Gold and Coronavirus: The Party is Just Getting Started

Published on
March 18th, 2020
Duration
25 minutes


Gold and Coronavirus: The Party is Just Getting Started

The Expert View ·
Featuring George Milling-Stanley

Published on: March 18th, 2020 • Duration: 25 minutes

After this week's massive exhale in the gold price, investors are left wondering whether this was the famed effect of margin call selling that could continue if equities move lower, or an unexplained opportunity to pile in at levels not seen since January. Regardless, with central banks cutting interest rates, the return of QE, and the potential for continued woes in equity markets, the medium-term outlook for gold has seldom looked better. That's why we are bringing back George Milling-Stanley, chief gold strategist at State Street, to assess gold in a world ravaged by coronavirus. He endeavors to answer the questions of whether we will see gold continue to sell-off due to margin call selling, if the speculative interests that drove the price of gold higher after the last crisis have finally returned to the market, and how gold will perform relative to other precious metals and miners that people often see as levered play on the spot price. Filmed on March 11, 2020 in New York.

Comments

Transcript

  • TZ
    Tibor Z.
    18 March 2020 @ 23:16
    Look at on silver at $12 ! Disaster!
    • AR
      Anthony R.
      22 March 2020 @ 04:13
      Tibor - It initially behaved the same in 08/09 - as did gold. Go take a look at the charts of that era. Silver went to a 9 handle and I loaded upon on what was the 'silver wheaton' - at about 3.20 a share. Silver shot up to 50 and I unloaded SLW at 43ish. Point is, short term reaction and how the long term plays out are two different things.... Short term the market is a voting machine - longer term, a weighing machine as someone once said. That's just my last experience. Your mileage may vary.
    • DM
      Doug M.
      31 July 2020 @ 15:57
      Tibor, look at Silver now, .....07 31 2020
  • OC
    Otto C.
    18 March 2020 @ 20:22
    The gold chart is broken, it has peaked. This will be a deflationary recession and that's why equities, gold and bonds are being sold in unison. The tide rises and lowers ALL boats.
    • MH
      Martin H.
      19 March 2020 @ 01:13
      Oh hardly! Back up a little and look at the market structure. Gold is looking OK here.
    • AF
      Andre F.
      19 March 2020 @ 03:51
      Jason H. What do you mean by "look at the market structure". It sounds fancy, but what do you actually mean.
    • AF
      Andre F.
      19 March 2020 @ 04:02
      Jason H. Can you also explain why gold looks "OK" in your view, when it went from a peak of $1700 to a print of sub $1500? Why is it that you interpret that as "OK"?
    • MH
      Martin H.
      22 March 2020 @ 03:48
      Andre F. the COT reports, open interest levels and who is short and long. I don't see capitulation here, I see really high OI (even after the liquidation that has taken place) and the potential for the short side to be squeezed if they don't manage get more liquidation. Given the size of the moves in other markets liquidation has been sluggish in gold. Given 2008's example many people are look for gold to be the first out of the gate. I'd in no way call it done, cripes, gold is flat for the year at these levels, not down 30%!!!
  • MC
    Michael C.
    22 March 2020 @ 00:09
    Which equity sector is most likely to maintain (or even maybe increase) EBIT margins and cashflows (and hence ability to service debts and pay dividends) in this crisis? Gold miners.
    • DH
      Dale H.
      22 March 2020 @ 01:02
      Exactly. I'm not worried that I have TOO much gold miners versus gold, I worry that I don't have ENOUGH gold miners. After all, gold will give you ordinary income, is taxed, and the "gains" will have to be adjusted for inflation, so the wealth BUILDING gains will be in the miners, while wealth MAINTAINING gains will be in gold itself.
  • CT
    Crispim T.
    18 March 2020 @ 14:21
    My money is going to Bitcoin (BTC). Gold had its days but this is the time to look ahead and see beyond the crowds.
    • SB
      Stephen B.
      18 March 2020 @ 16:20
      I remain nervous of Bitcoin because I fear that the western central banks will ultimately do everything in their power to eliminate such a competitor. They have their own plans for a global digital currency (one that they issue and control) and cyrpto's stand in their way. Of course, gold also stands in their way but there you have the Russian/Asian central banks pushing the other way, so gold is more of a draw. It seems to me, therefore, that to go long Bitcoin is a bet on the view that central banks will lose control of the agenda.
    • DS
      David S.
      18 March 2020 @ 19:46
