$10,000 gold price would mean the end of the financial system, as we know it. Peter Hug, Global Trading Director of Kitco Metals, talks about likely scenarios for inflation, the economy, gold, and silver for 2021.
The gold market rebounded from it's mid December lows, but can it break the $1,900 resistance level? Peter hug, global trading director of Keiko metals is back to give us his weekly rundown and how he's positioned for the remainder of the year. Peter, welcome back. This is I think our LA last talk before the end of the year, it's a pleasure speaking with you.
Yeah, it's nice to be here, dude. Um, 1900 1920 was your, uh, you said it was possible before the end of the year. Are you sticking to that? We're seeing very close to 1900. It's just sticky up that, that, that level. Yeah. I, I mean, if you're asking me, you put me in a corner, uh, yeah, I think 1920 is still a shot.
Uh, we've had, uh, 1897 tested twice, uh, yesterday, uh, overnight, uh, coming into this morning, straight in, um, No Brexit is still sort of in a fluff. And, uh, I'm pretty convinced that we're going to get the stimulus package. I'm a little concerned. It might already be priced into the market. So it might be a, you know, buy the rumor, sell the fact.
Uh, but, uh, you know, I think there's a possibility, uh, uh, if we get it. Uh, a gold close today in the 1890s. Um, I think there's a reasonable shot. We might see a test of 1920, uh, before Christmas. Uh, we get caught up in their short-term prices a lot because we speak on a weekly basis, but that's the, if you look at the, uh, If you just go back a couple of weeks, it's had a gold center, pretty nice run since November lows, right?
From the 1780 levels, 1770 level all the way up to now, it's been a pretty nice ride with its ups and downs in the last six weeks or so. But, uh, yeah, it's pretty, it's been pretty good. Uh, would you call this a bull run? That we're in. Well, you know, I, I don't think the, uh, the book the market is, has ever changed.
I mean, there's always corrections within a bull market. Um, as you remember, uh, again, it's almost, it's always like Groundhog day for me every day is the same. Uh, but, uh, you know, when, when it got down, we, we, we were pretty from that 1775, uh, W was a very solid line in the sand for us. And, uh, if you remember, uh, we, uh, you know, entered the market to, at those levels and silver, uh, you know, South of, uh, the $23 level was, uh, was also the, uh, the entry point, uh, you know, nothing, uh, from a macro perspective has changed.
I know it's. Frustrating and people are looking, you know, for gold to be sitting at, you know, whatever the number of 2,500, 3000. I mean, whatever number is in their head. And, you know, I, I still think that that trend, uh, through 2021 is going to realize that kind of, uh, that kind of thing. Print, but in the short term, uh, you know, uh, the market trades, uh, just like the equity market straight, uh, you get movement up when the market spells people get a little worried.
Sometimes they get bored and, uh, you know, they'll take profits and then you'll have the market move down. Uh, but in the overall trend perspective, as long as, you know, significant support, resistance levels play out, um, you know, you've got to go with the macro trend, which I still believe in the metals is higher.
Okay. Yeah, let's uh, briefly touch on the macro trends for, uh, for the viewers. Who've missed our show last week. Let's uh, talk about your outlook for 2021. The macro trends are still in place and you talking to monetary policy, you're talking about economic growth. What are the variables you're looking at Peter?
Well, I mean you, two weeks ago you had the EU come out, uh, and, uh, The central bank there indicated that they would be accommodated through 20, 23. Uh, you know, this week we had the fed meeting, uh, you know, pal didn't say a lot, uh, but he said enough. He said, look, uh, you know, he's concerned in the short-term he thinks first quarter 2021 is, is, uh, could be problematic until the vaccine takes, hold.
But he reiterated that, uh, you know, the fed would be accommodated through, uh, or up to 2023. Um, and, uh, he's a fairly flexible on us inflation target. So, I mean, you can't get a better green light, uh, than, than that, uh, from the central bank. And then on top of that, uh, it. It seems apparent that we're going to get at least a short-term stimulus package of a somewhere in the 900 billion level and then Biden, uh, indicating when he comes out, uh, that, uh, you know, there's 900 billion is nice, but it's a band-aid and he's looking to put in more money.
So you're going to have some, uh, Fiscal stimulus also, hopefully coming in the first quarter, you know, again, until this vaccine does its job, uh, you know, and in that context, uh, you've gotta be, you've gotta be a constructive, uh, hard assets. Yeah, I, I, I, uh, spoke to an economist recently and I was told that the Georgia runoff is an important event to look at because that determines how much stimulus we're going to get.
