when-to-buy-gold-silver-001719","first_image":"https://www.moneymetals.com/uploads/content/when-to-buy-gold-silver.jpg","truncated_description":"In the original (1960) classic movie The Magnificent Seven, a Western adaptation of Kurosawa's The S...","pretty_publish_date":"February 21st, 2019"}},{"page_description":"As silver makes an upside breakout on good volume above $30 – initially confirmed by several closes above that price (an occurrence I believe will take place this year) – the number of investors (as opposed to speculators) will immediately begin to shrink","page_image_url":"https://www.moneymetals.com/uploads/content/most-investors-will-miss-out-on-coming-upside-silver-breakout-part1-social.jpg","page_title":"Why Most Investors Will Miss Out on the Coming Upside Silver Breakout - Part 1","page_type":"news","score":6.106814494872591,"url":"https://www.moneymetals.com/news/2022/04/28/most-investors-will-miss-out-on-coming-upside-silver-breakout-part1-002520","data":{"id":2520,"title":"Why Most Investors Will Miss Out on the Coming Upside Silver Breakout - Part 1","description":"As silver makes an upside breakout on good volume above $30 – initially confirmed by several closes above that price (an occurrence I believe will take place this year) – the number of investors (as opposed to speculators) will immediately begin to shrink. This will continue to take place as the price works its way up toward $50 and accelerate into new all-time highs over the next 12-18 months, toward the magnetic target of $100 an ounce... For a start?","rss_title":"Why Most Investors Will Miss Out on the Coming Upside Silver Breakout - Part 1","slug":"most-investors-will-miss-out-on-coming-upside-silver-breakout-part1","h1_header":"Why Most Investors Will Miss Out on the Coming Upside Silver Breakout - Part 1","content":"

As silver makes an upside breakout on good volume above $30 – initially confirmed by several closes above that price (an occurrence I believe will take place this year) – the number of investors (as opposed to speculators) will immediately begin to shrink.

This will continue to take place as the price works its way up toward $50 and accelerate into new all-time highs over the next 12-18 months, toward the magnetic target of $100 an ounce... For a start?

The likelihood of and reasons for this being the case are the primary foci of this essay.

"Taking a tidy profit" after holding/adding to a position for such a long time. There's nothing wrong with taking some money off the table, especially into $45-$55 silver, but if you believe (as I do) that a literal once in a lifetime opportunity in gold, the miners, and especially silver awaits us, then be careful about taking too much out, lest you end up riding the wave with a position size that's much smaller than you were willing to risk at lower levels.

Much as you should buy in tranches (portions), so should you discipline yourself too – as Stewart Thomson likes to say – "Sell less than is rational."

"Recency Bias." "Silver has failed before, either in the high twenties, or around $50, and this time will be no different. 'Da boyz' will always remain 'Masters of the Universe' in this arena. The price will never break out unless they decide to let it." (Except for the old saw: "They are right every time until they aren't.")

"Expert" Touts. Selling behavior is based almost entirely upon technical "resistance" levels, be they horizontal resistance/support (HSR), or some kind of chart-induced technical formation like triangles, head and shoulder tops, resistance fan lines, or "overbought" signals.

And don't forget about "cycles" and "free rides."

A run-away market is rare, but when they do take place, or if it's simply a powerful impulse leg, most technical micro-analyses including "overbought/oversold" water-witching assumptions, can better be used as tactics, not strategy.

Like many of you, I experienced this up close, personal, and with blinding speed, during the 6-month silver and miners' explosion out of the late 2015 pit into June 2016. All the way up, soothsayers were counseling to "take profits into overhead resistance levels" which in the event only slowed the upward rush for a day or two... if that, before making new intermediate highs. This went on for almost 6 months!

My back-of-the-napkin guess is that less than 20% of those with positions in that market took even close to 50% of the available profits. As for the rest? Not (nearly) as much.

Adding insult to injury, the resulting top was not a spike, but a rollover, enabling reasonably competent investors to offset 30-50% of their profits into a willing crowd of new buyers.

Disbelief in the fact that "this time it is different." Folks, I don't care if you've held and added more gold and silver for years, and that all of us have been wrong about "the big breakout." By any rational measure, by even the most rudimentary fundamental analysis, the time when silver - among all other metals will continue trading at such wildly distorted price-versus-value metrics grows short.

The market is not going to drop a starting flag for you. What if we're not just "three feet from gold" but three inches? When, not if, this event takes place it will be a one-time deal. No second chance for you.

Silver's ("off-putting") tendency to lag Gold. Historically this has been the way to bet, but sometimes silver gets a bit in its mouth and decides to "do its thing." Not to mention that in 1979-80, both gold and silver took turns with the price baton on their own, while the other remained quiescent for a few days or even weeks.

Plus the way it likes to "break support" and be rebuffed by resistance line chart patterns before doing just the opposite.

Experience shows that when an impulse leg gets going, often for weeks – even months – the predictive ability of most chart data points recedes in value. If, in addition, "animal spirits" put in their appearance, then all bets are off. One is just best to follow the time-tested motto, "Be right. And Sit tight."

Counterparty risk: Most reading this understand that having your gold and silver in an "unallocated" account means that one more layer of accountability lies between you and your gold. But what if it is supposedly "allocated" – held in your name?

What if your "allocated" silver isn't in bailment as part of a true depository storage arrangement or doesn't exist (even though you're being charged insurance and storage)? And then what happens if the counterparty goes bankrupt?

And don't think this risk only applies to "the little guys." I would suggest (as David Morgan has discussed publicly since late last year) that it's probable some large metals' customers who assume their silver is being held in storage in their name, could turn out to be "bag holders."

Silver Manifest, Second Chance Books Available

Two books, available from Money Metals, give you an edge.

A few years ago, a major banking house lost a case exactly because of how they had defrauded their customers in this way.

As a variation on the theme, there's already precedent for bank "buy-ins" – where a bank in trouble takes a big chunk of customer funds to solve their financial missteps.

We may now "have an edge"

As, Stanley Druckenmiller, one of the world's greatest investors opines, "When you know you have an edge, push the advantage."

If you believe, as I do, that we may be on the cusp of developing such a fine and very sharp edge, might it not also be time to "push that advantage"?