      Gold and Bitcoin will be valuable as long as they are perceived to be scarce. If either is perceived to be abundant its value will change. Since one can own both for now, what is the urgency to only pick one or the other. You can pick both, one or none. DLS
    • MH
      Martin H.
      19 March 2020 @ 01:22
      You will learn the hard way.
    • MK
      Mike K.
      19 March 2020 @ 01:37
      Bitcoin will not go away, however it is now and will remain nothing more than a "collectable" just like as stamps are or baseball cards or wine is. Nothing more, nothing less.
    • PP
      Patrick P.
      19 March 2020 @ 02:02
      Bitcoin vs Gold? No thanks to (BTC) ..Besides I've heard Tulips are the next big thing.
    • JM
      John M.
      19 March 2020 @ 03:52
      I am not sure how you can say "Gold had its days.." It is more or less holding its value in the midst of this crisis whereas bitcoin has cratered. However let's see what the next 6 months to a year brings. I think that will be decisive.
    • AS
      Andrew S.
      21 March 2020 @ 22:59
      Hard to imagine not holding both gold and some Bitcoin......
  • JC
    JP C.
    21 March 2020 @ 22:16
    Any thoughts as to what might happen to the price of Gold if major CB's of the world guarantee all bank deposits (all ADI"S ) in full? (i/e. beyond FDIC insurance or similar etc). Could this happen ? Might/could they do this or perhaps something that is more robust than whats currently offered in the respective G20 countries ?
  • AL
    Andrew L.
    20 March 2020 @ 18:05
    Already knew it was going to be a bad interview when he starts off with jewelry demand lol
  • BA
    Bruce A.
    20 March 2020 @ 09:38
    Deflation fears are running rife. Real interest rates have moved strongly higher (out of -0.5% to +0.5% or so) over just a few weeks. This is my only worry for gold (and I have my share). If deflation were to set in and rates are stuck at zero but prices are falling everywhere, then that would be a bad environment for gold. This is my only worry for my beloved gold. Eventually you'd think the CB's and Treasuries will will print/ spend in 'consolidated balance sheet' fashion and give us inflation..........but these are odd times with a huge demand shock and likely a large debt default environment ahead. Going to be tough to get economic growth for a while yet.
  • PC
    Philip C.
    18 March 2020 @ 11:34
    A week has elapsed since this was filmed, and gold fell $200 in five days. Is this just volatility?
    • JL
      John L.
      18 March 2020 @ 11:49
      You betcha it was. Classic "Sell not what you want; but what you can !" It was the mad scramble to sell anything liquid enough, the panic selling and margin call selling about which the analyst thought was over...Nope. A week is way too long in this current climate; And 2020 will surely go down in history as one for the Ages... Be Prepared RV community.
    • pd
      peer d.
      18 March 2020 @ 13:17
      There was an unwind of a 3x levered ETF.
    • IP
      IDA P.
      20 March 2020 @ 06:07
      there was an unwind of a levered ETF because forward real rates became positive (inflation expectations collapsing below yields.) In years past gold would collapse when expected real rates would go positive. It held up pretty well so far actually.
  • NC
    N C.
    20 March 2020 @ 04:59
    Had the pressures & instabilities in the market been given even more time to build, gold would have slowly edged higher and surpassed its all time high. But Tom McClellan in his recent comments was exactly correct in that gold is bought up as people see the storm coming. Well, it hit us faster than expected with Covid so gold did not have enough time to reach its all time highs. Now that the storm is here, gold is being cashed in, forced or not.
  • TW
    Thomas W.
    19 March 2020 @ 15:24
    Okay, so apparently George thinks JFK was killed by Oswald alone shooting from the book depository as per the Warren Commission report. Ya know, the one with that zigzaggy bullet. So glad we got that sorted out. I've never been the least bit impressed by this guy in the 40+ years he and I have been involved in this market. His has always been a very superficial, CNBC-acceptable kind of commentary. That kind of mainstream pablum seems wasted here. That said, I happen to actually share many of his views. I'd like to think I'm able to separate the wheat from the chaff and the truth from the BS, my tinfoil hat notwithstanding. There is a fair amount of truth here ... and a fair amount of BS. I prefer guests who aren't serving as mouthpieces and who don't cast aspersions.
    • TT
      Terry T.
      20 March 2020 @ 04:00
      So you’re saying you believe JFK was killed by Oswald?)
  • SW
    Simon W.
    19 March 2020 @ 19:52
