Value, Gold, ETF investing, Commodities
Contributor Since 2015
Investors on Wall Street were definitely not thrilled last week when the DOW ended down almost 1,000 points. Oil investors must be feeling the same pain as yesterday oil futures closed at $31.25 a barrel, marking a new 12 year low. Copper was also no exception, falling to multi year lows. It is unlikely that any rebound in commodities is imminent as new lows continue to occur. Believe it or not, gold and silver have fared pretty well in the recent global selloff. Gold ran up to over $1,100 last week as investors fled paper assets in search of safe haven assets. We must now ask ourselves if this is a change in sentiment for the precious metals or rather a knee-jerk reaction to the bearishness of the global stock market. Time will only tell, but recent economic data has not been good in the United States, nor in China, where the majority of consumer goods are made. Last month, China's manufacturing sector shrank again, indicating that consumer demand from industrialized nations such as the United States and much of Europe is weak. Additionally, the Chinese stock market has reacted negatively to the new data that has been released. Chinese investors have continuously pummeled the market, pushing major indices down over seven percent during multiple trading sessions. This is causing market circuit breakers to trigger and investors to grow uneasy. With the Chinese stock market's sub-par performance, the Chinese government has flocked to purchasing physical gold with an increase of 6% last November. Additionally, yesterday's trading session did not bring much reprieve to markets, with the Dow up a minimal 50 points, and the Nasdaq finishing negative on the day. It will be interesting to see whether investors continue to push the markets lower or if the market starts to bottom out. If the markets continue to slide, the precious metals should see some upward pressure on their prices. Moreover, demand for silver is expected to be high in the month of January as investors and collectors await the release of the 2016 Silver Eagle at the end of the month. With demand for these silver bullion coins rising every year and silver at multi year lows, 2016 should see sales for the Silver Eagle surpass those of 2015. Furthermore, the fundamentals for the precious metals are strong. Miners are pulling silver out of the ground at approximately $19 an ounce and gold at around $1,300. With actual prices well below the cost of production, the precious metals must eventually see some upward price action. Many prudent investors are taking the opportunity of these low prices and strong fundamentals to stockpile the precious metals.
*These are solely the opinions of Bullion Shark, LLC and are not intended to be used as investment advice. Please consult an investment professional before investing.*
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.