Key news of the week:
Consumer price index over the years. We tend to forget how the cost of living has increased over the years. A long-term view of inflation tells us everything. To exaggerate... We are like a "frog" gradually boiling in a pot, and we don't notice it.
In the USA, the number of those continuing to receive unemployment benefits is at the highest level in the last two years. The number of Americans who first applied for benefits last week jumped to 231 thousand (from a revised 218 thousand), the highest since August... Expect this to escalate over the next few months.
The Purchasing Managers Index (ISM Manufacturing PMI) has been below 50 (indicating contraction) for 12 consecutive months, the longest downturn since 2008-09. This is very bad for the industry.
Industrial production in the United States has decreased by 0.7% in the last year, the largest YoY decline since February 2021.
Housing prices in the USA are contracting aggressively. In just 2 years, the percentage has gone from over 20% to -7.9%. This is THE sharpest collapse on record. Current levels have occurred ONLY 2 times in the last 60 years:
Both instances ended with equities declining more than 30%.
Physical-real assets are at their lowest levels compared to financial assets since 1925. Real assets include commodities and real estate. Particularly, commodities are exceptionally undervalued, signaling the beginning of a renewed commodities trend."
This turnaround is already well visible. In the last 50 years, we have experienced 3 major commodity trends. Below is the ratio of commodities to the S&P500 stock index.
Today, 71% of investment advisors hold only 0-1% of gold in their portfolios. I cannot recall a time in history when gold was as underallocated as it is currently. Keep in mind that in 1980, gold constituted 75% of global central bank assets, whereas now it accounts for less than 20%. These massive pools of capital have just started to shift significantly toward the metal, presenting one of the most compelling opportunities to invest in gold to date.
Interesting information is coming from India. In October, Indian gold imports surged by 60% compared to the same period last year, reaching the highest level in 31 months, as a drop in prices ahead of a key festival prompted jewellers to stock up. Larger imports of the world's second-largest consumer of precious metals, India, could support the price of gold, but could also widen India's trade deficit and put pressure on the struggling rupee.
India imported 123 metric tons of gold in October, compared with 77 metric tons a year earlier, the source said, declining to be named as he is not authorized to speak to the media. The average monthly imports in October in the past decade were around 66 tons.
Similar extremely high demand is happening in silver. In October, India imported a whopping 56 million ounces of silver, or 1,750 tons of silver!
It seems that the significant surge in silver imports into India in October is impacting silver inventories at the LBMA organization in London. London is one of the largest hubs for precious metals in the world, and India imported almost 1,000 tons of silver from the UK in just one month. A decline in LBMA's inventories by 38 million ounces = 1,182 tons.
According to The Silver Institute, the total silver deficit this year is still very high, at 140 million ounces, which is 45% lower than in 2022. However, it is particularly noticeable that industrial demand is increasing from the solar industry, for electric grids, 5G networks, auto electronics, etc. This year, it is estimated at 632 million ounces of silver.
Let's not forget that the silver market is extremely small and that intense movements can happen in the future due to intense demand and lower supply.
It's incredible that the market capitalization of Apple and Microsoft in the S&P 500 exceeds the entire weight of the metals and mining industry by 70 times. This reflects how distressed mining companies have become. Despite facing increased operating costs, companies in the commodities sector have inherent pricing power in their operations, as underlying commodity prices tend to perform exceptionally well during such periods.
The massive divergence between gold and silver prices is mainly due to a fundamental increase in production costs. Since 1971, costs have increased in the gold mining industry by +4,000%, and in the silver mining industry by +1,200%.
On a very broad picture, there is a massive divergence between $GOLD & $SILVER. The last time the two had a larger divergence like this, silver played catch-up big time. And this time, silver will break out of a 43-year+ cup and handle.
Investing at different ages and when to begin saving?
✔ Early investing brings the advantage of compound interest, allowing your money to grow exponentially over time.
✔ Early investments also provide a longer time horizon to weather market fluctuations, increasing the potential for long-term financial success.
Closing Thought
Let's maintain a critical yet optimistic outlook on the world. Let information guide us to make informed financial decisions, and let's not be those who toss them around without understanding what they mean for us."
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Source of information: https://www.linkedin.com/in/peter-herman
The Slovenia
BMC International