Gold and Silver Skyrocketing: What Give’s? Hey everyone and welcome to another weekly recap post for July 24, 2020. The markets made some pretty impressive moves this week. Let’s talk about it.
But first, my disclaimer: this post contains affiliate links where the blog may receive a small commission on any sales from EQ Bank, Questrade and Tangerine.
Gold and Silver Skyrocketing
Gold prices are at $1900 again and Silver is trading at highs not seen since 2013.
Precious metals have been skyrocketing on safe haven demand, tightening supply due to mine closures and, of course, all the money printing by central banks around the world.
The safe haven US dollar is losing ground to gold as Congress passes another trillion + stimulus bill.
Virus Cases Rise, So Do Bankruptcies
The US has over 4 million cases now and it’s likely that the part of the country will have to shutdown once again to contain the virus.
Meanwhile, investors watch the number of bankruptcies soar. Retailers are getting killed as are airlines and any travel related business.
The next shoe to drop will be commercial real estate and, once the stimulus checks run out, residential real estate.
US-China Relations at 67 Year Historic Low
Well at least they’re not killing each other…yet. The Korean War ended in 1953 which was the all-time low in US / China relations. As I’ve said repeatedly on this blog, I think we are seeing the slow march to war between the US and China.
First we had the trade war, then the virus, then in April, the US moved its bomber force from Guam (within striking range of Chinese missiles) to the mainland US. Then the Hong Kong issue, the Huawei ban, the sanctioning of Chinese nationals etc., the ongoing plight of the Uighurs.
In the latest move, the US ordered the Chinese consulate in Houston, Texas to close after consular staff were seen burning documents in the yard. China retaliated by ordering the closure of a US consulate in Chengdu.
I’m sure this stuff happens all the time so no need to be alarmed, but it reminds me of other times when documents were being burned by adversaries of the US.
In October, 1962 the Russians were burning documents at the height of the Cuban Missile Crisis when nuclear war between the superpowers seemed imminent.
In December, 1941 the Japanese were burning documents at their US Embassy in Washington D.C., hours before the devastating surprise attack on the US Pacific Fleet at Pearl Harbor.
All of this stuff is cause for concern, but I think the further down the tit for tat road the US and China travel, the harder it will be to de-escalate, to save face and return to normal. I think the damage is done and the next few decades will see this great power rivalry play out.
The Stock Market is Waking Up
Against the above macro backdrop, stock investors are finally coming to terms with the fact that the economy will never see a V-shaped recovers, no amount of money printing will bring back the businesses that went bankrupt and that unemployment will stay in the double digits for years to come.
I fear that politicians are so focused on the day to day, that they aren’t planning for or are missing the bigger picture completely. Western countries should be planning to rebuild ageing infrastructure to put people to work, not sending people checks to stay home.
I don’t think any of this will end well as countries around the world have trillions of dollars of debt on their books and a declining tax base.
Personal Finance For Uncertain Times
So what’s the solution to this? I think people need to be diversified. Reduce the amount of debt that we have. Rein in our spending. Build some cash reserves in a savings account like the EQ Bank Savings Plus Account.
Diversify our investments. First among asset classes: stocks, bonds, real estate, cash and gold. Then further diversify geographically: Own US, Canadian and International Stocks. Be careful with bonds and bond funds. Own home country and foreign REITs. Buy global businesses like big tech (Microsoft) and consumer staples (Unilever, Nestle).
Finally, I think everyone at this point should consider a little exposure to gold and silver. I’m not an alarmist but the future right now is just too uncertain. So I’m trying to play it safe.
Save, Invest, Build Wealth and Prosper
In case you’re wondering here’s where I park my money and some financial services that I use:
For my Daily banking I use Tangerine.
For my Savings I use the EQ Bank Savings Plus Account. Never heard of it? Click the link to check out my EQ Bank Savings Plus Account Review.
For investing I use a combination of TD Waterhouse (for legacy investments) and Questrade (low cost stock purchases and free ETF purchases). If you haven’t done so already, check out my Questrade Review to see why it’s the best deal around. Get $50 in Free Trades when you signup for Questrade through this link.