This morning’s price action shows exactly why I’m more bullish on precious metals in 2019 than I have been for years. News of more global economic slowing was the apparent cause of all major US stock indices falling—and gold rising.
Whatever happens next, this is important. Consider that it wasn’t just stocks falling. Also hit were oil, platinum, palladium, and other industrial metals.
Gold being the safe-haven asset it is, it’s no great surprise to see it bucking the overall metals trend. But what’s striking—and a departure from what we saw so often in recent years, until late 2018—is that the US dollar was up at the same time.
Gold
This clearly shows gold breaking away from the commodities pack. As mentioned, this started in late 2018, which is why I came out as much more bullish on precious metals for 2019. Right now, gold is trading like the form of cash that it really is, and not just like pork bellies or copper, as it so often has.
It’s important to see that this change in the market continues—as well as to be able to document it, as with the screenshots above.
Silver
Remember that silver prices usually lag when gold prices break out, and then go on to outperform. Remember also that most silver is produced as a byproduct of industrial metals mines, such as copper, lead, and zinc. If the global economic slowdown does turn into a global recession, that could reduce silver production at a time when precious metals prices are rising. I’m not predicting it for 2019, but it’s possible that this combination of trends could send silver into one of its famous manias this year. That would take silver prices much higher, much faster than gold’s.
Uranium
Finally, I want to point out that the “other yellow metal” is marching to the beat of a different drummer entirely. Prices are rising because enough uranium can’t be mined at current prices to keep the lights on in large parts of the world—including the US. Uranium can’t be substituted, not for years. It’s essential now. And major sources have been shutting mines down due to low prices. That can and will be reversed, but not quickly.
In short, uranium is not a precious metal, but I see its price as largely immune to the global economic slowdown.
And that’s not even counting any tailwind from the possibility of new US demand driven by the Department of Commerce’s Section 232 investigation into US dependency on foreign sources of uranium.
Metals vs. Stocks
I like buying gold and silver when I have extra cash to put away as savings. That’s simple prudence.
But when I think prices will rise, I speculate on related stocks. It’s not convenient to buy enough zinc to matter and store it in the basement—never mind uranium. More important is that the stocks typically give me leverage over the underlying metals. That multiplies my gains if I’m right. And right now, it’s gold, silver, and uranium stocks I’m looking to buy.
If you’d like to see which stocks I’m buying, you’re welcome to subscribe to The Independent Speculator.
Regardless, you now know the essentials of what and why I’m looking to buy in 2019.
Caveat emptor,
