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Gold and Silver Up in First Half of 2017

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With plenty of geopolitical turmoil around the world, and strong demand from the east, gold and silver both posted healthy gains through the first half of 2017.

While most of the mainstream headlines focus the short-term drop in the price of gold in June, looking at the bigger picture reveals a much more positive trend for precious metals. The price of gold rose 7.9% through the first half of the year. Meanwhile, the price of silver logged a healthy 4% advance.

Safe-haven buying helped drive the surge. Investors are buying gold and silver in a world of uncertainty, and an abundance of caution helped push the price of gold higher. Political uncertainty and geopolitical tensions around the world have people on edge and seeking the safe-haven gold traditionally offers. The war in Syria continues to rage, the relationship between Russia and US remains tense, Qatar is locked in a standoff with its neighbors, numerous terror attacks have rocked Europe over the last several month, and how Brexit will proceed remains up in the air.

One could look at the current political tensions and troubling events on the horizon and think, ‘well, this will soon pass.’ But as we’ve pointed out in recent months, uncertainty seems to be the new norm. Next week, there will be a whole new set of political issues, surprise events, and rising tensions to make us uneasy.

There is also significant uncertainty here in the US as Pres. Trump struggles to implement his policy agenda. Six months into the Trump administration and Obamacare remains in place, there has been no progress on tax reform, and contentious debates over the budget are on the horizon. Many analysts question whether Trump can ultimately deliver on his economic promises.

Many Americans who typically invest in gold have been lulled into a false sense of security with the election of Trump. In a recent interview at the International Metal Writers Conference, Peter Schiff said that’s a mistake. Despite his intentions, Trump won’t be able to change the course we’re already on.

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.”

Perhaps the biggest reason to think gold and silver will ultimately continue to push higher is the likelihood of a major stock market crash. Several notable economists have recently expressed concern about surging stock markets, particularly in the US. Marc Faber has predicted “massive” asset price deflation  – possibly of drop of as much as 40% in stock market value. Billionaire investor Paul Singer recently said the financial system is not sound. And former Ronald Reagan budget director David Stockman said we should get ready of “fiscal chaos.” Last week, Nobel Prize winning economist Robert Shiller called stock market valuations “concerning” and hinted that markets could be set up for a crash.

Strong demand for gold in the east – particularly India and China – more than compensated for sluggish sales in the US during the first two quarters of this year. Indians demonstrated their hunger for gold last April during the celebration of Akshay Tritiya, an important Hindu holiday. They bought some 23 tons of gold in a single day.

So, despite a sluggish June, gold and silver are both up on the year, and the table appears set for precious metals to continue on an upward trajectory in the longer term.

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