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Over the last half year or so, a number of analysts, well-heeled individuals, and mega-hedge fund managers have been taking a shine to silver. So far the "restless metal" hasn't been letting on that it's noticed.

It's understandable why someone who either has not yet begun to commit funds to build a physical silver position – or who has not completed his or her ownership program – might think it best to wait and see if the price starts rising, thus validating the silver bulls' call. But this kind of strategy could end up being a big financial mistake on several counts.

And worse yet, Mr. Market could decide to whisk away today's prices – and the relative availability of investment-grade silver – to the point that you'll never even take a position at all.

To get a sense of how you might feel as you watch, and watch, and watch while silver makes its long overdue, third, and almost certainly largest levitation toward the ultimate high since the start of its rise in 2001, please examine the palladium chart below.

Palladium Chart Mar '20

10-Year Monthly Palladium (Courtesy barcharts.com)

After spending 5 years in a $300 price range, palladium decided in December 2016 to put in a long-term bottom around the time that gold and silver were doing something similar.

Then, again like gold and silver at the time, it rallied, moving to a several years' high around $850... but kept on going. Gold and silver faded away for the next 18 months, putting in a double bottom in late 2018.

By the way, during this entire time, David Morgan, provided guidance for his subscribers – be they holders of The Morgan Report Premium, Mastermind, or Insiders' Memberships – in how to profitably trade these multiple hundred-dollar swings via futures, options, stocks, or physical palladium rounds and bullion itself.

Given David Morgan’s expertise in these areas, look to him being able to effectively help current and new subscribers alike do the same thing with the coming explosive upside run in silver and gold.

In January 2018, palladium seemed to build out a major top around $1,150 – almost exactly where it had done so twenty years before! Just about everyone (me included) watched with trepidation as that level once again turned back prices and the metal declined by over $300.

What happened next will be something chartists ponder for a long time to come. Within a matter of months, palladium proceeded to easily punch through that old $1,150 "top"... and to this day, almost 18 months later – continues to rise, seldom pausing, to, at this writing over $2,550... more than twice as high as it had ever traded before!

Palladium Price Chart (2/14/2020)

Daily $Palladium (Courtesy Stockcharts.com)

Now look at the nearby daily palladium chart. Do you think it would have been easy to "take a profit" – just about anywhere along the way?

On the other side of the coin, how many people who sold out around $1,000 ever got back on to experience any of this relentless additional $1,450 "profit launch"? More than likely, very, very few.

Silver's Supply-Demand Metrics look to be building the same fundamental – and technical picture as palladium.

For several years, analysts warned of a coming shortage and price spike for palladium.

With silver coming off its fourth consecutive year of lower production in most of the big mining camps and robust Chindian, Eurozone, and now North American demand, silver's building mirror image behavior to that of palladium looks more and more likely.

Top Silver Producing Countries Forecasted Change in Mine Supply 2017 vs 2018f

The top 10 silver-producing countries are Peru, Bolivia, Australia, Argentina, Mexico, Chile, Poland, China, Russia, and Guatemala. And get this... in nine of these countries, silver production has been falling for the past 4 consecutive years!

Rounding out the picture are these salient demand factors.

Supply from scrap sources is at a 20-year low.
Silver fabrication (manufacturing) demand is just below record levels.
Solar panels' silver demand has risen for 7 straight years (2013-2019).
Primary silver producer grams/ton yield has fallen by 50% in the last decade.

And the demand clincher? About 75% of the world's annual new silver supply comes from base metals production – copper, lead, and zinc. When, not if, investment demand spikes in competition with industrial needs, there's going to be a problem...

Dr. Peter Megaw, perhaps the person who has discovered more high-grade silver deposits than anyone else on the planet, puts it this way:

When the price of silver moves, you can't ratchet up the production from the world's largest gold, copper, and lead-zinc mines to pick up more silver. The only place you have to take up the slack on the supply side is [the small number of] primary silver mines.

And don't forget the rising "hidden" costs you'll pay, the longer you wait. Higher prices, and demand outstripping supply, both increase the premium (charge above spot).

In the case of American Silver Eagle coins, seigniorage – what it costs the U.S. Mint to produce a coin – has already risen by 50% in the last decade, so you can be sure this seldom-considered price factor will continue rising too.

Jeff Clark, one of the best-informed and most articulate analysts in space, calls the current silver price "A bottle rocket awaiting liftoff."

He says: "Supply and demand in the silver market are going in different directions. I cannot find a period in modern history where (they) were more out of balance than now. With the setup currently in place, the wick that leads to silver's rise sits precariously by a roaring fire."

So, don't let yourself fall into the trap of waiting until the writing is on the wall – and on the charts – to purchase the silver you want.

It would be wise to ask yourself right now, whether you'd like to participate as an owner in silver's oncoming multi-year run up into record territory, or instead (try to) be content sitting back and watching the charts print out a bigger and bigger profit stream, just like palladium has been doing for almost three years!

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Two years ago at a conference during which I both presented and attended, a Keynote speaker, "Rich Dad" Robert Kiyosaki, introduced me to a different way of looking at things. He posed the question, "How many sides does a coin have?"

The correct answer is "three." The front (obverse), back (reverse), and… the edge!

When you think about it, this makes sense. From this angle – uncommon to most observers – a person can begin to look more deeply at a given subject. From the edge, you are able by definition, to see "both sides" of the story.

Using Rich Dad's perspective as a research tool helps define and validate the premise of this essay… that the price action right now of gold – and soon silver – is giving us important clues about the direction, strength, and durability of the next price trend.

It's easy and understandable for Norteamericanos to become fixated on the price of gold and silver, expressed in their domestic currency, the U.S. dollar.

But once in a while, it's important to take a step back and gauge how much people in OTHER countries are paying in their currency when they exchange fiat for some of the honest money that gold and silver have historically represented.

When gold is in an uptrend against other currencies it lets you know that something is going on under the hood that most people are missing.

Gold in Yuan (2014-2018)

When precious metals buying in these countries continues to increase even though it has become even more expensive to do so, Mr. Market is letting you in on just one more reason why you should pay attention... and either start "stacking" or add to your current insurance/investment position.

