Sanctions, The Stock Market, And Silver

Unlike other Administrations, the Trump Administration has played foreign affairs very close to the vest. Other U.S. Administrations have played in world affairs as an open hand, with no surprises and no ‘Trump’ cards. Amid the current U.S. ruckus with Turkey, Foreign Minister Mevlut Cavusoglu last week stated that, “Today, sanctions are imposed on Turkey, and tomorrow they can be used against any other European state. If the United States wants to maintain respect in the international arena, then it is necessary for it to be respectful of the interests of other countries.” The comment was met with more U.S. saber rattling and greater threats of sanctions. But in a speech to French ambassadors today, French President Marcon said he would put forward new proposals to the EU to boost security and that all European nations “including Russia,” should be involved in discussions on defense cooperation. “Europe cannot rely on the United States only for its security.”

There were six things President Trump wanted from a NAFTA reorganization. Today, a new U.S./Mexico Trade Agreement was struck and none of his six desires were satiated. Canada was left out in the cold, to be visited later. They have a smaller trade gross, but definitely aren’t getting a warm and fuzzy from the current and coming one-on-one round of “renegotiations.” The U.S. dollar and 10-year Treasury yield gave ground today, as some economic underachievement was reported. Reports still coming this week are trade, income and personal spending, and revised Gross Domestic Product data. Another interest rate increase in September is already baked into this market, with more than 90% surveyed expecting the increase.

Overnight, the silver to gold ratio hit 81:1. Historically, achievement of the 80:1 silver to gold ratio has been a pretty clear indication of a coming reversal. Such a reversal can occur in a number of different ways. First of all, gold could get a lot cheaper. But considering that it’s bounced hard a couple of times after breaching the $1,200 level, it doesn’t seem like a logical possibility at this point, particularly when you consider that gold now finds itself more than 30% below its high and silver, a whopping 70%. When the ratio was achieved in 2003, silver went on a 40% run. When it was achieved again in 2009, silver went on a spree that resulted in a gain of 133%. So, silver putting on a dramatic rally seems to be the more likely scenario.

Lower prices have caused a slowdown in mining production. Meanwhile, more and more technologies are requiring the use of silver, while existing demand continues to grow. Demand for silver from the solar panel industry alone, rose 23.1% in 2017. The solar panel industry now requires 106 million ounces per year. That’s more than a tenth of the entire silver supply. Call American Bullion at (800) 653-7730 for professional service with all your precious metals needs. Don’t wait for the bandwagon! And most importantly, don’t get caught without a chair when the music stops!

Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.