Saturday, October 5, 2019

Fears of a Global Recession Grow, Gold and Silver Rally

With each passing day, the chances of the United States and in all likelihood, the entirety of the global economy entering into a deep recession grows.

The trade wars continue on and as I have written about numerous times in the recent past, I can't see a solution on the horizon, this is bad news in the short term for not only China, who relies heavily on the United States, but also the US economy as well.

Neither party is willing to budge and Central Bankers around the globe are beginning to come to the stark realization that things are going to get a whole lot worse, before they get better.

This is exactly why the FED is cutting rates, this is why the European Central Bank plans on once again entering into a massive stimulus program, as they know that a reckoning is coming.

Confirming this new reality, the World Trade Organization once again cut its forecast for global trade growth on Tuesday.

The Washington Post reports;

"On Tuesday, the WTO said world merchandise trade volume is expected to rise 1.2 percent in 2019 — markedly slower than the 2.6 percent forecast in April. For 2020, the forecast estimates 2.7 percent growth instead of 3 percent.

The revised projections come less than two weeks after President Trump called China a “threat to the world” and said there was little urgency for an interim trade agreement. On Sept. 20, he told reporters he was under no pressure to reach a deal with China before the 2020 election, despite his early insistence that China was eager to return to the negotiation table."

Further confirming this news, it is reported that both US and Chinese manufacturers have entered into recession territory, as the ISM’s U.S. manufacturing Purchasing Managers Index fell to 47.8% last month.

According to CNBC, this is the worst level in a decade, with the index not seeing these numbers since June 2009, when the United States was going through its "great recession" after the 2008 collapse.

Unfortunately, as many of you know, when the United States sneezes, the world gets a cold and already, it appears that the contagion is spreading, with countries such as Singapore reporting that its economy is also "tipping" into recession.

All this negativity and talks of recession, caused gold and silver to plummet lower in price early this week.

(Charts via Goldprice)

Fortunately, it appears that market participants regained some semblance of sanity as the week dragged on, with both gold and silver recovering much of their earlier week losses.

As it stands now, gold bullion has moved once again above $1500 USD per ounce, while silver bullion stands at $17.70 USD per ounce.

These are important levels to maintain and any protracted time spent below these levels could mean much lower prices, however, given the fundamentals it seems unlikely that this will be the case.

Central bankers around the world are now fully aware that we are about to enter into a dragged out global recession as the trade wars continue to go on, with no end in sight.

This means that interest rates around the world are going to be slashed by Central Bankers, stimulus programs are going to once again be all the rage and the money printing is going to be happening at a feverish pace.

In addition to this, the Democratic party in the United States seems hell bent on moving forward with impeachment proceedings against President Trump, a plan that appears to be pivotal in their 2020 election campaign strategy and nothing further, as it is incredibly unlikely that he will be impeached and removed from office.

Even if the House does vote to impeach, the Senate, which is controlled by Republicans are not going to vote to remove him from office, as 2/3rd's must do so.

Unfortunately for the Democrats, I along with many others believe that this is going to backfire on them, as it is only going to embolden Republicans and result in a staggering high turnout for the President come 2020.

Regardless, uncertainty abounds and precious metals are going to take notice as this political theater continues to unfold.

People should not be selling gold and silver bullion as we saw earlier in this week, but in fact be buying it hand over fist in the coming climate.

Expect much higher prices as global risk grows and as QE to infinity goes worldwide.

Keep stacking. Focus on the long term. Ignore the short term noise.

- As first seen on the Sprott Money Blog