Andy Schectman: JP Morgan Raises Silver Target To $34 | Arcadia Economics

➡ The Arcadia Economics article discusses the potential rise in gold and silver prices due to the country’s financial obligations that can only be met through printing money or monetizing bonds. This is because of the risks associated with holding treasuries, such as inflation, default, and confiscation. The article also mentions that JP Morgan is bullish on gold and silver, predicting a significant increase in their value by 2025. The author agrees with this prediction, suggesting that the prices could be even higher due to the ongoing shift away from the dollar.

➡ The discussion revolves around the investment in gold versus silver, with gold seeing significantly more investment. The conversation also touches on inflation, with the belief that the reported 2% inflation rate is inaccurate and the real rate is much higher. The topic of central banks buying more gold and the possibility of them moving away from the dollar in favor of gold is also discussed. Lastly, the discussion highlights the under reporting of gold holdings by countries like China and the increasing trend of repatriation of gold by various countries.

➡ The article discusses the shift in trust from traditional assets like treasuries to commodities like gold and silver, due to perceived risks and loss of trust in the former. It also highlights the increasing premiums on retail gold and silver, and the scarcity of backdated items. The author suggests that junk silver pre-65 dimes and quarters offer the best value currently. The article ends with a mention of upcoming specials related to the election and the debate.

So, yeah, ultimately, I think those numbers might even prove to be low. Ultimately, gold and silver go higher in the face of obligations by this country that can really probably only be met through printing of money or monetization of bonds. Same thing. Because just no one wants to hold our treasuries because of inflation risk, default risk and outright confiscation risk. Well, hello there, my friends. Chris Marcus here with you for Arcadia Economics, and happy to have Andy Schechman backed on with me this week. And he’s been busy traveling in the past couple of weeks. Exciting schedule of a gold and silver dealer that he lives.

Although, of course, there’s been plenty happening in gold and silver in these past two weeks since he’s been on here, which we’ll look forward to digging into today. Obviously, we had a sell off that started on Friday right after silver was back over $30, pushing it down back under that level and continuing on Tuesday. And either case, Andy, a lot happening here. Good to have you back. And how’s everything going? You always put a smile on my face, Chris, and actually, some people realize how witty you truly are. But it’s great to be back here, brother, and thanks for having me.

I missed you, but it’s good to be back. Well, I know something that excites many gold and silver investors is, of course, news about JP Morgan, who is now actually structurally bullish on gold and silver. This is a report that came out Monday, and if I can brag for a second here, even the great Vince Lancey, who is on top of the banking reports that come out on metals, he hadn’t even seen this one. So I’m going to call that a scoop in my own eyes. But all of that silliness aside, here is the keynote JPMorgan mentioned.

Structurally bullish on gold and silver. Recent consolidation calls a buying opportunity. So, Andy, I don’t know if you’re happy or not being in company with JPMorgan, but I know you think gold and silver are a good buy at this particular point in history of monetary cycles and whatnot. But here we see their targets, $2,634 an ounce on silver, respectively, in 2025. And they also like copper, too. But, Andy, do you care to comment on JPMorgan and their view that the pullback is an opportunity to continue accumulating? I mean, look, man, it just. It makes sense, Chris.

I mean, everyone talks about the price of gold and silver and inflation and soft landing and all of the noise, but let’s break it down and make it real simple. I mean, look, we’re adding a trillion dollars in debt every 100 days and we have 150 trillion in unfunded liabilities. The national debt is up eleven and a half trillion since 2020. And this is a country that has its fiscal house not in order. And when you look at the unfunded liabilities, whos going to pay for them? And when the Congressional Budget office says in six years, 100% of tax revenue goes just to pay mandatory entitlement and interest on the debt, only when you realize military spending is discretional, whos going to fund our military? So we have a situation that is on, you know, it’s just, we can’t continue down this path, put it to you that way.

