By Remy Blaire
GOLD-TO-SILVER RATIO: OPTIMISTIC BULLION OUTLOOK
Gold prices hit 3-week highs in the aftermath of the March Federal Reserve meeting. Yet as the U.S. dollar climbed a day after the Fed announcement – gold pared gains but managed to settle at a one-week high.
Andy Schectman, president of Miles Franklin, remarked on the fairly predictable price action in gold and silver leading up to a Federal Reserve meeting. He views it as an opportunity for investors to accumulate the “undervalued assets.”
Schectman says the central bank prefers “the appearance of a strong economy — but not too strong because an overly bullish forecast brings the Fed’s flip-flopping on rate hikes into question.”
Overall, the Federal Reserve’s accommodative stance and dovish position on the interest rate outlook provide positive momentum for the yellow metal. Only time will tell whether gold will challenge last year’s highs.
Rick Rule, president and CEO of Sprott U.S. Holdings Inc. spoke with Schectman about the precious metals landscape. Notably, the gold-to-silver ratio was explored in the brief but valuable discussion about the conditions in the bullion market. Schectman noted that the gold-to-silver ratio stands at approximately 84:1, an “inequity … screams to me of opportunity – akin to 4 feet of snow in the Florida Keys.”
The ratio is representative of the ounces of silver necessary to acquire an ounce of gold. While there is profit potential there are risks involved for investors. Schectman is excited about the outlook for precious metals and is particularly bullish on the ratio. He views it as an opportunity — especially considering that the average gold-silver ratio has been 50:1.
FEEDING THE BULL: NO DOTS, NO HIKES AHEAD
The latest Federal Reserve meeting concluded with the Fed Funds rate holding at steady and a forecast of no more rate hikes in 2019. The median forecast points to one more hike in 2020. The central bank announced the end to is balance sheet runoff by September 2018 and also cut its growth forecasts.
The broader market advance in the aftermath of the March Fed meeting speaks for itself. The central bank may be attempting to communicate that the U.S. economy is in good standing but its dovish shift has many scratching their heads and wondering: If “patience” isn’t enough, is staying on hold adequate for the rest of 2019?
DOVES — NO HOMING INSTINCT?
It doesn’t take an ornithologist to tell the market that the Fed’s policy statement was a dovish one. It would take a rogue birdwatcher with defective binoculars to mistake Wednesday’s commentary as hawkish. This is quite a turnaround from the stance by the central bank at the end of 2018.
The Federal Reserve is not alone in its position as more central banks go the way of the dove amid slowing global growth. As concerns about price pressures linger, there are unresolved geopolitical issues that could affect many an investment portfolio: U.S.-China trade and tariff implications, Brexit risks.
Fed Chair Powell mentioned that low inflation is “one of the major challenges of our time” and that the central bank may need to get “more creative” in its commitment to the inflation target at 2%. Powell and Fed officials are keen to avoid a deflationary minefield akin to Japan.
MILES FRANKLIN — WE DO IT OUR WAY
While a dovish Fed is not synonymous with a bull market for the precious metal, Schectman is optimistic about the trajectory for gold prices — especially in light of the rising U.S. dollar. He also believes that silver is an “investment opportunity of a generation.”
Miles Franklin is known for its unique storage program that allows clients to purchase precious metals and store their physical holdings in the Miles Franklin Vaults at Brink’s locations in Canada. The program is in directly held segregated storage at Brink’s facilities in Montreal, Toronto and Vancouver. Miles Franklin welcomes the storage of their own metals purchased from other sources and insures the contents of the safe deposit boxes.
Ahead of the 2019 Sprott Natural Resource Symposium, Rick Rule, president and CEO of Sprott US Holdings Inc. spoke with Andy Schectman, president of Miles Franklin to discuss the outlook for precious metals and his excitement for Tradewind Markets, Inc.’s blockchain application VaultChain™ Gold: