Coming up David Morgan of The Morgan Report joins me to discuss the year ahead for silver. He also gives some great advice on how to make and keep profits when investing in precious metals and talks about a tipping point he sees ahead in the silver market. Don’t miss a fantastic interview with the silver guru himself, David Morgan, coming up after this week’s market update.
David Morgan: “New” Ways to Use Your Gold & Silver
Mike Gleason: It is my privilege now to welcome in our good friend David Morgan of The Morgan Report. David, thanks so much for joining us. It’s great to have you on, as always. How are you doing so far here in 2017?
David Morgan: I’m doing pretty good, Mike. It’s great to be on your show. Thank you very much.
Mike Gleason: Well, as we begin here, David, we’re off to another solid start to the year in the precious metals markets. Things look quite similar today to where they did a year ago. We also saw some early momentum in 2016.
So, what have been the key drivers, in your view, thus far in the metals markets, particularly the white metals, silver, platinum, palladium, which have all outperformed gold to this point. What’s behind the advance?
David Morgan: A couple of things. It’s a lot like last year, I think.
First of all, there’s always some contingent of people that are looking for a safe haven or a hedge, and of course that ebbs and flows with market conditions and perception. However, long term investors realize that the financial situation on a global basis, the debt structure, is unsolvable. So, I think there’s that and there’s always people that are adding to that. There’s people that invest too much or expect the market … the gold market or the silver market to move at a certain place, and it doesn’t. So again, it ebbs and flows.
As far as the white metals are concerned, it’s pretty interesting. Number one is that platinum has been under the price of gold for months now, which is highly unusual. I mean with my 40 years’ experience in the metal markets, when platinum reaches a discount to gold, usually it’s a lead pipe cinch trade. You just basically arb(itrage) it.
You go long platinum, short gold and within usually a few months you are in the profit zone. Not true this time. Part of it has to do with the Volkswagen no-no with the T.D.I. with their diesel engine, and the platinum and palladium’s are used in the catalytic converters for gas and diesel. And that’s part of it.
The other part of it is seasonality. I used to trade platinum and palladium quite a bit and there is a seasonality in the first of the year for both white metals. In fact, it’s almost a sure thing, of course there’s no such thing as a sure thing. So that’s part of it as well. There’s a seasonality.
And if you look at the fundamentals … I mean platinum is under the cost of production, most of it comes from South Africa. Their mines are a mess. Their workforce is a mess. They have a lot of problems. And so that puts some upward pressure on the price of platinum, at some point in time. But it really hasn’t become real robust. I mean obviously as you said it’s outperforming gold, but not what I consider in a significant way.
So, Mike, I latch to your thought. Look, we’re going to see a seasonality of gold and silver, and I thought it would go a month or two. And that’s where I started the report in January when I put it out. And I’m a good believer that the market knows more than anyone, regardless of the reasons, regardless of commitment of traders, anything.
So, if you listen to the market it will help you a great deal as far as how long the trade will take place et cetera. What I did was I let the market tell me where it was going last year and we got to the point where gold and silver were doing really well in the summer, which is unusual, it’s different, than their normal seasonality.
And I started to look at the commitment of trades closer and closer and closer, and I picked a point where I was highly uncomfortable. The sentiment was very, very high. And I chose that as a point to off the trade.
So, what I do is I keep 75% invested and trade with 25% at the maximum and I like to book profits. And in this new next little market that we’re in, it really in my opinion, strong one, it behooves you to be able to trade, because the ebbs and flows are going to be rather dramatic. So, if you can trade with part of your portfolio you can increase your gains.
So, what I have said all that to say this Mike, and thanks for listening so well. I am just going to do the exact same thing again this year and hopefully I’ll get it right again. Which means, the market is tenuous, the gold commitment traders looks more favorable than the silver one. There’s a lot of my friends saying silver’s going to go in the short squeeze eminently.
I don’t see that, but it doesn’t mean they’re wrong and I’m right, it just means I don’t see it, and they may see something I don’t. But I’m just going to let the market tell me. I think we’ve got more upside than both the metals. But I do not think we’re going to go all the way into the summer, like we did last year. I think we’re probably going to go, I’m guessing now, another month or so.
And of course, I will update premium members on the website. That’s what it’s all about, because I do it real time and draw the graph and explain what’s going on, and also how the market reacts, in other words, if we get to this point here, I’ll draw a line I get the number, then the market is telling us the game is over and you should take your profits.
I got everyone in suggested as a $16.60 basis to spot market. If you look at $16.60 on the chart and where we are now, most of those people that took that piece of education that I gave out of where I would enter, are pretty happy right now.
Mike Gleason: Yeah. Absolutely. Now, there are some that don’t think we’re necessarily still in a bull market, so talk about this idea that we’re hearing from some of the bearish analysts who say, that the first half of last year where we saw a very strong advance in the metals, as you eluded to, was nothing more than a bear trap, we remain in a longer term down trending market for gold and silver. That was just a blip, what’s what they’ve said. I know you’re calling for a strong year for gold and silver, so what is your