Vince Lanci and Eric Yeung recently joined Tom Luongo to discuss the gold and silver markets, focusing strongly on China. It’s well worth a listen. Here’s a summary of the key points:
Gold Market
Chinese investors are just beginning to consider gold as an investment asset class.
Most Chinese savings are still allocated to real estate and high-yield financial products.
Chinese people buy gold as a long-term investment, not for short-term gains.
Gold buying in China is expected to increase as gold prices surpass $3,000 per ounce. Current gold prices are considered unappealing.
Silver Market
Most silver bought in China is for industrial use, not investment.
Retail investors in China have yet to buy silver with any serious intent.
Once silver surpasses $50 per ounce and sustains above that level, Chinese investors are expected to buy aggressively.
Silver is considered cheap by Chinese investors compared with historical prices.
Silver suffers from being both an industrial and precious metal, leaving it stranded between recommendations to buy gold for investment and copper for exposure to booming economies.
Monetary Policy and Market Trends
Federal Reserve Chair Powell's dovish stance is expected to lead to a policy adjustment of lower interest rates, which would be bullish for metals.
The market anticipates a 25-basis-point cut next month and a 30% chance of a 50-basis-point cut.
Silver industrial demand is cannibalizing investment coin supplies in the US, which will lead to a prolonged production shortfall.
Silver needs a new all-time high to trigger increased investment interest, especially in China.