(Money Metals Exchange) A violent and chaotic week in America’s cities was met with little apparent concern on Wall Street. For the most part, the stock market continued on its merry way higher.
Precious metals markets, meanwhile, are giving back some of their recent gains. Gold prices are off 2.9% this week to trade at $1,686 an ounce.
Turning to silver, the white metal rallied up to nearly $19 intraday on Monday before retreating. Prices currently come in at $17.42, down 3.3% now for the week.
It’s no surprise that silver encountered some resistance at $19. In fact, on May 26th we had pointed to that very level being the next important target for silver in our weekly News Alert that we send out via email every Monday morning.
$19 was also the high point for silver in late February before the steep selloff began. So, this week silver essentially made up for all the losses incurred during the entire virus lockdown panic, although it has pulled back since Monday.
It was a quite a huge run in such a short amount of time though. From a low of right around $12 on March 18th, silver surged 60% up through this Monday before faltering.
This is very bullish long-term, as silver is showing some real strength and sector leadership. But we would not be surprised if more consolidation occurs in the days ahead before the market makes run to $20 per ounce and ultimately higher.
As for the more widely followed U.S. stock market, its rally hasn’t been quite as breathtaking as silver’s but it has been impressive in its own right. Since bottoming off the panic selling spree that ended on March 23rd, the S&P 500 has put together a furious 43% advance.
The stock market also rallied over 40% off the 1929 crash and into 1930 before crashing a full 80% over the next two years. We bring up that history as perhaps something of an ominous sign of danger ahead.
One threat now looming is that of a second wave of COVID infections and lockdown impositions amid mass gatherings of race protesters and Antifa supporters.
Liberal governors and mayors in many parts of the country have actively encouraged these deadly protests to continue even though they clearly violate their own social distancing directives that are still being imposed on everyone else.
It’s naturally impossible to socially distance at these illegal gatherings of hundreds and often thousands of people in close proximity who are yelling, chanting, kneeling, punching, throwing, and looting.
And obviously in instances when some of the protestors instigate bloody altercations – as has been happening on a daily basis – infections can more easily spread.
It remains to be seen whether a meaningful spike in cases will result. The virus has proven to be unpredictable. And nobody really even knows if the lockdowns were effective in the first place at reducing overall infections and deaths.
The so-called public health experts have really been winging it with respect to their guidance.
Some of the same “stay at home” scolds and mainstream media outlets who shamed barbers, churchgoers, and lockdown protestors for trying to carry on a normal life have now revealed themselves as total hypocrites. They are cheering on the agents of mayhem as they take to the streets and put countless numbers of people at supposed risk of an infection.
Maybe this was all just political for them from the beginning.
As investors contemplate these continually disturbing developments, they might want to consider de-risking their portfolios. If the economy locks down again, a Great Depression scenario could be back on the table.
Of course, our monetary system works a lot differently in 2020 than it did 90 years ago. Today, the Federal Reserve can inject digital dollars into the financial system on an unlimited basis.
Not only can it do so, but Fed officials have essentially vowed to do so. They have bought up trillions of dollars in government bonds and corporate junk bonds while providing liquidity for mortgages and small business loans and who knows what else.
We very much doubt that our monetary central planners will allow banks and capital markets to collapse or for deflation to take hold for any significant period.
The real question – and one few investors are asking right now – is how high they will allow inflation to go. While Fed officials tout a 2% target, they have also explicitly stated they are willing to let it run higher than that over an extended period.
There’s no telling how high and for how long. The economy, the stock market, and the U.S. government itself – which is running a record high budget deficit of close to $4 trillion – are now totally dependent on ongoing currency expansion. The Fed simply may not be able to cut off the flow of liquidity to its dependents even when policymakers would otherwise want to tighten in order to tame consumer prices.
In this turbulent and still dangerous environment for investors, owning gold and silver remains an absolute must.