Silk Road Gold Total Reserves Plus Demand

The Trend is Your Friend

Increased gold purchases by "Silk Road" countries – for going on two decades – have continued unabated despite periodic currency devaluations and loss of purchasing power to the U.S. dollar. Not to mention that China, which used to export millions of ounces of silver annually, has for some years, not only been keeping all of its internal production, but importing more!

The Shanghai Gold Exchange (SGE) chart demonstrates that this trend shows no signs of letting up.

Going forward, the plan on gold being more challenging to find, and due to increased regulation along with overall country risk, more complicated, costly, and time-consuming to produce. And, not to mention, more expensive to buy as mushrooming demand across the globe kicks in and continues with a vengeance.

Goldcorp was recently bought out by Newmont Mining, creating the world's largest producer. This is the second recent gold company mega-merger – with others almost certainly to follow – indicating the need these operators have for nailing down future ore bodies, as every ounce they produce depletes their reserves.

Ian Telfer, Goldcorp's Chairman, has said, “If I could give one sentence about the gold mining business… it’s that in my life, gold produced from mines has gone up pretty steadily for 40 years. Well, either this year it starts to go down, or next year it starts to go down, or it’s already going down… We’re right at peak gold here.”

SGE Silver Delivery Volume

Physical Silver Deliveries in Shanghai Are Skyrocketing

After a brief time lag, when gold experiences a sustained and robust rise price rise, so does silver.

The directional correlation between gold and silver is close to 90%. When you observe the statistical rarity of a gold/silver ratio above 80:1 – which happens to be where we are right now – a "reversion to the mean" is in the offing.

Central Bank Gold Holdings Reveal What “The Man” Is Doing

Even as the new gold secular bull run got underway in 2000, central banks continued to sell gold for nine more years.

However, in 2010 that trend reversed and has continued upward through the present day. From 2015 through the end of 2018, central bank buying has noticeably accelerated.

One writer has referred to central banks as "one trick ponies with printing presses."

But even as they push out more paper promises, these tricksters continue to covet the Midas metal. Former Federal Reserve Chairman, Ben Bernanke, pressed to answer why they still held gold, replied curtly, "Because of tradition."

We'd say there's more to it than his brief reply – a lot more.

Central Bank Gold

Central Banks Are Stockpiling Gold Once Again (Courtesy World Gold Council)

Way back in 2002, David Morgan made the following comment:

For the record, I will state, there will be another, more frenzied, scramble that will carry silver prices to highs that will repair all the excess paper money creation, price suppression, supply deficit, and bearish sentiment over the past two decades. This will become known as the Great Silver Crisis.

Gold, silver, and mining stocks are finally awakening from an eight-year slumber.

While no one can predict just how far and how fast prices will rise, the odds of missing out for those who continue to look the other way or who hesitate to act, will parallel the metals' upside trajectory.

Then at some point, as surely as the sun rises each morning, many of these same people will decide to step up to the plate and start buying at much higher prices. They will be driven - not by calm, calculated decision-making, but rather by FOMO - the fear of missing out.

Do yourself a favor. Behave like "Rich Dad." Get up on "the edge of the coin" and take a look at both sides.

Then start "vaulting" gold and silver regularly, while availability is good, and the price is still reasonable.

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In March 1980, the University of Washington installed a seismograph system designed to monitor earthquake activity in the Cascades, with a focus on increased seismic activity around Mount St. Helens.

Starting just a few days later, a series of earthquakes, small eruptions, and steam releases took place. Near the end of the month, the peak of the mountain started to open up.

Volcano with Ash Cloud

But this was only the beginning. For the next six weeks, small eruptions alternated with intermittent quiet periods. But beneath the surface, liquid magma was forcing its way upward, creating intense pressure.

News wires in Washington State reported on these changes, but few people – including scores who would later be killed – paid much attention.

As reported in LiveScience, even the USGS position at the time was that "The changes to the bulging mountain were consistent with what had been reported several times daily since the watch began and left no indication of what was about to happen."

Then on May 18, a lateral blast involving a release of pressure over the magma chamber created "a glowing superheated cloud of gas and debris moving at nearly supersonic speeds" leaving an eight-mile path of destruction.

A second, vertical explosion at the summit took off the top thousand feet of the mountain, killing 57 people and scattering ash over seven states.

Pressure Is Building Inside the Gold (and Silver) "Volcano"

The Mount St. Helens explosion offers a fitting metaphor for the pressures building in the gold and silver markets.

Tremors are intensifying around the globe due to the massive overprinting of fiat currencies, creating debt levels without historical precedent. Financial "earthquakes" are taking place as we speak in Venezuela, Argentina, parts of the Middle East, and Africa. Yet most people – especially in the West – are simply not paying attention.

Yearly gold acquisition by four countries alone – China, India, Russia, and Turkey – now exceeds annual global production. Central banks are vaulting gold at the fastest pace in decades.

The falling gold reserves of major producers have declined 26% since 2012. Gold (and silver) yields during the last few years have plummeted on the order of 50%, with discoveries of new projects headed in the same direction. The time frame from discovery to production is moving off the charts. Derivatives have been written dwarfing the total amount of precious metals ever produced in history.

Gold Performance by Foreign Exchange

Since 2001, gold owners, even in countries where inflation has so far been low, have profited by holding this historically powerful asset protection vehicle. Their otherwise less-fortunate brethren in other locales who did the same have done very, very well indeed!

Risks Are Mounting

"From a risk/reward perspective, there is no asset class that has anything even close to the positive attributes that gold has at this point in US business cycle time." Stewart Thomson, Graceland Updates

For over a decade, the policies of central banks – including the Federal Reserve – have been almost entirely unblemished by success. Keeping interest rates below what would normally be the case when borrowers and lenders agree on a loan, based on the risk/reward economics of doing so, has created a series of asset bubbles.

Panic in Chinese Line for 40 Gram Gold

1948 Chinese Hyperinflation.
(Source: goldswitzerland.com)

This monetary malpractice has impoverished the majority while excessively rewarding the minority who can comfortably take highly-leveraged risks, knowing that "the authorities" have their back, come what may.

But now the banks are stuck between the proverbial rock and a hard place, with nowhere to go but zero to negative rates.

The result, as Jim Rickards puts it, is that the "Failure of central banks to exit from radical monetary experiments will drive the next leg of the gold bull market."