    George is clearly a smart guy - but too much 'price talk' here and not enough on fundamentals.
  • DT
    David T.
    19 March 2020 @ 17:57
    HSBS holds GLD Gold in its volts. Good luck with that :)
  • AT
    Andrea T.
    18 March 2020 @ 21:59
    Amazing to call silver an industrial metal. Total ignorance of monetary history. No money has been used more widely than silver throughout human history, not even gold.
    • RM
      Robert M.
      18 March 2020 @ 22:15
      Many people in the markets talk about silver and industrial uses vs gold and jewelry. Get your point, but there is still an industrial tie to silver demand that hurts its pricing in downturns.
    • MH
      Martin H.
      19 March 2020 @ 01:10
      Silvers supply is largely by-product and recycle. Supply plummets with falling industrial demand as both these elements fall away. There are very few pure silver mines. Silvers monetary role comes forward in times like this. Look at most dealers in the USA, they are sold out, it has all gone, 2-4 months wait! This guy talks his book. Most people don't get silver. For now this is about the futures market not the physical market but that will change.
    • AT
      Andrea T.
      19 March 2020 @ 09:03
      Of course silver has *also* an industrial use, it is a form of *commodity money*. But this is true also for gold. On the other hand, fiat money and bitcoin don't have any use as a commodity. It is just that they are different form of money. So to say that silver is an industrial metal misses the point entirely.
  • TR
    Theodore R.
    19 March 2020 @ 05:37
    IF the speculators come back and big money flows into GLD, while, say due to even temporary supply chain interruptions for physical delivery needed to balance GLD inflows, what does that mean for the etf? Would appreciate George’s input. Thank you.
  • AF
    Andre F.
    19 March 2020 @ 04:26
    This gentleman speaks like someone on the payroll of junior mining company. Also, he just makes vague remarks. He is not "an expert" he is a talking head. He's just a P.R. man all things gold. I've heard him in three interviews now: a previous appearance on R.V; a CNBC spot; and this current appearance. Putting them altogether he's just a P.R. man, a cheerleader. He should never be sought out by Real Vision ever again, his commentary is worthless and possibly dangerous.
    • AF
      Andre F.
      19 March 2020 @ 04:27
      "a P.R. man *for* all things gold"
  • AI
    Alita I.
    18 March 2020 @ 20:59
    He mentioned Russia, China, Brazil, Thailand, (S) Korea will continue to buy gold becuase they have been buying in the pas 10 yeip[ars ?? Thats when the economic wheels are spinning. When the world GDPs are hit hard. They will postpone buying or even liquidate some to prop up their economy. Look at venezuela. Central Banks will be so busy buying their own gov bonds and equities they will get distracted from gold.
    • AF
      Andre F.
      19 March 2020 @ 03:49
      Translation please. What do you mean they will liquidate to "prop up" their economy? "Prop up" is vagueness speech or shorthand speech. By "prop up" do you mean that these countries will be starved for dollars and will therefore sell gold in order to get dollars. To me, that is the only thing you could have meant, Is that, in fact, what you meant?
  • BM
    Beth M.
    19 March 2020 @ 03:20
    All the QT will do wonders for gold and silver...and love what Kyle Bass said about the Wuhan virus here...https://www.youtube.com/watch?v=HWaCdUgLjus and the Australian here...https://www.theaustralian.com.au/commentary/coronavirus-there-are-lies-damned-lies-and-the-chinese-communist-party/news-story/f05b395352ded974defbabeacc43481c Hopefully the snowflakes can handle it. ?! ;)
  • WM
    William M.
    18 March 2020 @ 17:53
    Right now silver and platinum are dropping as hard as the S&P 500 because of the industrial nature of both. They did the same in 2008 but bottomed before the stock market, before they soared for several years and outperformed everything including gold. Yes they are primarily industrially useful and selling well below the miner's cost of production, but they still are also good alternatives to fiat money. Both are at the largest discounts to gold ever. (The gold/silver ratio has rarely exceeded 100 and averages about half of that level. Right now it's at 126). George says that central banks own none of either silver or platinum...that they only own gold. But do we really trust central banks (the original source of many of our problems!) not to dump gold for a variety of reasons? As the world's debt markets implode, it does seem prudent to have assets without counter party risk like gold, and maybe some bitcoin, but don't shun silver and platinum at these prices. (Sprott has a great silver ETF PSLV). Right now my local precious metals dealers