David Morgan of the Morgan Report expects the summer months to be slow for precious metals. But after that we should “see a shift coming back in the resources generally.”
What can investors expect from gold and silver this summer? David Morgan, publisher of the Morgan Report, believes the next few months will be “very dull” — but he expects to see a pickup in Q3.
“The third quarter is usually good for the metals, and I think we are going to see that again this year from September, October, on to the end of the year,” he told the Investing News Network (INN) at the International Mining Investment Conference (IMIC).
“I think we’re going to see a shift coming back in the resources generally, and I think we’re going to see enough problems in the debt markets, and probably the equity markets start to stumble again,” he continued. “And who knows where the dollar will be; I’m not sure, but probably lower. So I think we’ll see a lot of impetus to go back into gold at least as a hedge position.”
Morgan participated in a panel at the conference that pitted gold, cryptocurrencies and cannabis against each other, and said he sees cryptocurrencies and cannabis outperforming gold this year and perhaps beyond. He explained, “I’ve always advocated a hedge position, about 20 percent. So that gives you 80 percent to put in other investment classes.”
Watch the video above for more insight from Morgan on precious metals. You can also read the transcript below.
INN: We’re here today at IMIC in Vancouver. This morning you participated in a panel — it was gold vs. cryptocurrencies vs. cannabis. I was interested to see that you were on this panel because I know you like gold and you have an interest in blockchain technology. Where in this debate did you end up coming down?
DM: I think both the crypto space and the cannabis space will outperform gold this year, probably maybe for some time. I also made the point that I’ve always advocated a hedge position, about 20 percent. So that gives you 80 percent to put in other investment classes, like real estate or cryptos or mutual funds or the general equity market or whatever.
I think it was about balance across the panel, about having some of each. I’m not that favorable to knowing very much about the crypto space or the cannabis space, although I did note that hemp, generally speaking, the plant itself is extremely useful. I think there’s a lot to come about that whole genre, other than … what everyone equates with cannabis, and that’s getting high. There’s so much more to it. Everybody on the panel discussed that, and the audience knew quite a bit about that as well.
INN: Yes, it was quite balanced I thought. I was surprised, but it was good. Speaking more about gold, which you definitely do know about — yesterday we saw gold go below $1,300 an ounce. Many see that as a key level for gold. Is gold in trouble now that we have gone under that price?
DM: I don’t think it is. $1,300 — the commodities markets hate round numbers, but people use them because they’re easy to remember. $1,300 is kind of a support level, but not the exact number. I think that gold is holding up quite well vis a vis the fact that the US dollar has gone from 80 … all the way up to 93. If you look at that percentage gain vs. gold’s loss, I think you would actually have to conclude that gold is holding up rather well with such a good dollar rally.
INN: Where is silver in all of this? It went down yesterday as well. What are the key price points for silver that investors should watch?
DM: Silver is at about an 80:1 ratio, which favors a silver investment over gold at this time … silver and gold were off the same percentage two days ago, which shows silver being strong, because normally silver leads both up and down. Which means that if gold’s off 1 percent, silver can be off 3 percent; if gold’s up 1 percent, silver can be up 2 or 3 percent.
Since it was holding its own, meaning it was the same as platinum, palladium and gold in percentage terms, I think we’re getting close to the bottoming process. We’ve got to remember we’re still seeing higher highs, excuse me, higher lows in the gold market; that upturn hasn’t been breached since the end of 2015. If that level is breached, then I’ll be bearish on gold.
INN: You mentioned in your presentation the Dow/silver ratio as well. What is that? What do we need to know about this?
DM: Like the gold/silver ratio, how many ounces of silver does it take to buy an ounce of gold, the silver/Dow ratio is how many ounces of silver does it take to buy the Dow Jones Industrial Average (INDEXDJX:.DJI). At one time we got to about a 16:1 ratio with the gold/silver, when the gold/Dow ratio was somewhere around 1:1. Gold was around $800 and the Dow was around 800. So we could get to an extreme case like that again, that was the whole point of that graph.
INN: Alright. As we head into the summer, what can investors expect from silver and gold prices It’s typically a lower time — what do you see?
DM: Charlotte, that’s a great question. My answer is going to very dull because I think it’s going to be a very dull summer. I have brought up the adage “sell in May and come back after Labor Day” several times. Almost every quarter I write for my subscribers in that timeframe, I’ve discussed that. Historically the metals don’t do well in the summer, although we had a surprise in 2016 — silver did extremely well for the summer months. That’s the exception, not the rule, so I expect more of the majority, which means not much happening in this summer.
INN: Okay, but there is hope. Moving a little further on, you mentioned silver ending the year higher, maybe around $20.
DM: Yeah, the third quarter is usually good for the metals, and I think we are going to see that again this year from September, October, on to the end of the year. I know it’s fallen off at the end of the year several years in a row. But I think we’re going to see a shift coming back in the resources generally, and I think we’re going to see enough problems in the debt markets, and probably the equity markets start to stumble again. And who knows where the dollar will be; I’m not sure, but probably lower. So I think we’ll see a lot of impetus to go back into gold at least as a hedge position.
INN: Any final thoughts to keep that in mind for the resource space, or advice for investors for the rest of 2018.
DM: Since you gave me the opportunity, I’d just like to say people should go to themorganreport.com and get on our free email list. We discuss currencies, the metals, the general equity market and just about anything to do with finances and resource stocks.
Don’t forget to follow us @INN_Resource for real-time updates!
Securities Disclosure: I, Charlotte McLeod, 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 contributed article. 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.