Currency Devaluations Galore! Godsend for Gold & Silver Bulls

by Brittany Stepniak, Outsider Club Yesterday we alerted you to China’s emergency devaluation situation. But today we want to expand on the enormity of it in terms of related consequences. First, it emphasizes how dangerously loose monetary policy is in many parts of the world. The U.S. is flirting with raising rates after years of addictive bouts of quantitative easing, China devalued its currency last month in an attempt to stimulate its own bleak-looking economy, and the yen’s been steadily plunging at an alarming rate in Japan — the world’s third largest economy. Other countries have been rapidly devaluing currencies in the aftermath of oil’s plunge this year, too. For example, Turkmenistan devalued its currency 19% vs. the U.S. dollar back in January. Indeed, it’s been a tough year, economically speaking. And while this news is most immediately ominous, there is a silver lining (literally). Despite silver and gold’s brutal beating over the past four years(ish), we believe silver’s resurgence is right around the corner in light of monetary policy failures the world over. “Independently, every country is looking at their own weak economies but all are failing to grasp nettle of structural reform,” says Michael Every, head of market research at Rabobank in Hong Kong. Subsequently, we could see shifting momentum in precious metals as investors seek safe havens in the wake of all these brewing economic storms. “There’s going to be a significant opportunity with prices down here, because I think with all this currency devaluation people are going to run to gold eventually,” said Jeffrey Sica, who oversees $1.5 billion as the president of Circle Squared Alternative Investments in Morristown, New Jersey. From a technical perspective, silver’s new lows are significant in that you can’t find this anywhere else on the five-year chart as shown below. 5 year silver Although gold prices are trading a bit lower in early trading today, the bearish market is bound to transition… If you’re on the sidelines waiting for the best opportunity to get in, experts believe prices will remain “sideways to lower” in the near term, but — as always — that is dependent on what happens at the upcoming Federal Open Market Committee meeting on Wednesday and Thursday, in which members will discuss monetary policy. Silver’s a Unique Story Normally, gold and silver prices trade in tandem. However, something interesting is going on in the U.S. silver market. Silver’s supply has been hard-hit so much that the deficit is expected to grow to 57.7 million ounces this year from 4.9 million ounces last year even as demand grows, and this will lead to higher silver pricing. The U.S. Mint’s been selling out of American Eagle silver bullion coins all summer due to a “significant” increase in demand — another sign that recent price dips have spurred a resurgence of retail buying. Even more interesting is the steep increase in Indian imports of U.S. silver bullion. Just take a look at the chart below to see how astonishing these recent increases truly are: India imports silver Another contributor to the increased silver demand centers around the globe’s latest energy transition. The solar industry accounts for 56% of total silver consumption, and since solar installations are expected to grow by 160% in the next five years, silver demand will naturally increase. Already, silver is up 115% compared to the S&P’s 71% over the past 10 years. It’s up 194% versus the S&P’s 46% when you look at the past 15 years. These facts are certain. What remains uncertain is monetary policy. While we wait for the big Fed rate hike verdict this Thursday, it’s plausible that increased market volatility could emerge from the news, which will also help give silver and gold a nice little boost — maybe a big boost. Many financial analysts are already predicting a major market crash coming sometime this fall. That’s the uncertain part. And although I’m not a big fan of blind faith, I do believe in faith with substance. And I’m putting that faith into silver because of the facts outlined above which are certain… and also because the future of our monetary policy is frighteningly uncertain. Herein lies the importance of investing in precious metals. Silver, in my humble opinion, is one of the most interesting investment options at the moment because it harbors industrial demand, yet it also serves as insurance during times of crisis. What more could you want? It’s practical. It’s got intrinsic value. It’s ideal. And it’s incredibly cheap right now. But precious metals experts don’t see cheap prices lasting long… and neither do we. The coming crisis may prove to be a major opportunity if you focus on the silver lining and play your cards right. Farewell for now, Brittany Stepniak

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