Gold and Silver Market Fundamentals Explained by Senior Precious Metals Analyst Jeff Clark

hi I'm mark Yaxley welcome back to inside the vault very pleased to have a good friend of mine joining me inside the vault today senior precious metals analyst mr. Jeff Clark from gold silver comm so stay tuned you're going to learn something hi Jeff welcome back inside the vault we're very glad to have you here with us today and looking forward to hearing your thoughts about gold and silver I'm glad to be back inside the vault to mark it's been a little while yeah a couple years yeah so I wanted to start off with a pretty simple question for the benefit of our viewers who might not be as familiar with precious metals when we see the price of gold flash across the screen whether it be the nightly news or maybe a ticker on a financial website what does that number actually represent so what we're looking at there is the spot price of gold and that's the price of gold that is determined in the markets by buyers and sellers and that's the actual trading price that is current for the price of gold gold trades around the clock pretty much 23 hours a day five days a week and everything is based off the spot price so you and I don't pay spot prices when we buy something because when you buy a fabricated product there's a premium involved in manufacturing and refining that product but the spot prices where everything starts and is that spot price gonna be the same for a person sitting in Singapore or London as it would be for someone sitting in Toronto or New York for example so the price of gold is based on US dollars it's it's priced in u.s. dollars internationally around the world so it all starts with the US dollar price however what a lot of countries will do is they will convert that price to their local currency and they'll trade based on that but of course as the spot price of gold fluctuates their currency is fluctuating as well so it can be slightly different and in fact last year why that's important is last year many currencies saw the price of gold in their currency at all either at or near all-time highs whereas in the u.s. price it was not near all-time highs so the currency their conversion to their currency they'll trade in that and that can have an impact on what they're paying as well right and what are the main factors that influence that price of gold or silver well the the price during the day is basically the back-and-forth of buying and selling between Trey it'll fluctuate based on various things that they're doing whether it be from technical trading trading or all the way up to some sort of major economical economic issue so it varies throughout the day but it's based on many factors it could be from something small that someone is buying and selling for some event that happened that day or it could be a major economic concern such as maybe an impending recession and so they're piling more into gold so a lot of different factors will play into that price of gold throughout the day and throughout the year so when you talk about traders I imagine those traders are representing different segments or groups of people and industry maybe the government what are some of those segments can you tell us a little bit more so the big players first of all would be central banks central banks are have been net buyers of gold for ten years now they will have an impact on the price of gold they've been buying so that's been a supportive factor for the price of gold they we usually trade either with each other directly or sometimes I'll go through large commercial banks so when you look at the commitment of traders report as we call it and people can follow that if they want it comes out once a week you can see the large commercial traders and what they're doing they're buying and selling and that's usually large banks large commercial banks that are buying and selling and then the big factor recently though has been more of the hedge funds the non-commercial traders the hedge funds that are buying and selling gold they've been net buyers a lot recently back in 2016 for example they were buying a lot more gold than they were selling because of the rise in negative interest rates last year was because of the trade war between Trump and China there were concerns everybody got my growth so the hedge funds were buying more gold than they were selling this year recently it's been the coronavirus that's been driving some of the price that hasn't been has hasn't had as big an impact as some of the other issues but that's what's been going about so it's been driving the price and it's been those hedge funds the large funds the non-commercial traders that have been driving the price more recently okay and what about I call them you know I refer to them it's kind of Main Street or mom-and-pop investors I think of my parents for example myself included yourself included what about private individuals like us who is representing us is that its own segment or do we fall into the same hedge fund segment where these you know these larger trades or this these trades are being grouped together and then placed into the market it depends on where you're buying from and who you're buying through so if you're buying from a dealer a dealer will be packaged all together all the dealers will be packaged usually together in a big purchase order if it's all coming in at the same time a lot of those buy orders will go in together that could drive the price either up or down if there's more buyers than sellers or vice versa so retail demand whether it's a paper product or a physical product can drive the price they're usually grouped together you know depending on who you're buying from so I wanted to ask you if you could give us an idea of the size of the gold and silver market because obviously these commodities have played an important role in history especially gold I mean it's it's just a pillar of economics it was money for the longest time people used to when they built the railroads I mean people were being paid and $20 gold pieces $10 gold pieces $5 gold pieces it's not money anymore but it's still