If you wait until a crisis situation is obvious to everyone else, most of the profit opportunity – not to mention even the ability to protect your finances by acquiring "hold in your hand" gold and silver – may have disappeared or will seem to have become unaffordable (See last month's When (not If) Silver has a Bitcoin Moment).

"Seismic Activity" in the Gold Markets Is Increasing

Several increasingly – evident factors are building pressure under this "golden volcano." Like the Mount St. Helens eruption in 1980, it's difficult even for professional observers to gauge just when an explosion – not to mention its magnitude – is going to take place.

What's important in our analysis is not precisely when gold (and silver) is going to "erupt," but that the evidence overwhelmingly suggests we're getting closer by the day.

As this is being written during the overnight session, gold has penetrated the $1385 level for the fourth time in the last few years. Regardless of whether this price holds, it should forcefully demonstrate – to anyone paying attention – that the preconditions necessary for an unexpected and sustained upside price explosion are being laid.

Look objectively at what's causing the pressure to build, decide how it might affect your situation, make a plan (how much to devote, level of risk tolerance, time frame, and goals) – then begin to act.

Pressure is building. You may think you're not living in a "financial blast zone." But neither did that doomed volcanologist who woke up that morning on a ridge 6 miles north of Mount St. Helens' peak. After finding himself directly – and unexpectedly – in the path of an explosion traveling 90 miles per hour, his last radio transmission was, "This is it!"

Don't let time run out before taking action to protect your finances. Learn from what others, across cultures, have done ahead of time for thousands of years, and from what millions of people around the globe are doing today.

The clock on the coming eruption of the gold (and silver) volcano is ticking...

","image_selection":0,"primary_keywords":"gold silver good investment for the future featured","secondary_keywords":"","publish_date":"2019-06-20","podcast_url":"","quick_text":"...","author_id":3,"content_type_id":1,"created_at":"2019-06-20T14:56:39.000000Z","updated_at":"2024-03-27T19:09:54.000000Z","podcast_subject_line":"","meta_description":"In March 1980, the University of Washington installed a seismograph system designed to monitor earthquake activity in the Cascades, with a focus on increased seismic activity around Mount St. Helens.","podcast_duration":"","header_image":"","article_image":"https://www.moneymetals.com/uploads/content/gold-silver-good-investment-for-the-future.jpg","redirect":"","canonical":"","sort":null,"featured_image":"https://www.moneymetals.com/uploads/content/gold-silver-good-investment-for-the-future.jpg","facebook_image":"https://www.moneymetals.com/uploads/content/gold-silver-good-investment-for-the-future-social.jpg","twitter_image":"https://www.moneymetals.com/uploads/content/gold-silver-good-investment-for-the-future-social.jpg","status":1,"show_guest_author":0,"guest_author_image":"","guest_author_name":"","guest_author_description":"","h2_header":"","image_width":700,"image_height":368,"noindex_flag":0,"podcast_embed":"","added_schema":"","banner_image":null,"full_url":"news/2019/06/20/gold-silver-good-investment-for-the-future-001798","first_image":"https://www.moneymetals.com/uploads/content/gold-silver-good-investment-for-the-future.jpg","truncated_description":"In March 1980, the University of Washington installed a seismograph system designed to monitor earth...","pretty_publish_date":"June 20th, 2019"}},{"page_description":"David Smith of The Morgan Report and MoneyMetals.com columnist joins me for a wonderful discussion on the state of the precious metals, an exciting new silver backed cryptocurrency and when he believes silver will finally play catch up to gold’s rally.","page_image_url":"https://www.moneymetals.com/uploads/content/youtube-thumbnail-davidsmith-social.jpg","page_title":"Fed Chairman and "Systemically Important" Banks Nervous about Gold","page_type":"podcast","score":6.0819302764946475,"url":"https://www.moneymetals.com/podcasts/2019/07/12/silver-from-weak-to-strong-hands-001814","data":{"id":1814,"title":"Fed Chairman and "Systemically Important" Banks Nervous about Gold","description":"David Smith of The Morgan Report and MoneyMetals.com columnist joins me for a wonderful discussion on the state of the precious metals, an exciting new silver backed cryptocurrency and when he believes silver will finally play catch up to gold’s rally.","rss_title":"Fed Chair Powell and "Systemically Important" Banks Nervous about Gold","slug":"silver-from-weak-to-strong-hands","h1_header":"Fed Chairman and "Systemically Important" Banks Nervous about Gold","content":"

Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up our good friend David Smith of The Morgan Report and MoneyMetals.com columnist joins me for a wonderful discussion on the state of the precious metals, an exciting new silver backed cryptocurrency and when he believes silver will finally play catch up to gold’s rally. So be sure you stick around for my conversation with David Smith, coming up after this week’s market update.

As Federal Reserve chairman Jerome Powell testified before Congress this week, investors became more confident that they will soon see interest rate cuts. The Dow Jones Industrials traded up to a new record high while commodities and precious metals also gained strength on Powell’s dovish comments.

Gold prices currently trade at $1,408 an ounce, up 0.6% since last Friday’s close. Silver is up 0.7% this week and currently settles at $15.18. Platinum is putting in a weekly gain of 1.7% to check in at $827. And finally, palladium is off slightly from record highs put in earlier in the week. It trades at $1,547 per ounce, down 1.5% now for the week as of this Friday morning recording.

Well, Chairman Powell’s testimony was closely scrutinized not just for its economic implications but also for its political overtones. Powell cited “trade tensions” as cause for concern about the strength of the global economy. He clearly seemed to be blaming President Trump’s tariffs.

But if the tariffs are what ultimately move the Fed to cut rates, Trump will have finally gotten what he wants out of Powell. In recent weeks, Trump has stepped up his attacks on the central bank, calling it the biggest problem facing the economy, floating the idea of firing Powell, and suggesting his administration would match China’s and Europe’s "currency manipulation game."

Although many presidents before have pursued currency interventions and quibbled with Fed chairmen over interest rate policy, none have ever done it as openly and directly as the current one. Fed apologists in the media and in Congress view the central bank’s “independence” as being under assault.

The notion that the Fed ever was or could be independent of politics is a fanciful one. When a small group of people – appointed and confirmed by politicians – are empowered to make decisions that can make or break markets, economies, and elections, politics will inevitably intrude.

