As we reported yesterday, it’s been a great year for silver. The in-demand commodity is up twenty-two percent for the year. That amazing performance even topped gold, which is up eighteen percent. The people who listened when we encouraged them to rebalance their portfolios, sell off some of those high flying stocks and use the cash to buy bargain priced precious metals are smiling today. The really great news is that the good times for precious metals are just getting started.
Due to a number of factors precious metals are likely to have a huge upside ahead of them. Keep in mind it took nearly five years for prices to get to bargain territory, so we potentially have years on the upside. There was also some shady trading going in precious metals by big banks, something we’ve suspected for years, but the details are only now starting to emerge.
Usual Suspect #1: Big Banks
Big banks rip us off in just about every other financial aspect of our lives so it was folly to think that the cartel of banks running the daily price market for gold and silver, ironically named “the fix,” would play that straight. Deutsche Bank, one of the of the banks in that cartel, just this month admitted that it rigged prices and agreed to a settlement that included blowing the whistle on other banks involved in the process. As part of the deal Deutsche agreed to turn over instant messages and other electronic communications related to the price fixing game. What we’re likely to discover is what we’ve suspected all along: banks are rigging the price of precious metals to their own advantage. It’s certainly no coincidence that right after the investigation of the gold and silver fix started banks and investment houses suddenly divested themselves from commodities trading in general.
Usual Suspect #2: The Dollar
Just about the time banks started bailing out of commodities and selling off inventory, the dollar went on a tear against other currencies. In those days we had a rising dollar putting downward pressure on precious metals at the very time big players were liquidating physical inventory. That’s a formula for any commodity to become oversold. Then Saudi Arabia’s price machinations pushed the oil market even lower. Lower oil and commodity prices rippled across the Chinese economy, tipping them into a market crash, and we’ve all been dealing with the aftermath ever since.
The dollar is relevant for another reason: a strong dollar hurts U.S. competitiveness overseas, and that puts pressure on the Federal Reserve to hold off on interest rate hikes. After one meager boost the Fed lost its nerve for further tightening, creating a huge upside vacuum for precious metals prices. It’s even likely that another quarter-point bump has already been priced into the market and investors aren’t worried if we see additional tightening in 2016. The Fed simply can’t raise interest rates too high or too fast without crippling the competitiveness of U.S. businesses.
Lots of Running Room
With precious metals finally operating in something resembling an honest market, and the Fed cooling on its interest rate hike projections we can get back to investors using precious metals as a hedge against both central bank currency missteps and global market instability. Gold, silver, platinum and palladium are all back on investors’ radar and some pundits see gold prices as high as $1,400 an ounce in 2016.
There’s still plenty of time to get in on the ground floor of recovering precious metals prices. Investment-grade Gold and Silver Eagles from the U.S. Mint are still available at bargain prices. If you still think you can’t afford it, remember you can put gold and silver in your portfolio easily, using money you already have, through a gold IRA rollover. Those of you who listened months ago, good for you! Those listening today, you still have time but the window is going to close fast.