part of the conversation so is it like a really big market or is it actually a lot smaller than some people might realize it's a it's a very small market smaller I think than people realize but I would say gold is money it's not currency so it doesn't fluctuate around the the or float around the though markets as currency but it is money in fact it's the best form of money in my opinion because it's a long-term store of value as history has shown over a thousands of years so in terms of actual size can you give us a comparison and draw a comparison with another asset class yes I love this question because it just shows how small the gold and silver markets are gold for example if you took all the eligible or excuse me the registered gold stock at the comics that's eligible for delivery they can be taken for delivery that's classified as such Warren Buffett and his fund Berkshire Hathaway has I think the latest figure was something like 121 billion in cash could be a little higher lower don't quote me on that but it was an awful lot of cash well if you multiplied all the registered gold at the comics by the current price of gold Berkshire Hathaway could buy every single ounce of registered gold in the comics with 1% of his cash that's what that just shows you how small this market really is Gold's very liquid it trades around the world on every major exchange but it's a very small market when it comes to the size of other markets and the point there is of course if we get some type of crisis or a recession or stock market crash anything at all that would drive people into gold more that demand can easily influence the price because it's such a small market and circling back to central banks for a second we talked about them a little bit earlier if gold is such a small market and some people who aren't you know gold bugs or believers and gold might say it's inconsequential almost why is it that central banks such important institutions in our society rely on gold to protect their population what is it about yellow metal that that that that makes central banks buy so much of it I think that goes back to what we were saying earlier it is money is the best long-term store of value it's why everyone from Kings to pirates were hoarding metal back in the day it is the same relevance and same significance the same importance to finances today and central banks do hold gold in their reserves it's a reserve asset in case they need it it's it's reserved for them in case something happens to their currency or something happens to their economy or their markets they have gold because it'll hold its value they have gold that they can use to support their economy or the markets if they need it and they don't hold any other metal by the way so they hold gold in their reserves but they don't hold silver they don't have platinum they don't hold palladium these are all other precious metals but gold is the only one that they hold so a store a value and for a retail investor for the average person who you know probably owns their home they have some equity or have some money in the equities markets it doesn't play a similar role for that for that person as well that's a great question go it has been demonstrated to be an excellent hedge so it's a fear metal let's face it when fear Rises when uncertainty grows that's when people turn to go and that's when gold tends to do its best right there are times where it can be an offensive asset it can make you money but most of the time it's a defensive asset so it's a great hedge so if the stock market does decline where we do go into a recession or there's some other major geopolitical event you name it Gold tends to do well in those environments and that's why it can be an excellent hedge for people to own you can go ahead and be long stocks but when you hold gold you're hedged against a stock market decline that's why it can be such an advantageous metal to hold right and let's talk a little bit about silver I know you like silver you talk a lot about silver in your newsletter what is it about gold's little brother we'll call it that that you like what makes it so attractive and why should people consider owning some I like silver it is more volatile it's an even smaller market than the gold market so it tends to be more volatile in price the advantage there is that if we're in a bull market for precious metals silver will tend to rise more than gold in fact in every major bull market in the last 50 years of precious metals silver has eventually outperformed gold it doesn't necessarily start out outperforming gold what it tends to catch up and pass it as the bull market goes on so you can't actually make more money in silver if your timing is good if you're buying at the beginning of a bull market holding it through that with silver the issue with silver of course is that it it takes more space to store it it takes a lot more you and I could hold $50,000 worth of gold here in the vault in the palm of our hand but the hold $50,000 worth of silver would take something like a dozen different shoe boxes and would weigh like a hundred ninety pounds so storage is an issue with silver and that's why you know using swp to store some silver is a great idea now the reverse also works the volatility so in a bear market or in declining market silver will fall more than gold and gold tends to hedge stock market crashes and recessions more than silver does silver as more tends to respond more to monetary or currency concerns like inflation and things like that so you know for me I like to own both right and that was my next question if you're just getting started out in precious metals let's say you had ten thousand dollars to invest would you be investing only in gold or silver or would you consider mixing up the portfolio a little bit I would definitely own both because they can serve different purposes Gold Z the ultimate backstop it is money it's the last man standing so I would definitely own some gold I would own some silver - if you think some type of monetary issue is ahead because silver will tend to outperform it in that environment so I like to own both