Three Current Themes Precious Metals Investors Need to Consider

Is Now the Time to Buy Precious Metals?

By Hard Assets Alliance Team

By Ed D’Agostino, General Manager, Hard Assets Alliance

I recently attended John Mauldin’s Strategic Investor Conference, where I heard some of the world’s brightest minds in finance and economics. From Paul McCully to Mohamed El-Erian, David Rosenberg to Noriel Roubini, the best of the best were on stage pontificating on the future.

And now I know exactly what the next five years will bring. Without a doubt, the next five years are sure to bring inflation. Perhaps double-digit inflation.

Unless, of course, we have a sustained period of deflation.

At the risk of being too cute, I’ll just say that there was no consensus among the economists, investors, and attendees. And how could there be, really? I heard well-reasoned and convincing arguments for both sides of just about every major question facing investors today. The arguments for inflation and deflation were equally compelling.

One statement I did not hear was, “Everything is going to be fine.”

There were, however, three common themes that should be of interest to precious metals investors.

1. The Expansion of Quantitative Easing in the Developed World

Japan is taking QE to new levels. They make the US Fed’s quantitative easing look almost laissez faire by comparison. Japan’s commitment to generating 2% inflation will come through an almost doubling of its monetary supply. The goal? To make Japanese companies more competitive in global markets through the devaluation of the Japanese yen, thereby stimulating growth and breaking their decades-long bout of deflation.

But Japan does not operate in a vacuum. Its actions will force other nations – think South Korea – to respond in kind. Samsung and Kia have made great strides over the past 10 years in the global marketplace. South Korea will not let Sony and Toyota compete on price without a fight. Which leads me directly into the second common theme discussed.

2. Currency Wars

The EU, the UK, and US are all continuing their easy-money policies. Mohamed El-Erian described the unfolding stress among the G20 nations as “currency tension.” Less polite investors would call this the beginning of a currency war, and on a scale never seen before. I don’t see this ending well.

It’s another compelling reason to own precious metals.  

3. Precious Metals On Sale

The third common theme was the agreement that precious metals have been put on sale. Not surprisingly, there was no true consensus to explain the price volatility we’ve seen in the metals market over the past several weeks. So what did cause the dramatic price drop? A better question might be, “Will we ever know what caused the dramatic price drop?”; and I’m reasonably confident the answer to my last question is No. I like this analysis of JP Morgan’s explanation from the folks at Zero Hedge.


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