RE: $24 spot silver27 Jul 2020 12:35
Carvegyber, I agree with you: it was kind of a rhetorical question :)
Central banks the world over have painted themselves into a corner. Let's consider the options (central banks, in reality, have very few REAL tools):-
1) Lower interest rates: might stimulate demand, but at the "lower bound" (& we are most surely now there) that will be of negligible benefit to the economy & would actually make PMs more attractive, whilst likely adding to the world's supply of negative-yielding debt.
2) Raise interest rates: whilst higher rates are usually bad for PMs & could be seen as a sign of recovery in the economy, in reality this would instantly evicerate the stock market & would render great swathes of individuals, companies & even countries bankrupt. Result: positive for PMs (although there may well be an initial sell-off (like we saw in March)).
3) Announce quantitative tightening: we've already seen how this one plays-out...the stock market will immediately **** the bed. Removing currency from circulation invariably causes a recession, & they're not likely to reverse course anytime soon. Or at all, IMHO. Whilst the ensuing deflation maybe bad for PMs in the short-term, the guaranteed ensuing economic calamity would be very much PM-positive.
4) Expand quantitative easing: given the state of the world, I see this as the most likely outcome, although it will (of course) do nothing to dampen enthusiasm for PMs. Quite the opposite, in fact.
5) Yield curve control: IMHO, this has been underway for a very long time already, ever since central banks started buying government bonds following the GFC. Their current discussions about this as a "possibility" is just mis-direction to hide the fact that it's already been underway for quite some time. What they really MEAN is "expand it". YCC is undertaken to LOWER bond yields (just in case there's anyone left on the planet who thinks they're not low enough). Needless to say; PMs are a winner again.
My conclusion, therefore, is that with the limited tools they have, CBs are powerless to stop the rise in PMs (&, by extension, mining stocks). My guess, is that they'll spout a load of drivel in an effort to move the market without actually doing anything. Gold has a habit of getting hammered whenever Powell opens his mouth, even if what he says is actually PM-positive: that trick hasn't worked so well of late...
Powell speaks on Wednesday following the latest Fed meeting: it will be interesting to see what he says. Suffice to say: anyone invested here is on a winner (although there are certainly better performing mining stocks out there, this is certainly the sector to be in). I would hope that all those invested here are already holding some PHYSICAL PMs. Very soon, fiat currency, quite literally, won't be worth the paper it's printed on.
GLA.
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