Fed chairman Jerome Powell may sincerely want to make monetary policy without regard to politics. But when political forces exert themselves on the Fed, he finds himself in an impossible catch-22. If he fails to cut rates, then the central bank risks becoming seen as the enemy of half the country as President Trump makes it his foil at campaign rallies. If Powell does what the President wants, then Democrats will accuse him of succumbing to political pressure from the White House.

Democrats used Powell’s Congressional testimony as an opportunity to get him on record in opposition to a gold standard.

Although Trump himself is not calling for a gold-pegged dollar, one of his nominees to the Fed Board of Governors is – or at least has in the past. Potential Fed policymaker Judy Shelton has written and spoken extensively about the gold standard.

Apparently seeking to discredit Shelton’s views, Democrat Jennifer Wexton prodded Fed Chairman Powell into weighing in on the gold standard.

Ms. Wexton: Chairman Powell, do you think that the US should go back to the Gold Standard for our currency?

Chairman Powell: Let me say I wouldn't... This could feasibly be considered commenting on a particular nominee who has recommended that, and of course, I will not do that. I will answer your question, but I want to make sure that this isn't interpreted in that way. So, no, I don't think that would be a good idea. The idea would be... Congress would have to pass a law and that law would say that our job with monetary policy is to manage the level of the dollar, stabilize the dollar price of gold, and we would then not be looking at maximum employment or stable prices. There have been plenty of times in the fairly recent history where the price of gold has sent signals that would be quite negative for either of those goals.

Ms. Wexton: Much better mission for the Fed is what you're doing right now.

Chairman Powell: Well, this is why every country in the world abandoned the Gold Standard some decades ago.

Ms. Wexton: Okay. Well, that reluctance or that desire not to go back to the Gold Standard is something that you have in common with the CEO's of seven of the world's globally systemic important banks-

It’s no surprise that “too big to fail” bankers who depend on special privileges from the Fed and other central banks don’t like gold. It’s hard to orchestrate multi-trillion dollar bailouts of the financial system when the currency supply is limited by gold.

Some see that as a disadvantage. Others see it as a distinct advantage because it discourages banks from getting too big to fail to begin with.

Chairman Powell claims that gold-backed money would prevent the Fed from pursuing full employment – as if all workers have monetary planners to thank for their jobs – and stable prices. Of course, by “stable prices” he means prices that rise at his target rate of 2% inflation. He means a dollar that steadily loses purchasing power over time instead of retaining it like a sound dollar would.

Sound money is inherently stable and inherently independent. It can be based on gold, silver, or even certain other assets with intrinsic value. If the dollar were defined simply in terms of grains of silver, for example, then monetary policy and the politics surrounding it would recede into the background. No longer would markets swing wildly based on the particular phraseology contained in Fed policy statements.

No longer would every incumbent administration push for easy money policies. Instead of counting on the Fed to devalue existing debt and pave the way to pile on more of it, hard choices would have to be made by members of Congress about paying down debt and embarking on a fiscally sustainable path.

The fact that politicians, central bankers, and “too big to fail” bankers all oppose a gold standard is a tacit admission that hard money would serve as an effective constraint on their activities.

Well now, without further delay, let’s get right to this week’s exclusive interview.

Mike Gleason: It is my privilege now to welcome back David Smith, Senior Analyst at The Morgan Report and regular contributor to MoneyMetals.com. David, thanks for coming on again and how are you, my friend?

David Smith: Oh, very good. It's great to be back again.

Mike Gleason: Well, David, as we start out today, and before we get into silver and what's going on with the white metal, let's focus on gold for a moment and the recent move we saw there as it finally pushed through the multi-year overhead resistance level of, say, $1,370 or $1380. It's now been consolidating over the last couple of weeks at or around $1,400. Talk about what you're seeing there with the yellow metal, why you think it was finally able to break out of that five year long trading range, and then where we're likely to go from here.

David Smith: Well, I think it was just a convergence of factors that all came together that gave it that extra critical mass to move through, and it did so decisively and, in closing above there around $1,365 or so, it was really, really powerful. And what I'm impressed by lately, I'm always aware that we could see a $100 drop before things get going again, but it looks less and less likely the longer it stays at a very high consolidating level. For example, it was up today around $15 or so. It just doesn't like to stay much below, say, $1,395. It likes to be above 14 (hundred).

And then also, there's another tale going on with the mining stocks. They are remaining pretty strong. All the good ones are giving up ground very begrudgingly. And so, what I think is going on is accumulation, not only in the mining stocks, but also in the physical metal itself. Maybe the retail sector hasn't caught on fire yet, but I think the big players are adding to their physical metal and that's, of course, going to be draining more and more physical out of the place where people can buy it at the retail level.

Mike Gleason: We talk a lot about the real interest rate environment. Obviously, there's now a lot of momentum for a reduction in interest rates, which obviously helps gold look a lot better as an investment. The big knock on gold is it doesn't earn you a yield, and you think part of that is playing into this recent move?

David Smith: Oh, I definitely think so. I was just reading, a couple days ago, that there are over 13 trillion dollars of negative interest rate paper that’s written in Europe in the Eurozone, that's just incredible where, actually, you pay people to take your money. And they talk about gold not earning interest, but another thing, nowadays with all this negative interest, you never have to pay people to buy your gold. It's just stunning and this is not going to end well, but it'll keep the fiction going for a while and, as long as they want to do that, that's just going to be a real tailwind for gold because, like you said, the real interest rate, when that changes in favor of gold, then it makes more sense to hold gold than it does paper. And it looks like we're going to be seeing basically flat to lower interest rates here about as far as the eye can see, and that means that we're going to see continued strength in gold as far as the eye can see.

Mike Gleason: Turning to silver, it's definitely been a laggard, and one of the big questions many are asking in the metals community is when will silver similarly break to the upside and confirm gold's rally? What is it going to take to get the white metal moving again, David, and will see this year’s long trading range in silver breach like gold's was recently? And then what are some of the reasons silver has been held down here? Let's get your thoughts on silver now.

