Gold and Guns

Gold and Guns from Schiff Gold

It’s no secret that 2017 was a down year for the precious metals market in the United States. Looking at US Mint sales figures tells the story. In 2016, the mint sold nearly 1 million ounces of American Gold Eagles. Sales figures in 2017 came in at just over 302,000 ounces.

Meanwhile, demand for gold surged in China last year. Imports of gold into India increased. So, what’s up with America?

In two words – Donald Trump.

As ETF analyst Doug Eberhardt pointed out in a recent article he penned for Seeking Alpha, there’s no secret who buys gold in the United States. Where do you see and hear the most advertisements for gold and silver? Fox News and conservative talk radio. In other words, Trump voters buy gold – at least when Democrats are in office.

But right now, those people aren’t buying gold. They’re optimistic about the economy. They believe tax cuts, decreased regulations and Trump trade policies will spur economic growth. Generally speaking, optimistic people don’t think about buying precious metals. They should. But they don’t.

Do you know what else optimistic people don’t buy?

Guns.

Gun sales have also fallen off a cliff over the last year. Bloomberg ran an article last month highlighting lackluster firearms sales over the holiday season.

The sluggishness in sales is due in part to a lack of fear on the part of gun enthusiasts. Now that Republicans who typically oppose gun regulation control Congress and the White House, even rushes on gun stores (and increases in gun stocks) have slowed in the wake of mass shootings.”

American Outdoor brands (formerly Smith and Wesson) CEO James Debney told Bloomberg, “There is is no fear-based buying out there right now,” and he noted deep discounts now serve as the primary driver in the firearms market.

Take a look at the stock price of American Outdoor. (Graph courtesy of Doug Eberhardt.) It’s a pretty striking visual representation of what a Trump presidency has meant for the gun market.

So, we see a pattern here. Guns and gold are both out of fashion right now.

Is this wise?

Peter Schiff says it isn’t – at least not as far as gold goes. Over the last year, he’s repeated this theme over and over – the optimism is unwarranted. Nobody is worried about anything, even though there is everything to be worried about. In a podcast earlier this week, he said he felt like he was in Alice and Wonderland. Then he threw a bucket of cold water on the economic optimists.

Even this summer, Peter was warning people about getting caught up in unbridled optimism, at the time noting the slumping gold market in America.

You have the opposite of a bubble in gold. Certainly, if you look at the United States, Americans are buying less gold now than they’ve done since the bull market began in 1999 – 2000.  Sales from the US Mint have collapsed. At SchiffGold, we just had our weakest quarter since the company has been in existence. And it’s not just my firm. It’s industry-wide. Americans are not buying gold, even though gold prices year-to-date are up more than the S&P 500. But the people who typically buy gold in America voted for Trump, and they’re no longer worried about the economy. So they’re not buying gold. They’re buying stocks instead, and I think they’re making a big mistake. They should be selling their stocks and buying even more gold.”

The central bankers have built a house of cards. It doesn’t take much of a breeze to topple such a thing. As Eberhardt said, “At some point, the price of gold will move up no matter who is in office or who controls Congress. All government knows how to do is spend. And history shows that over time, gold and silver maintain purchasing power, and it makes sense to own some as insurance.”

Trump’s presence in the Oval Office doesn’t change that on iota.

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Peter Schiff

Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for more than twenty years, he joined Euro Pacific in 1996 and served as its President until December 2010, when he became CEO. An expert on money, economic theory, and international investing, he is a highly sought after speaker at conferences and symposia around the world. He served as an economic advisor to the 2008 Ron Paul presidential campaign and ran unsuccessfully for the U.S. Senate in Connecticut in 2010.