And so I would just simply say that ultimately gold and silver go higher in the face of a dollar that falls. And I don’t know if it’s gold and silver going higher as much as what JP Morgan is saying is that the dollar has to fall. And that’s really what I think ultimately will happen. Now, when you look at what’s happening around the globe, the de dollarization, the detreasurization, a growing union of countries, as we’ve talked about forever, and only treasurization, is that a new one? Detreasurization? Yes. Well, I mean, that’s what they’re doing there. Why would anyone want to hold treasuries? You look at gold, it’s up 9.9% on average for 25 years.

That’s doubled the pace of the ten year treasury. And we’ve proven to the world that we don’t like what you’re doing. We’ll take your treasuries and maybe give them to the country, or buy weapons with the proceeds and give to the country you’re in a war with. That’s a very tough thing to come back from. So I think ultimately it leads to more of the same countries seeking alternatives to the dollar, seeking alternatives to the treasury. It reads old tampos are, this is Bretton woods three, all about commodities. And it’s also a country that has obligations that will be very difficult to meet just from tax revenue.

So where are your options? Raise taxes, print money and selling Treasuries in an environment where there’s only $8 trillion in treasury holdings that are foreign held, the majority of it is owed to us. Foreigners are not really keen. Now, there are some countries, if we are to believe that UK and Ireland and Cayman Islands are keen on holding our treasury debt, but the ones that have been responsible for funding our spending bidge binge seemed to be moving in another direction. So yeah, ultimately I think those numbers might even prove to be low. Ultimately, gold and silver go higher in the face of obligations by this country that can really probably only be met through printing of money or monetization of bonds.

Same thing. Because just no one wants to hold our treasuries because of inflation risk, default risk and outright confiscation risk. And I think that’s really where, where, where it is in its simplest of terms. So yeah, I don’t think we’ve seen anything yet I guess is the bottom line. And I’m happy with those numbers, but I would think that they could actually be much higher. Well then I will raise you a bank of America. They’re calling for 3000 ants over the next twelve to 18 months. So does that fit your forecast a little better? Yeah, I mean it does and I think that that does.

And then you take, you take 3000 and divide it by 42, which has been the average price ratio of the last 100 plus years. You get 71 and a half bucks, divide it by seven and you’re almost to 400. That would be what it’s coming out of the ground at. So yeah, look, I think it’s just fair to say that gold and silver are two of the only assets that haven’t been allowed to find fair value when everything else has been distorted to the upside. Price discovery hasnt really happened in gold and silver for the numerous reasons weve enumerated before.

But I think, yeah, ultimately those are numbers that I think are certainly realistic and maybe a whole hell of a lot higher. I guess ill say this, there are very few absolutes that you can talk about in finance. Ive learned in 34 years. Maybe the only absolute I can give you is that bull markets go higher than anyone thinks possible. Look at the Dow. When I started it was 2100 and bear markets will fall further than anyone ever thinks possible. I would look at the Nikkei, which was 40,000 in 1990, or pretty damn close to it.

Its just now getting back to where it was. I know it bettered it for a moment recently, but its taken 34 years to do that and its still just barely there, if not just below it, at a period of time where interest rates in Japan have been zero bound forever. So even with 0% interest, you cant entice the public who was burned so badly to go back into the Nikkei. And so I think when we look at gold and silver in the scheme of things, this is, I think, a massive shift, a once in a generation shift away from the dollar.

And so, yeah, sky’s the limit, I guess, but it won’t be easy and it won’t be smooth and it won’t be just straight up because of the obvious ramifications of all of this. So you got the west hanging on, doing all they can to shake people from the bull. Bull wants to take as few people along for the ride as possible. But when you realize that gold right now has replaced the euro in terms of the second largest asset held by central banks right now for the first time ever, 18% allocation of central bank holdings, if we believe those numbers.

The writing is on the wall. Gold and silver are replacing many traditional assets along with other commodities too. As old Tam Pozar says, this is about real commodities no longer promises from countries that are bankrupt, morally, socially and actually. And I think that that portrays for much higher prices in gold and silver even than bank of America or JP Morgan optimistically are telling us, Trey. Well, and since you mentioned Zoltan Pozar in there, in fact, before we get to that though, did mention something else about the rate at which gold and silver coming out of the ground and the pricing.