I wouldn't own just one I don't think you should put all your eggs in one metal so I think you would own them for different reasons and it would be great to own both that's what I do now what about the platinum group metals that they can buy platinum in the shape of bars and coins and then you have palladium and rhodium which most people haven't even heard of what's your feeling about these metals palladium and rhodium are actually the two most valuable precious metals that I mean palladium is surpassed Gold which had never happened until recently and it's flown right by it are we in a bubble for these two metals would you recommend buying them right now or would you say maybe it's time to be selling them if you are holding the reason palladium is rising so much in price is it because of a supply issue it's strictly a supply issue demand is really is increasing because of electric cars and things like that and other uses but it's really been a supply issue that's driving the price of palladium based on the things I read I don't think the supply issues are going to resolve real soon like in 2020 but eventually they're going to and let's be honest the price of palladium has gone parabolic it's what I think doubled roughly in the last just as last summer that's an awful big rise for the price of a metal so I would be very cautious to buy palladium now I'm not saying it's gonna fall tomorrow I just think it has gone pear ball like you're buying high could go higher but we don't know I don't know that it's necessarily the most prudent thing to buy after something's risen so much platinum is probably a better buy right now it's up as well maybe 20% or something in the same timeframe that use is probably not going to go away but let's keep in mind both of those metals are industrial metals they're driven by industry 90% of their use goes to industrial use uses you know mostly catalytic converters so if you think we're gonna go into some kind of economic slowdown or recession something like that those metals will be impacted because demand will fall so Jeff I'd like to play a little game with you called would you rather there's no wrong answers I'm gonna throw up two words and you just go with your gut and tell us which you'd rather okay okay gold or silver I would rather hold gold for the long term but Silver's more undervalued at present that gold silver ratio is almost at ninety back again so that clearly shows Silver's more undervalued so there's probably better value with silver right now bandwidth gold so I'm here in silver okay platinum or palladium I would go with platinum because it's again more undervalue than palladium palladium is arisen a lot it's been in a almost parabolic rise I'm gonna get better value with platinum right now okay stepping outside of your comfort zone maybe a little bit now oil or natural gas oh boy that is outside of my knowledge base but I'd probably say natural gas because it's cleaner okay in environmentalist you are from California or as that makes a lot of sense US dollar or pound sterling oh boy I mean I think there's probably going to be some type of crisis in the near future so people will investors will flee to the dollar to the Treasuries and bonds and that sort of thing first that'll probably drive up the dollar price so I would probably start there but I'm not gonna hold it forever that's my caveat all right well let you off the hook good answers finally Jeff I wanted to ask you you've been around gold and silver a long time you have children of your own I'm sure you've advised people of all ages precious metals isn't only for older wealthy people I think that's something that swp does try to drive home we we think young people should own precious metals so if you had to give a young and investor some advice about owning precious metals what would it be I would say first of all you do want to own some even though it may seem old-fashioned you're holding a piece of metal in your hand and most things that trade today are done via electronically or paper I think its value but to hold something real in your hand I own probably both gold and silver I would be careful where I store them but I think having some exposure especially at this particular point in history when there's so many risks out there all of which are elevated any of which could blow up I think you'll be well served by owning some real gold and silver actually in your hand that you can sell at any time if you want to it's still very liquid so I think having some exposure right now is just a wonderful idea and that's the same advice we did we'd say just get started it doesn't have to be a large amount of money but the earlier you start the better I always wish I had started when I was 18 for example you know and caught the last bull market or in this case the next bull market for my grandfather actually left me a gold eagle one ounce gold Eagle from the first year that they were made by the US Mint and I've always treasured that and the first time I held it in my hand I love the the weight of it in the heft of it and I think people instinctively know gold is real gold as money and gold as a true store of value that's where it's real advantage comes from well Jeff thanks a lot for sharing your thoughts with us today great conversation I learned something I'm sure the viewers did as well appreciate having you here inside the vault and I hope you'll come back soon I will mark I love being inside the bone [Music]

Channel: Strategic Wealth Preservation - SWP

Views: 106,805

Rating: 4.9286017 out of 5

Keywords: precious metals, metal, SWP, Strategic Wealth Preservation, gold, gold bars, gold coins, bullion, bars, silver, silver coins, silver bullion, gold bullion, platinum, invest, investment, vault, cold storage, offshore, Cayman Islands, Grand Cayman, gold stacking, silver stacking, deposit, safe, security, deposit box, segregated, travelling with gold, travelling with silver, storing gold, storing silver, offshore storage, macroeconomics, recession, economics, jeff clark, goldsilver, mike maloney

Id: vhKqwxmdScs

Length: 18min 29sec (1109 seconds)

Published: Tue Mar 24 2020