David Smith: Well, the day, a few weeks ago, when GLD established the largest inflow in history, I think it was one and a half billion dollars in one day, people didn't realize it, but silver also had the second highest volume inflows in ETFs, in its history as well too. And what I think was happening with silver is it was going from the last of the weak hands to stronger and stronger hands. And so, the longer it stays down like it is and not doing too much, the longer that happens, I think the more explosive will be the movement. And I think, one of these days, it'll just pop up above these trim lines like gold did and suddenly, there'll be people going, "Good grief," and then it'll be off to the races. We'll need that investment group to come back in, but I think they're moving in and I think it's going to be pretty darned interesting.

And, of course, the silver mining stocks themselves have been pretty strong. So, again, like with the gold stocks, it indicates accumulation and it won't take too much to get it moving on the upside, and it may wait until the first week of September. I don't think it'll wait that long, but, if it does, it still doesn't mean that we've got a problem because gold and silver over time do correlate. They don't correlate every day, but the direction of movement tends to be very similar to the point of about 90%. If gold is going to be strong, say, over the next few weeks or so and silver is subdued, at some point, it will play catch-up and you'll probably see, and I remember this in 1980, '79, '80, you would see gold moving strongly for day after day and silver just sat there. And then, all of a sudden, gold would take a breather and silver would go for a week or so.

I think we'll see tag team going on, playing catch up between gold and silver, and that will become the leitmotif of the bull market as it gets going and you'll see that going on for months and perhaps years at a time.

Mike Gleason: We've got the silver to gold ratio in the 92 to one range right now. Where are you looking for that to go over the next several years? We're obviously at an extreme. I don't think we've ever seen it higher than about 100 to one, and I think it's been 25-plus years since we've seen it even this high. Comment on gold versus silver as an investment right now.

David Smith: Well, just by that alone (the gold to silver ratio) people have made a lot of money by speculating on the type of movement coming back into balance. And so at 90 to one, they would buy more silver and less gold, or they would sell some of their gold and buy silver, and then when it drops, say, to 60 to one, they'd buy gold again. And it went down into the high teens in 1980 and so this thing, it could go higher. It could go back and challenge at 100. Part of this is because it's an industrial metal first and an investment metal second, and it's the investment level that brings out the real powerful push on the upside. And so I think, once the investors start coming back in, I wouldn't be surprised to see this staying as high as it is. When we get into September, October, I think that'll start to see a change and then, if it's profound enough, it'll be a change that lasts for quite a while and it'll work its way down. But 90 to one is not normal, as you said.

Mike Gleason: Getting back to the mining sector, you follow that very closely, and I wanted to get a little bit of an update from you there. Mining stocks have often been a leading indicator for metals' prices. Those stocks have bounced pretty hard off the lows put in back in May. The GDX index is up about 25% this year, with most of those gains coming in the last two months, for instance. What do you think? Is this another false start for shareholders or is the long drought finally over here?

David Smith: I don't think it's a false start, and I look at a number of the ones that I have and, gee, they're 30, 40% above where they were last spring or last winter, and some of them are 70 or 80, some of the exploration plays that had really good drill holes. And so, usually, you'll see the big mining stocks go up first and then the juniors second and then the explorers third, but what I'm seeing now is that the best big ones are going up sharply and then the juniors, the good juniors, are going up. In other words, it's a quality thing. Quality, I think, is really important. And the good thing for people picking up stocks these days, mining stocks, is that a lot of the dead wood has been just blown away or doesn't trade anymore or went out of business or literally went to pot, they're selling pot stocks.

And so there are less bad ones out there now, but there are still some that won't hunt. There are some that are inefficiently managed. There are some that are just burning through cash, and some of them are almost like a lifestyle company where they keep issuing shares and drilling holes and never finding anything or never selling anything. And so you really want the quality and, what I talk about when I go to these conferences, when we're talking about the mining shares, I just say, "Look. Try to find somebody that's done it before." Now, there are cases where somebody new comes on the scene and makes a big discovery, but, generally speaking, somebody that's done it once or twice or three times, like a Ross Beaty or a Lundin or a stock-picker like Rick Rule, someone like that, they're going to be able to do it again. And so when they start a new project and they find a new brownfield project or they buy a shell company or whatever, keep an eye on what they're doing.

Rob McEwen is one of my all-time favorites in this sector, I'll tell you that. He's a quality human being and he's an amazing professional, and I have several companies that I either have stocks in, exploration stocks, that I think are really special, or even some producers, and I look and I find that Rob's got stock in that company. He does not sit on his laurels. He's doing a great job with his own company, but he's out there taking positions in others, whether it's a new way of looking at mining, a digital-type company, or a new type of geophysics that's going on, he'll have shares in that. Or there's one stock I'm following in the Red Lake district in Canada, which has some of the richest veins in the world. They're finding some great drill holes and darned if he doesn't have about 15% of the shares, pretty neat.

But watch the guys that have done it, and the ladies, there are a few ladies, watch the people that have done it before and, the odds are, they'll do it again.

Mike Gleason: You are involved with the LODE project. It's an effort to combine the advantages of cryptocurrency with the stability and confidence of physical metal. The tokens are backed by actual silver sitting in a vault, and we encourage listeners to check that out at LODE.one. We are all working to promote honest money. Cryptocurrency certainly has some promise, but I wanted to get your thoughts on a phenomenon we don't really understand in the Bitcoin world. A group of fairly prominent people in the Bitcoin community recently began taking shots at gold. Instead of finding common ground with gold bugs, they sound more like John Maynard Keynes when he referred to gold as a barbarous relic. Bitcoin was launched as a form of honest money and intended to take away power from the central bankers and free-spending politicians and those are the same reasons to promote gold. We think these people would do better attacking their actual enemies and not their friends. What is your view here?

David Smith: Well, I agree. I don't see any reason to be antagonistic toward Bitcoin in particular or certain other crypto assets in general. Bitcoin, at its root, is really a transfer mechanism. It enables you to transfer value. And so, if you think about it, transfer of value can be yuan to dollars and it could be gold to dollars or it could be dollars to gold and you transfer the Bitcoin and you buy the gold. And I believe Money Metals even has the ability to make sales with people who have Bitcoin. Is that not correct?

Mike Gleason: Yeah, we accept all forms of crypto for payment and we'll even pay people in crypto when they want to sell metal too.