Do you agree with that? Only a, I mean, if the two seats, Senate seats go to the Democrat, Uh, I would be extremely constructive, the precious metals markets, because then Biden's basically got a blank check. Now, if the Republicans take one or both of those seats, uh, then we have a lame duck, uh, presidency, and it's going to be much more difficult for Biden to get things done, but that's going to create, uh, again, an angst and volatility in the market.
I think either scenario, uh, again, pretends, well, at least through the first half of 2021, and then. Depending on how this economy recovers, if it recovers, uh, w you'll have to reassess, uh, you know, whether the trend is still intact, what are some of the, uh, what are some of the things Biden wants to do? And that's going to require basically a lot of money.
Well, he definitely wants to throw a lot more, uh, fiscal stimulus into the market wants to do an infrastructure, uh, uh, uh, project to, to get Americans working again. I mean, all good ideas, uh, not so much the spending of the money, although that's necessary. Uh, but the infrastructure program I think is long overdue in the U S um, I think, uh, he may reverse his policy on China.
So, you know, there were a number of things, uh, that he also wants to get back into the green deal, uh, and, and joining the Paris Accords, uh, all of that costs money. So, uh, I mean, I see Biden coming in, spending money. He's indicated that he'll try to pay for this with tax increases. Um, I think if he has a majority, including the Senate, Uh, that that's a possibility, but I do not think it's a possibility in 2021.
I do not think, uh, raising, uh, income tax and or capital gains tax in 2021 is going to be on his plate. That's more a 20, 22, uh, obstacle or issue that we're going to have to look. Got it. Do you think the fed could hit their 2% inflation target next year? Give another stimulus. You just talk again. I think if the economy turns, uh, and, uh, we get some semblance of normalcy, hopefully by end of second quarter, next year.
Um, given the fact that the central banks both, uh, both the fed and the global central banks, um, are going to remain in stimulus mode, uh, through 2022. Uh, that being the case, uh, I would suspect that, uh, they are going to be behind the curve. Uh, if the economy picks up and demand resurfaces behind the inflation curve.
And again, that will also be in my opinion, constructive for the metals, sort of a, a 1970s type of scenario. Now, um, let's talk about silver, silver. A couple of times you had mentioned to me that in 2021, Thirties, potentially even forties as possible for a price range. Are you sticking to that? Uh, yeah. I mean, again, it's, you know, anybody that just says, yeah, it's going to be at $35.
Yeah. I mean, certainly, certainly within the realm of possibility, uh, I mean, I think silver goes to $35 with gold, just going North of, uh, of, uh, $2,000 again, I think there's a, uh, there's more interest in silver at these levels now, uh, you know, take that out of the equation and just sort of have gold hang around.
I mean, there, I think the ratio will favor silver next year. Uh, especially if the economy, uh, rebounds. Um, there's going to be industrial demand pickup and silver, and I, and I think, uh, from that perspective alone, uh, I think the ratio gold silver ratio is going to narrow in favor of silver. So I'm constructing both metal groups into 2021.
I am more constructive from a percentage gain perspective on silver than I am on gold. Is it possible? This is a view I've heard, but is it possible that silver and gold could decouple meaning that silver could go up and gold could go down. It decouples, but it be couples in the context of ratio. Uh, so I mean, w when you sort of look at the historic ratio of gold and silver, uh, you know, a lot of analysts sort of say the historic norm is about 35 to one, so it's possible gold does nothing.
Silver moves up in that. Rachel comes down from where it is now. And I think it's around 70 to one right now, um, where, uh, you know, the ratio gets maybe to 45 to one, uh, Uh, you know, 45 ounces of silver to announce of goal, as opposed to a 70 ounces of silver to announce of gold, uh, or you have gold moving up in silver, accelerating and move higher, achieving the same, uh, you know, the same type of, uh, uh, of racial tightening.
If you're asking me if gold is sitting here at 1900 and gold drops to 1500, will silver go to $35? No, I don't think it will. Okay. And, uh, so let's, uh, let's talk about, let's talk about your forecast for gold than you given your outlook for silver, uh, $2,000 for, for gold by, uh, let's say the first quarter of 2021.
Is that a reasonable estimate? You think. Uh, I think $2,000 is certainly, uh, uh, certainly within my target range. Uh, again, I'm a trader, so I'm still looking for price points to break up. I need 1925 taken out. I think that's. Possible to approach that level, uh, between now and Christmas might be able to take it out before the year end.
