It’s been a wild week in the financial markets and not a good week for that matter. Whether you’re a gold bull, silver bull, rooting for the stock market or crypto currencies… No matter what… You got hammered. Ordinarily, you would expect in this environment for gold and silver to be going in the other direction. But the banks have been trapped in these short positions for so long that counterintuitively, they’re pushing the prices of gold and silver lower. Whether it makes sense or not, this is the environment we’re in… Where up is down and down is up. Stephen, what are your thoughts?
DR. STEPHEN LEEB
Eric, I think your summary was perfect. This is an economic environment unlike anything we have ever witnessed and I’ve been in this industry for over 45 years.
All the basic grains come from incredibly rich Ukrainian and Russian soil. The world is on the verge of a food crisis. Food prices have just continued to rise. And the Europeans (our allies) are paying the hideous price.
If you want stone cold evidence, take a look at the behavior of the Russian ruble. Since the United States initiated the sanctions, the ruble is up substantially since its initial low. When we instituted the sanctions back in late February of 2022, the ruble dropped like a stone. From that low, it has more than tripled relative to the dollar. As of today’s date, it’s now closing in on a five year high versus the euro and the dollar.
One of the consequences of the sanctions is that anyone who wants Russian exports such as food or oil has to pay in rubles.
Previously, the situation was set up so that oil was going to be routed directly to Europe- to Germany from Russia. Now it has to go through Ukraine.
Bloomberg featured a story the other night that the Ukrainians have not only cut back on the natural gas supply but now control the supply of energy to Europe.
Now the script changes… Instead of allowing everything to run very smoothly for Europe, Russia has stopped the supply chain. Obviously the Europeans were already paying inflated prices for their natural gas, oil and food. All that’s turned around. And it’s turned around in a way that benefits Russia. Prior they were paying in dollars for their oil and gas, now they have to pay in rubles because of the sanctions.
“If we wanted to hurt our allies we could not have picked a better way of doing it than with all of these sanctions applied to Russia.”
Europe produces a lot of food on its own, but still not enough to be independent. However Japan is getting a double blow. They’re not anywhere near self-sufficient in energy, food, and they have to ignore our sanctions. Same with India, they are basically ignoring our sanctions also because they need Russian oil.
Again, this whole quad that we supposedly created to counteract China in the Pacific consisted of India, Japan, South Korea and Australia. I don’t think we can count on virtually any of these countries anymore, maybe Australia to some extent, but even that may be going by the wayside. There’s a lot of people in parts of Australia, particularly in Western Australia, which enjoy doing business with China. They made a lot of money. China made a lot of money.
No Apologies For China
Incidentally, China is a ruthless country. There is no doubt. I’m not defending China in any way, shape or form. They’re ruthless to the extent that they would do the following…
They would deliberately seek a reason to shut down Shanghai and Beijing just for the sake of slowing down their economy so they are in an ideal position to speed it up very rapidly when things start to collapse in the West. And I think we’ve gotten very close to that point. Things are starting to collapse in the West.
China was starting to let their economy reopen. The other night I was watching futures trading (including commodity futures) and everything fell because Shanghai reported two new COVID cases.
What? Is anyone paying attention here? Two new Covid cases in a country of 1.4 billion? And markets collapse on that basis!
Obviously, China has this incredible control and they’re exercising it because they don’t mind causing their own people to suffer if they think they’re suffering in the name of something that’s going to happen… Be it for good or not. Consequently, they’re shutting down Shanghai and Beijing. Ironically, they’re not shutting down their high technology centers, which also had outbreaks of COVID (which somehow they say they can manage without shutting down the cities). Meanwhile, ships pile up outside of Shanghai harbor and you can’t see the end of that line.
Again, I want to remind everyone that I am not an apologist for China. I’m just speaking the truth. And the reason I have to know the truth is due to the fact that I take my responsibilities as an investment adviser very seriously. You can’t be an investment adviser if you’re going to ignore commodities, ignore gold, ignore assets that have performed so well. I’m a good researcher… I’m not a brilliant guy. I just work day and night trying to find out what the truth is.
The things we refer to as sacred values in America: liberty, freedom, and democracy have become nothing more than slogans that allow us to do anything we want.