And it reminds me of something I looked up about a week or two ago, where if you look at how much money has gone into at least what we see reported investment demand from World Gold Council and Silver Institute. Andy, would you care to venture a guess at what is the amount that gets invested into gold versus silver according to those numbers? I don’t know. I would say much more in gold than in silver. I can’t. I don’t know. And as usual, you are like a maven as it comes to mining these articles and it’s always amazed me how you do.

But I would say probably a whole. I mean, if we realize that. I think on the London Metals Exchange, if I’m not mistaken, that the silver trade only represents about 3% of the gold trade, I would say much, much, much more in gold than in silver. Yeah. And again, keep in mind this is a total dollar amount, not ounces. But you had about 128 billion in gold to 6 billion in silver, which just have been thinking about it over the past couple of months where we’ve seen plenty about how much gold the central banks have been buying.

I’ve not seen. I’ve not heard of any reports yet. Central banks allocating to silver. Well, that’s pretty close to that 3%. That’s real close to that 3%, brother. So, yeah, I mean, doesn’t surprise me. Yeah. So again, that has not changed yet. Should that change where even five or 10% of that money went into silver. Certainly would be an interesting day in the silver market if we ever get to that point. And you mentioned Zoltan Pozar, who talks a lot about how this is a process and not a single event. And he was doing interview with Ronnie Stoifferlay from Ingoldbe Trust, and something he mentioned here that perhaps, as we’re just about halfway through the year here in 2024, and now we had central bankers out this morning saying there might be no rate cuts in 2024, why don’t you just tell me how many rate cuts you would like? Anyway, Zoltan here mentions 2% inflation.

And going back to the old world, I don’t think it stands a snowball’s chance in hell. Low inflation is over and we’re not going back. So we’re certainly in a different market mindset, shall we say, than when we began the year. Curious if you have any reaction to what he’s saying here, that 2% inflation is done. What do you say? Yeah, I mean, I don’t care what the CPI says. I can’t think of hardly anything that’s only up 3% like they’re telling us. I was just in Las Vegas, and although we stayed at the win, which is great, that sphere is incredible, by the way, a cheeseburger, french fries and a Coke delivered to my room was dollar 74.

Dead serious on that. I mean, I wish things were only up 3%, but I think that the likelihood of inflation getting down to those levels is next to nil. I mean, the 3% inflation theyre telling us is fugazi. The money creation is off the charts. The metrics by which they gauge inflation are distorted. And remember, they told us originally there was no inflation and then it was transitory. And, well, they told us there’d be four rate hikes or decreases, rather, for sure, the beginning of the year, and now maybe one. And if they do that one towards the end of the year, it just reeks of it being politicized to keep the Democrats in office to get that run up of the market prior to the election.

But yeah, I think those days are long over. Like I was saying earlier, how do you pay these unfunded liabilities? Where does the money come from? You’re creating a trillion dollars in debt every single month. How is inflation over it only at 3%? Where is it holed up? Is it all in the equity markets? Is it in the treasury market? Where is it? And when it finally starts to rear its head in the real economy, it’s impossible to say that inflation will get down to 2%. I can’t believe it. I don’t think if you go back and look at their numbers over the last 30 years, theyve been at 2% more than once or twice.

Most of the time theyre over 2%, even by their own flawed metrics. But yeah, I would agree. Zoltan Pozar is a genius and I dont think that we get inflation anywhere near 2%. If they were really honest with their inflation numbers, it would be a whole hell of a lot higher. So if they do pivot and lower rates, it only reignites that inflation engine that is already higher than 3% for what they’re trying to get us to believe. Well, he also mentions one other interesting thing down here. These topics are becoming more mainstream. When I talk to most sophisticated macro hedge funds and investors, the common refrain that comes back is they’ve never seen an environment as complicated as this.

