For Brien Lundin, the coronavirus’ impacts will likely be felt more on a mental level than a long term effect on the market despite an interest rate cut.
According to Brien Lundin, the COVID-19 coronavirus’ impacts will likely be felt more on a mental level than have a long term effect on the market despite a central bank interest rate cut.
In an interview with the Investing News Network (INN) at the Prospectors and Developers Association of Canada (PDAC) convention, the editor of the Gold Newsletter noted that he thinks cases of the novel respiratory virus will likely grow in North America, but the ultimate effect will probably be muted.
“I don’t think (COVID-19) will have a significant effect, but perception is reality,” he said. “I don’t think it’s going to be a bottom line effect, but I think the psychological effect will be quite significant.”
In regards to the recent dramatic slip the precious metals sector experienced on Friday (February 28), the host of the New Orleans Investment Conference explained that silver faced headwinds on two fronts, one as a safe haven asset amid a liquidity crunch and one as an important raw material in a global economy that is is full of volatility.
“Silver actually got hit more on the downside, because it also has this perceived industrial demand, so people sold it because they thought there was an economic slowdown coming on,” said Lundin. “So they sold silver more energetically, more enthusiastically. And in reality silver is much more valued as a monetary metal and its industrial demand has very little effect on its real value.”
Speaking about the interest rate cut, which at the time was still speculation, Lundin was certain the Fed would slash rates for a fourth time in less than year (which they since have). He was adamant that it wouldn’t have the desired effect on the market, but thought it could ease some of the fears investors are feeling.
“I think people need to look at it from two standpoints: what will be the economic effect and what will be the effect on the markets,” he said. “The economic effect will be zero, nada, nothing, the rates are already too low. There’s no impediment to borrowing money and money flows right now.
“But it will have a psychological effect on the markets. And that’s important. That’s what the markets are looking for.”
Watch the interview above to hear more from Lundin about how low interest rates can go and why the silver-gold ratio is so high at the moment.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.