David Smith: Yeah. So, it's just another form and it's not money per se, but it's the utility that gives it value and people see it as historic value. And, for example, I saw a chart not too long ago about Bitcoin in Argentine pesos, and I think it was about the middle of June, the Bitcoin exceeded the number of pesos it took to buy from when it was priced at $20,000 a Bitcoin in the U.S., and so it was like it had been about 140,000 Argentine pesos that it took to buy a Bitcoin when it was at 20,000. Well, now, it's worth 190,000 or 200,000 Argentine pesos.

It's really saving people that don't have access to the metal or that need a transfer vehicle to get it. It's really saving some of their wealth and keeping them, literally, sometimes from starvation at death's door because they could all those massive amounts of pesos, into a Bitcoin or a fraction, it can go down to six or seven places or eight places, I think, and then when they are in a place where they can buy gold and silver, then they can take their Bitcoins, just like they would at Money Metals, and they can buy the metal with it. I think they're complementary to each other.

And I think one of the earliest comments that I thought that was really valid was the whole idea of cryptocurrencies and Bitcoin in particular has started a discussion about what is money? People always just thought it was what's in your pocket, it's a currency, even though they know it's being inflated away and the purchasing power keeps dropping. And people are asking, "What is money? Is what I have in my pocket that keeps being devalued, is it really money?" And so they're saying, "Hey, there are other things and there are historically other things that were money, such as and gold and silver." So, it's kind of a virtuous circle. It brings people back, they start comparing what Bitcoin is, how that compares to money, and then they end up talking about gold and silver. It brings people back into that arena where they continually find themselves, and have done so for thousands of years in any time of concern about inflation or about societal issues or political issues, metals are always a safe harbor.

And the LODE project, being backed by silver, each AGX coin is backed by one gram of silver and each LODE token, which creates a silver mass, is backed by the gram of silver and it's stored in eight vaults around the world. And when these coins start trading, we had a soft launch this spring in Anarchapulco, but when they start fully trading we'll have a Visa type of card for our debit that you can use. You'll be able to speculate on the value of silver in relationship to buying AGX coins, and there'll be store of value. I think what's going to be amazing, it's hard to predict exactly how long it will take and what that footprint will look like when it gets out there, but I think of people in South America, like in Venezuela and in Mexico and Chile and these places, and Africa and in India, I think they're going to really like this idea of not only having a crypto asset, but one that's backed by physical metal and that can be redeemable upon demand at some place somewhere in the world in a different vault.

It's pretty exciting, and it's exciting to me that David Morgan, who's had this vision for his whole professional life, of somehow getting silver as money back into the public usage. And it's not going to end up in our pocket, but it won't to. It'll end up digitally on a card that we have. And in India, 100,000 people a day are opening wallets, which they put cryptocurrencies in, and so they're not going to need a big discussion about what are the benefits. They already know what it is.

And so this whole idea, it's going to involve more physical metal being sold, because every time an AGX coin is created and purchased, the LODE program has to go in and buy silver in the open market to back that. And so you'll have a new demand factor, which we've never had before, on physical silver in addition to more and more investors coming back into the market buying physical silver and gold. So, I think these things are going to come together in a way that will be a perfect storm for demand and a perfect problem that's going to be hard to solve for supply over time with silver. And I don't think the market is understanding what this could be like, and it could be a massive outlier that really knocks the supply situation out of kilter in relationship to demand.

Mike Gleason: Yeah, very well put. There's a lot of things that can converge here and really cause a massive supply shortage with silver. The mining industry, for what it's been the last several years, there is not a tremendous amount of exploration happening, which means there's not a whole lot of extra ounces. We still have lots of industrial uses for silver. We may have some serious demand coming from things like LODE and maybe some other projects with backing of physical precious metals. And then, obviously, as the dollar continues to devalue and paper currencies around the world, more and more people are going to get interested in this precious metal story as a true store of value and, yeah, it could get very interesting.

Well, thanks so much for time today, David. We always enjoy getting your insights. And, before we sign off, you've got a couple of speaking engagements coming up that I was hoping you would fill people in on. Talk about that, if you would.

David Smith: Yeah. At the end of this month, July 30th through August 2nd, there'll be a four-day symposium, the Sprott Symposium in Vancouver, BC. I'll be there on media day, on the first day, interviewing people, and I'll be helping a little bit at the conference introducing a few people that are doing workshops as the conference progresses and attending a lot of these myself. There'll be a lot of big names there, and some of the people you've interviewed, like Steve Forbes will be there and Jim Rickards, you've interviewed Jim. These are all high-powered people and it's a tremendous conference. If anybody can get up to it, I think they're really benefit by it.

And then around the middle of August, it's actually the, let's see, the 15th through the 17th of August, I'll be in San Francisco and I'll be presenting on the 17th of August there at the San Francisco Money Show. Looking forward to those two events plus keeping up with you guys and watching the price of metals, so it should be a pretty interesting summer. It's definitely not going to be a quiet one.

Mike Gleason: Yeah. It's already been an exciting one for many people in the metals community and I think it's going to continue to be that. We'll be keeping a close eye and look forward to catching up with you again before long. Hope you have some safe travels there and a good rest of your summer. Take care, David.

David Smith: You bet. Take care, Mike. Bye-bye.

Mike Gleason: Well that will do it for this week, thanks again to David Smith, Senior Analyst at The Morgan Report and a regular columnist for MoneyMetals.com, and the co-author, along with the aforementioned David Morgan of the book Second Chance: How to Make and Keep Big Money During the Coming Gold and Silver Shock Wave, which is available at MoneyMetals.com and Amazon. Pick up a copy today.

Mike Gleason: And don't forget to tune in here next Friday for next Weekly Market Wrap Podcast, until then this has been Mike Gleason with Money Metals Exchange, thanks for listening and have a great weekend everybody.

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At Money Metals Exchange, we believe a significant part of our mission is to educate customers and the public at large about the many aspects of the precious metals market.

Our precious metals Specialists enjoy addressing your many excellent questions on an individual basis. But we know you also like to see what others are asking about.

Precious Metals Questions Answered

So we regularly share some of the most relevant questions and answers in a more public way...

Who is Harry Dent? He keeps running newsletter ads telling people to sell their gold and silver. He argues we are having a deflation and says gold will drop to $600 per ounce while silver falls to $5.50. I am freaking out!

Deflation vs Inflation

While we do not have a crystal ball, we believe that Harry Dent and other deflationists will continue to be wrong about gold prices as they have been most of the bull market over the last 10-15 years. Those who heeded the deflationists' advice over the past 15 years probably regret doing so, unless they happened to buy within a few months of the $1,900 gold high in 2011.

There is always a temptation to try to time the market...

But it's downright dangerous NOT to own some gold and instead place your full faith in paper assets, the politicians, and the central bankers.

Physical gold and silver are financial insurance, and folks should have some whether prices are going up or down at any given time.

While there are indeed deflationary forces at play, central planners at the Federal Reserve and other central banks around the world are committed to counteracting those forces with inflationary policies, and they have the unrestrained power to create unbacked fiat money to do so.

Inflationary forces have “won” throughout the Federal Reserve's 102-year history, a period in which the U.S. dollar has lost more than 97% of its purchasing power. And there is no reason to believe this trend will suddenly change.

As Former Federal Reserve Chairman Alan Greenspan admitted recently:

"The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default. We can guarantee cash benefits as far out and whatever size you like but we cannot guarantee their purchasing power. Because we can always print money but we cannot guarantee their purchasing power."

Here is a deeper examination of the deflationists' views and why we at MoneyMetals.com feel they will continue to be misguided in their predictions. On the subject of “freaking out,” here is a great article by our columnist Guy Christopher that may quell your fears. And please take a look at the advice Money Metals contributor David Smith shares about using a “secret investment tool” – your mind! – when investing.

If I want to buy a good amount of gold, and I do not have the money to buy it outright, can I pay for it a little at a time?

Yes! This is exactly why we have a monthly savings plan. It’s perfect for accumulating gold and silver over time.

You can put your individualized plan on autopilot and even set it to happen automatically via bank debit.

Money Metals’ gold/silver savings plan is one of very few in America, and over 3,000 people are currently enrolled to purchase every month. The monthly minimum is just $100 for silver and $200 for gold.

It’s popular for folks who are on smaller budgets or who wish to take the guesswork out of timing purchases.

Dollar-cost averaging is a proven, disciplined way of building wealth over time. Check out all the details here.

","image_selection":0,"primary_keywords":"Deflation","secondary_keywords":"Physical Gold","publish_date":"2015-07-16","podcast_url":"","quick_text":"...","author_id":4,"content_type_id":1,"created_at":"2015-07-16T13:06:41.000000Z","updated_at":"2023-09-25T19:03:48.000000Z","podcast_subject_line":"","meta_description":"It’s tempting to try to time the market, but it's dangerous NOT to own some gold & instead place your faith in paper assets, the politicians, and the central bankers.","podcast_duration":"","header_image":"","article_image":"https://www.moneymetals.com/uploads/content/gold-on-a-budget.jpg","redirect":"","canonical":"","sort":null,"featured_image":"","facebook_image":"https://www.moneymetals.com/uploads/content/questions-and-answers-facebook.png","twitter_image":"https://www.moneymetals.com/uploads/content/questions-and-answers-twitter.png","status":1,"show_guest_author":0,"guest_author_image":"","guest_author_name":"","guest_author_description":"","h2_header":null,"image_width":700,"image_height":368,"noindex_flag":0,"podcast_embed":"","added_schema":"","banner_image":null,"full_url":"news/2015/07/16/buy-gold-budget-000737","first_image":"https://www.moneymetals.com/uploads/content/gold-on-a-budget.jpg","truncated_description":"Money Metals Exchange answers important questions about buying gold on a budget and if investors sho...","pretty_publish_date":"July 16th, 2015"}},{"page_description":"David Smith’s credentials as a writer and analyst are impeccable. Prior to joining our Money Metals editorial team, he’d already spent 15 years investigating precious metals mines and exploration sites all over Argentina, Chile, Mexico, China, Canada, an","page_image_url":"https://www.moneymetals.com/uploads/content/david-smith-keeps-your-head-in-the-game-social.png","page_title":"Exclusive Insight from a Wise Precious Metals Investor","page_type":"news","score":6.0778079242674625,"url":"https://www.moneymetals.com/news/2014/11/13/david-smith-keeps-your-head-in-the-game-000629","data":{"id":629,"title":"Exclusive Insight from a Wise Precious Metals Investor","description":"David Smith’s credentials as a writer and analyst are impeccable. Prior to joining our Money Metals editorial team, he’d already spent 15 years investigating precious metals mines and exploration sites all over Argentina, Chile, Mexico, China, Canada, and the U.S. and frequently shares his findings and investment wisdom with readers, radio listeners, and audiences at North American investment conferences.","rss_title":"David Smith Keeps Your Head in the Game...","slug":"david-smith-keeps-your-head-in-the-game","h1_header":"David Smith Keeps Your Head in the Game...","content":"

If you haven’t caught David Smith’s monthly column for Money Metals Exchange, you’re missing out on some truly great – and free – commentary that every person who owns precious metals really must read.

David Smith shares his insight on precious metals

Money Metals columnist,
David Smith

But today I’m giving you another chance.

David Smith’s credentials as a writer and analyst are impeccable. Before joining our Money Metals editorial team, he’d already spent 15 years investigating precious metals mines and exploration sites all over Argentina, Chile, Mexico, China, Canada, and the U.S. and frequently shares his findings and investment wisdom with readers, radio listeners, and audiences at North American investment conferences.

I’ve been an admirer of David’s work for years and have benefited greatly from his knowledge and insights. The thing that has always struck me about David is his wise and calm approach to investing. He’s a philosopher and a teacher.

So please enjoy David’s most recent commentaries, penned specifically for Money Metals customers:

You can also catch David Smith on the occasional Money Metals podcast, including last week’s!

Yours Sincerely,

Stefan Gleason, President
Money Metals Exchange

P.S. I hope you enjoy the informative news and commentary from experts like David Smith that we bring to you each week as a free service!

Also, I want to alert you that David Smith serves as Senior Analyst for the Morgan Report. This exclusive newsletter is vital to anyone mining for profits in resource sector stocks. Below is a special subscription offer for Money Metals customers, including a FREE SILVER EAGLE! Please read on…

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