have no platinum and only the 100 oz silver bars (at a 20% spread between buy and sell) available....and that seems to be the case everywhere. Also silver is the common man's precious metal, especially with gold viewed as relatively expensive by precious metals and jewelry customers both in Asia and in the western world. Still, insanity rules in all the markets, so hiding out in the (for now) almighty US dollar feels most comfortable....longer term who knows how debased it will be. In one month we've gone from all-time highs in the S&P 500 to a potential global depression on the horizon, and not only is monetary policy already at a new extreme and growing, but fiscal policy around the globe is rapidly entering the Modern Monetary Theory world of printing money to pay for everything until we get enough inflation to tell the politicians to stop (will they?!). While I understand the need to smooth the curve for the sake of the hospitals and medical staffs, it does seem like there's no guarantee that that will ultimately save that many lives....it'll just spread the deaths out over a longer stretch. Meanwhile we risk creating a global depression at a time when $250 trillion in debt looks increasingly shaky...and we'll be adding to it faster than ever. A depression will lead obviously lead to enormous economic suffering for all of us...but it will also lead to massive suffering in terms of human health. I'm 60 and have mild asthma (but am otherwise quite healthy)....if I get this virus badly enough, I'd really like the option of a quickly administered death....especially since surviving this I'd probably have such damaged lungs etc. that life would not be worth living for me. I'd rather the medical care potentially used on me be reserved instead for younger people. Triage is already occurring in Italy (and probably did so in China if we heard the facts). Humans aren't good at weighing tough choices like triage...and also putting fatal risks and death etc. in perspective....but I fear a global depression will mean death by drugs, drinking, reckless driving and other forms of slow and fast suicide will skyrocket. And even for the healthy, the financial stress will lead to more cancer, heart conditions etc.
    • DS
      David S.
      18 March 2020 @ 19:21
      Really good discussion on platinum. I will watch it as a possible market turning point also. As for your health, build up your immune system now! Be positive now! If you boost your immune system and take care of yourself, I hope you will not get or can beat this virus. Compared to cancer this virus is in the little leagues. It is in the major leagues for economic dislocations. Take care of yourself so you can take care of others. DLS
    • RM
      Robert M.
      18 March 2020 @ 22:12
      I am hiding in dollars. Market is much too volatile for me as well. Only have one miner. TLT all over the place. Never was a trader, more LT, but have no idea what is going to happen in market on a day to day basis.
    • MH
      Martin H.
      19 March 2020 @ 01:19
      Silver supply is mostly byproduct and recycle, both fall away as industrial demand falls.
  • MF
    Max F.
    18 March 2020 @ 21:46
    Jan '22 20$ Silver (SLV) calls very cheap. Massive upside snapback risk if COVID is less impactful we think. Remember, Silver was trading at $18.8 just a few short weeks ago.
  • IZ
    Ignacio Z.
    18 March 2020 @ 16:51
    Sir, The Spanish Flu wasn't a flu nor spanish. Why don't we call this one the Chinese Virus?
    • DS
      David S.
      18 March 2020 @ 19:39
      Ignacio Z. -Sir, The medical community thinks it was influenza caused by a virus - Wikipedia: Spanish Flu. It is best to call a virus by a scientific name as no one knows where many viruses start. In the Wikipedia article " It has been theorized that the flu (Spanish - 1918) originated in Kansas". DLS
  • TJ
    Terry J.
    18 March 2020 @ 15:29
    Thanks RV. I enjoyed hearing George's views again and most of the arguments he made make total sense. However, I would love to get an alternative view on the potential question of fractional reserve gold being used within bullion ETF's. What about inviting Egon Von Greyerz to give us his views on this important subject?
  • WM
    Will M.
    18 March 2020 @ 14:13
    Very sage advice from a grey haired professional gold advisor. If I was a risk taker, I would not be sitting with only ~ 12% in precious metals/stock. I am looking at buying some more miners once I get any indication we have bottomed out. Trouble is that could be anywhere from 20k down to probably 15k in the Dow.
  • km
    kenneth m.
    18 March 2020 @ 12:37
    Key point - and proving very prescient to what happened later last week. He points out that equities of all types (Miners included) are still equities and not gold, in the short term.