Brexit shined a bright light on euro currency concerns, but a brewing banking crisis in Italy has combined with a rapidly growing anti-euro sentiment in France and the Netherlands to drive vast amounts of euro currency holders to the presumed safety of German banks. The German Central Bank saw its liabilities to customers outside the currency bloc rise to an all-time high at the end of last year, attributable most probably to safe haven needs created by the European Central Bank’s (ECB) injection of billions of euros through its bond-buying program. And all of this is in spite of the fact that German banks charge a higher rate than the ECB for currency storage.
While Europe continues to deal with a myriad of economic failures, North Korea has taken the opportunity to condemn annual joint military exercises between the United States and South Korea, calling them a practice for North Korean invasion. To underscore their displeasure, North Korea launched five extended-range SCUD missiles Sunday night, four of which made it to the end of their 600 mile range and fell into the Sea of Japan. China is North Korea’s biggest trading partner and primary source of arms, food, and energy, driven mainly by a desire to avoid a regime collapse, which could result in a massive influx of refugees across their 870-mile border. The new U.S. administration however, seems content to continue saber rattling, by threaten China with trade tariffs and potential sanctions for continuing expansion in the South China Sea.
While global economic and political wounds continue to fester, matters on the domestic front seem to be more divisive and chaotic than ever. Under extreme conditions, that would normally drive investors from the market and to the safety of physical gold and other precious metals, instead we continue to see a complete role reversal. I believe the only possible explanation is a combination of determined hope, market seasonality, and the first hundred days of a new Republican administration. All of which historically provide stronger markets and less concern for safe haven. But as April comes to a close, the seasonal market will begin to turn and as the first hundred days of the new administration’s results are compared to campaign promises, the euphoria will wear off and reality will regain control.
A correction is inevitable. This bull market is more than a little long in the tooth. The only questions are how quickly and how much? If combined with a major event, whether economic, political or terrorist, the answers could be immediate and dramatic. With all the catastrophic pieces in place, markets flirting with all-time highs, and metals languishing at relative lows, how could any savvy investor not recognize today’s outstanding opportunity to further protect their portfolio, by increasing their levels of precious metals ownership? And anyone without the minimum typically recommended 5% to 15% portfolio share in physical precious metals, needs to realize that they’re on the verge of playing Russian roulette, with a loaded gun.