There’s consensus around gold. It’s a safe bet. And everything else is uncertain. Now, certainly, by all means, I don’t think everyone in the world is looking at it like that. But interesting comment from Zoltan, and as I’ve mentioned in previous Andy Schachtman, retail silver and gold physical market updates that I enjoyed going through that World bank report. And there was one other comment that I had pulled up here that ties into what we just heard from Zoltan, where again, this is from the World bank, who I might add, assisted in the creation of Zimbabwe’s gold backed currency.

So they’re active these days, did that and had time to write. There’s an argument that in the aftermath of Russia’s supply side crisis and sanctions imposed on Russia, the world is transitioning from the Bretton woods era, which was backed by gold bullion, to Bretton woods two, which was backed by inside money, to Bretton woods three, which was backed by outside money, as Zoltan Posar described in 2022, and the outside money being gold bullion and other commodities. And the belief is that russian sanctions create incentives for central banks to abandon the dollar in favor of gold and for governments to cash in their dollar reserves for stocks of other commodities.

So we’re seeing some of that happen in terms of some other central banker thoughts. So again, not my opinion here, but this was from the World Gold Council. They did a survey of 70 central bankers here. You see. What proportion of total reserves do you think will be denominated in gold five years from now? And 68% think that the amount of gold is going to be higher. So, yeah, I believe that. I mean, I think it’s. You look at the amount of gold that China has been accumulating and we’re only supposed to believe and producing that they have 26 or 2700 metric tons.

They have way more than that. And their banks are accumulating it and doing so in a manner that isn’t reported to the IMF. Why would anyone tell the IMF exactly how much they have? And people have been saying China has been underreporting it forever. And you look at the central banks, they are buying gold hand over fist, but also equally as impressive to me in terms of the big picture. By the way, I apologize to your guest because I watched the video five times and I don’t have his name and I owe him a phone call, but it was one of the best videos I’ve ever seen in a very long time.

The guy’s real smart about Enbridge and about the unit, and I’ve learned a lot from him. And thank you. And I owe you a phone call. What’s his name? Matt Riley. I suggest everyone watch that video. It’s very eye opening. But you look at like, ICBC bank and a few of the other state owned banks. They buy gold as a proxy on behalf of the PBOC. They work at the refineries all around the world. They don’t tell this to the IMF. It’s not reported. Everyone always said China underreports. China under reports. Alistair McNau. We’re supposed to believe them, right? Alistair McLeod says, you know, that they have 40,000 metric tons, or thereabouts, five times what we do, of which state owns 20 and the people own 19.

But I look at, like, India as an example of what’s really happening. They bought one and a half times the amount of gold in the first four months than they did in the entire year last year. But they repatriated 100 metric tons from the bank of England, which by proxy is the London bullion metals Exchange. And all of these countries in Africa, including Saudi Arabia and Egypt, have repatriated their gold from the New York Fed. That is the Comex. So it’s not only the accumulation by the most well informed traders, it’s also the repatriation, the removal of counterparty risk.

And that’s a lot. I think what Zoltan Pozar is talking about, that’s why it’s commodities. We’ve broken trust. And I think that’s the most important thing. When the central banks say we’re going to keep buying? Sure. I would argue that the numbers that we all are led to believe are way underreported. The IMF says that, the analysts at bank of Montreal says that. And everyone has said that about China in particular for years, going back as far as I can remember. So I would simply say that there is no reason for gold to have been reclassified tier one.

And when you see other than that, it’s significant in terms of where it’s going. And when I say gold, silver is part of gold. And as one goes, so too will the other, ultimately for different reasons now, but they’re not going. One’s not going to the heaven without heavens without the other one coming with. But I think when you see the repatriation, it speaks volumes. It’s about the loss of trust. This is what it’s all about, the loss of trust. And can you put Humpty Dumpty back together? Don’t know. The trust is something that I think is very difficult to get back once you break it in any form of life, whether it be relationships or in this case the world reserve status or the center of free trade.

