Continuing with my 2019 forecast, this piece is all about metals.
Last year I was totally humiliated by markets on my precious metals call. This year I don’t plan on that happening. What I suspect out of gold will be support at the $1200 level, and we are now in the middle of establishing a new support level of $1280-$1290. For silver the support is around $14.20, and we are now reestablishing support at current levels of $15.50. Platinum and Palladium I am not addressing today because they are much more of an industrial metal than a precious metal, and we can see that with the tremendous upheaval in South Africa recently, the price of both has spiked. However that can change very rapidly, and because of this very volatile political situation coming from the largest producer in the world, it’s just not something I want to get into right now.
As for gold and silver though, as the Fed balks at continued rate hikes and reverses hiking and also reverses asset sales (lower rates and asset purchases), the price of both metals should move up quite significantly. We’ll find further support for gold around $1400 and silver around $16.50. If the monetary situation in America devolves further, and as more bad news comes out in other places in the world, both metals may possibly break through these higher levels, and if they do we could see significant outperformance.
To make a go of these metals I would NOT be in an EFT like GLD or IAU, or similar ETFs for silver. Look at pages 5-8 in their prospectus to see why. I would also stay away from most of the mutual funds or the precious metals index funds. I would rather be in bullion bars and coins, for which there are reputable dealers who don’t have expensive radio ads with celebrity conservative talk show hosts. And you can also get interest on your ounces paid in more ounces. There are also couple a excellent funds out there that make a habit of really doing the proper leg work with each and every company, as they say, “kicking the rocks”. And you also want to consider not just the majors, but also something called a streaming company, which lends cash to the miners to build mines in exchange for a portion of the profits on the ounces that come out of the ground at a later date. And by the way, hit me with a DM to find out how to get interest on your ounces paid in more ounces (not paid advertising).
Besides gold and silver, the other metal I like for this year is copper. The price has been a little low for a little long and we’ve seen some consolidation in the industry. Watch out though because copper is a pretty good barometer for the economy, and if the price breaks down to $250 per pound on the comex, the price of copper is either indicating trouble in the economy, trouble in copper itself, or both.
What I like about copper though, aside from the low price, is the best play on alternative energy is not to buy an alternator at the auto parts store and build yourself a rooftop turbine. The best play is copper, because more than silver or lithium, copper is needed for all things electric. Which includes electric vehicles and solar panels. We’re seeing more of these come into use, especially in Asia, and we’re seeing Asian countries ramp up tremendous amounts of power in their grids using solar as well. And again, copper is the main event when it comes to electricity generation, transmission, and use.
One last note, which I’m borrowing from Marin Katusa. For those of you who don’t know him, he is one of the most successful resource investors ever, and has probably put more people into a Ferrari than many other legends of Wall Street, combined. Marin has been saying two things lately. One is that he likes certain American steel companies. The second is that whatever positions you take directly with any resource company, first and foremost is make sure the people behind the company are the household names of the sector. People like Lucas Lundin, Keith Neumeyer, or Bob Quartermain. Once you have that, the next most important factor for any resource company at this time will be how much debt they owe. Look for companies that have very little or no debt at all. They’re the ones that will soar in the next resource boom.
Until next time remember that there is always a bull market somewhere in the world, and on the opposite side of every crisis, lies opportunity.