Basically, the Russian sanctions have backfired, which has hurt the economies of America’s strongest allies. And vicariously, we’re helping both China and Russia in the process. It seems that the United States has done a lot of things to shoot itself in the foot over the past 40 years.
After all, Elon Musk of Tesla got rich because he opened one of his first factories in Shanghai instead of the United States. People don’t realize that! Our reaction to Elon Musk right now is to vilify him. Although… He’s the essence of the American dream. He had an absolutely horrible life in South Africa and emigrated to the U.S. and basically started from scratch. And now he’s one of the world’s richest men and using some of his capital to buy Twitter. Why? Because he thinks what is happening in this country is terrible. Elon has been excluded from meetings about electric vehicles, even though he’s the only game in town.
China doesn’t exclude Elon Musk but the United States does. Now, explain that rationale!
Suppression In The Gold Market
The next thing to fall for the West is gold. As hard as the United States has been trying to suppress the price of gold, its spot price has come down. It has come down to the point where the Fed would like to see it fall below $1,000. The United States doesn’t want gold to be a threat to the dollar.
Frankly, that’s impossible at this point. In the United States, you already have consumer confidence at a ten decade low. And you have the Fed raising rates, which is to slow things down. Right now, there couldn’t be a better recipe for economic disaster.
The only crowning touch will be commodity prices starting to rise again, which will happen courtesy of China, reopening their economy. They shut it down- and they shut it down in a way that it’s easy to reopen.
In 2009, a tremendous amount of debt was required to create an unsustainable boom. But this time around, the United States will create a lot of infrastructure spending and a lot of demand for commodities. Personally, I think it will crush the dollar.
Gold… It’s the fat man in the coal mine… The last one to die!
And gold is playing that role right now, except it will not die. It’s going to break out of the coal mine because the Chinese love gold. They’ve been accumulating the hell out of it and it will take off!
Given the current economic climate, which is so different from anything I ever expected to see, the powers that be will no longer be able to suppress the price of gold.
My role right now is to try and help people realize that you’re not living in America anymore, at least not the ‘America’ this country used to be. The United States of America may come back in a new world, a sustainable world, which I still haven’t stopped believing in. However we’re not going to get to that sustainable world unless we’re willing to cooperate. And that includes cooperation between all the developed and undeveloped countries in the world.
It's like the Hundredth Monkey Syndrome. If 100 out of 1,000 monkeys start doing something different and believing a contrary narrative, it can have an impact.
We are going to be forced to cooperate. And you know what? That could be the best thing that ever happened to this country. It’ll give us a chance to come back to those original sacred values that our Founding Fathers wrote into the Declaration of Independence.
The Case For Silver
Right now, as we stand, investing in silver is secure. Its spot price is as low as it’s going to go and it will bounce back because it’s a vital industrial metal. It’s one of the best thermal and electrical conductors on the planet. It’s needed vitally for solar and photovoltaics. You will never be able to circumvent silver usage on an industrial level.
Silver is a surefire bet. It tends to move in tandem with gold and I expect that the suppression of its price will be affected equally so. However, they won’t be able to suppress the price of silver, especially once China reopens. Demand for silver will really start soaring.
They will continue to try and suppress the price of gold because it doesn’t have industrial uses. But that’s exactly why it’s so useful, because it’s finite. It’s the one thing that’s cherished despite the fact that it doesn’t have industrial use, plus it’s valued for its beauty.
Regardless, gold will rally and when it does (if you own it) you will be in for the ride of your life. Windfall gains unlike anything we have ever seen. I wish I could give you a timeframe of how long the price of gold will continue to be suppressed. But given what’s happening now, given what we’ve done to our allies, it’s hard to say exactly when this gargantuan move is going to happen.
When silver and gold really start to move- that could take another month, two months, three months. It could go lower in the meantime. But when it goes, it’s going to be something to the likes of which no one has ever seen.
For investors bullish on gold and silver, I’m sorry you’ve had to wait this long. But folks, we are at the top of the ninth in this game. And gold is about to hit a walkoff home run…
It’s just a question of when. So stay with it. Please don’t be panicked out by what you see going on in the precious metals or financial markets in general.
Own silver, own gold. Just keep it. And if it goes down further, jump on the opportunity to buy more!