People look at this country differently now in many ways. And I think maybe the most important way is the risk of having assets in treasuries as savings. Instead, theyre looking at commodities which I think have no counterparty risk and the relevance of how important they are moving forward. I think Zoltan nailed it. So, yeah, it doesnt surprise me. The central banks say that and I would argue that theyre buying way more than theyre telling us and producing more than theyre telling us. So tell us just enough to keep us interested. But if we really knew how much the Chinese were buying or any of these countries, the price would go parabolic and its in all of their best interests during the accumulation phase.

To be tight lipped about that and not be genuine doesnt do them any good to do that. Well, I hear you and perhaps well find out how much gold China really has one day. Would be hard to imagine what they could say that similar with the US where you actually fully trust the answer. Either case, we’ll see if we ever get an answer. Any time will tell, brother. You’re right as always. Andy, last thing in wrapping up, anything you could say about what’s been going on with the premiums on retail lately on gold and silver? Well, what I will tell you is that, and it’s interesting, part of the reason the premiums were so cheap for the last several months has been the overhang of backdated items where for the first half of the year, I didn’t sell anything.

2024, we had so much stuff from previous years and a lot of people selling that’s for the most part gone. And you can’t find much in the way of backdated material anymore. That would be step number one. Silver eagle premiums have been on the rise. That would be step number two. I would say that the premiums are just about ready to start moving. They’ve moved up a little bit, but the tightness in the physical market in terms of secondary product, we’ve seen kind of a ceasing, if you will, of the sellbacks, and now it’s moved now to people are buying again.

But you don’t find those really, really great deals on the backdated stuff that we’ve seen. I would still say that probably the best value, period, bar none, would be junk silver pre 65 dimes and quarters. Because it seems as though that’s the one item that hasn’t kept up with the sovereign mint coins recently and through most of the pandemic was only second to silver eagles in premium and most of the time north of ten dollar eleven over spot. And now you’re buying it at well under $2 over spot. So if I were buying anything right now, that’s what it would be.

Because the premium on that has yet to match those of the sovereign mint coins, which is really kind of confusing. I can’t explain it other than to say it is the way that it is. But yeah, whether it be big stashes of hundred ounce bars or back date sovereign mint coins like maples and eagles and philharmonics, it’s all gone. So I would expect to see premiums really start to slowly and then maybe even gradually and faster move up as we get into the fall, which is typically when that happens, let alone with the Brics meeting and the election, I’m shocked it’s lasted this long with the strength of gold and the central bank’s buying.

I’ll be really shocked if we don’t see something that wakes people up into the election that would push premiums higher. But it’s still ultimately a very advantageous. It’s a buyer’s market right now, at least in terms of price. Alrighty. And is there anything in particular on special this week? Good question. You know, you usually catch me off guard on that. I know we are working on. So I think we kept the specials the same, which would be silver kilo Ital Preziosi bars at $1.79 over because we wanted to do something special, maybe even as soon as tomorrow for the debate.

And stay tuned. I will let you know. Maybe you can attach something to this or send something out or I know it’s a little bit late in the tooth here since we’re doing this video right now, but we’re working on something special for the debate, american, and I’m sure it’ll be junk silver, maybe some Morgan silver dollars, maybe some, some circulated ten and $20 gold pieces. It’s a big, it’s a, it’s a big moment for the United States this election. And it starts, I guess you could say it kind of really starts Thursday with the debate.

So we still have the Ital Preziosi kilos at a buck 79 over. And I would tell you the junk silver is less than that and probably a better buy. So that’s all we got this week in special. I’m sure next week there’ll be something much more grandiose, but maybe in the next day or two something really special. So stay tuned. Well, and you can find out or take advantage of that by emailing arcadiailesfranklin or if you would like to check back in and find out what the super election special might be once such information is made public, just email us at arcadiasfranklin and happy to talk with anyone who has questions there.

And Andy will wrap up for this week. But thank you as always for making some time and who knows what next week holds in store, but I’m sure it’ll be eventful and we’ll see how the debates go this week and all sorts of other things that are happening. But appreciate you being here and we will see you again soon. I will always be here, Chris, and I’m still waiting to do one in person, brother, so I look forward to seeing you soon and picking up where we left off. Thanks again, buddy.
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