Uh, and then, uh, you know, once we get through 1925, then, uh, you know, the next target is going to be psychologically $2,000. Uh, and then, uh, you know, from there, uh, you're probably looking at the, uh, at the high, which was, uh, roughly 2175. If I remember right. Uh, so those are sort of levels that have to, that have to be breached on the way up.
I think at 1925 is taking out, I think $2,000 is a given and it'll happen fairly quickly. Do you anticipate more or less monetary stimulus next year then compared to 2020 Peter, more or less? Uh, if, if the economy. Shows any semblance of legs and reviving itself by the end of first quarter next year, I don't think the fed is going to need to do more.
Um, I do think we'll have fiscal stimulus over and above this current package that we're talking about as a bridge to get us to the end of first quarter, possibly second quarter next year, when, uh, they hope to have 75 or 80% of Americans, uh, immunized. Um, so I, I think it may come more from the fiscal side than from the fed side.
If the government is not capable, uh, because Biden doesn't have the majority in the Senate and, and, uh, the Republican stand in his way, if the government's not capable of creating that fiscal package, uh, then I think the fed does have tools at its disposal, um, to, uh, to create more liquidity in the market.
And I do think they will step up. So here's what I'm wondering. Peter, uh, monetary policy this year was one of the main forces behind. Goals rise. According to many analysts I've spoken to now, I'm just looking at the charts, looking at GLD as a proxy, Gold's up approximately 19 20% year to date. As of today, 20% growth in a year is substantial for, for, for Goldman in any year.
Can we expect the same kind of growth momentum to continue to 2021? Well, you know, 20% at current levels is about $200. Give or take, I'm sorry, about 300 and $350 give or take, which at current price takes it just about $80 over the high that we had this year. So, uh, yeah, I mean, from this level 20%, certainly, uh, certainly achievable.
Uh, and if we are in a bull market, uh, you know, bull markets don't lie last a year. I mean, you know, when, when gold hit the high in 2011, And, uh, you know, it took almost nine years or eight years to, to get to the low, uh, or close to the low, um, uh, on the cycle. And the, you know, since, uh, since early 2019 we've been moving higher.
So I think we're in very early stages of, uh, of, of the bull market in, in the commodity sector in general. Uh, and, uh, which will also be positive for gold, silver, platinum, and palladium. I'm getting much more positive on the industrial side of the metals complex. I E platinum silver. Um, I mean, just look at rhodium.
Rhodium is trading at almost $16,000 right now. Uh, palladium is still treating, uh, you know, North of 20, uh, 2300. So I I'm, I'm getting more constructive on the industrial side, copper, uh, on the industrial side of the, of this market. And I think gold will at least, uh, be carried along in that trend. And I think the metals of the commodities trend has still got a few years to run before we get a situation where the central banks, uh, have to finally reverse course and start to tighten.
And, you know, once you start hearing the verbiage. Uh, that Powell or whoever the fed chairman is. Um, and some of the, uh, central banks or the central bank in the EU starts talking about, you know, we're, we're sort of done and we're looking now to sort of unwind this easy. That's your signal that we're probably close to the top.
And I, I don't see that for a couple of years. I, I get asked this question all the time by my friends and family is, Hey golds, Gold's going up. Should I buy now or wait for a pullback? And I always say, watch Peter hugs. He, he, he breaks it down very, very succinctly and clearly, but, uh, let, let's say to somebody ask you this question today.
Hey, should I wait, should I buy now? Can you, how would you, how would you explain, how would you, uh, answer that question? Uh, you know, and again, I don't want to sound old hat here. I mean, I've been very consistent throughout my career and, uh, you know, I'm moving on to 48 years in this business, uh, in 2021.
And, uh, you know what I looked at, you know, when people ask me that question and I've had that question asked to me ever since the mid seventies is, is really. What's what, what's your intent? I mean, what is the reason that you would want to hold the precious metals in your portfolio? And they can't answer the question most of the time, but, but, but generally.
I, I, I keep going back to what I was trained as back in the seventies. When I, you know, I took the securities course and I was managing other people's money is I think it's extremely important to have a balanced portfolio. And I think within the context of a balanced portfolio, you need hard assets and those hard assets.
Could be gold, could be silver, uh, could be an industrial metal. Uh, it could be, uh, um, uh, it could be oil, um, but you need a component of your portfolio and hard assets, but you don't stop there. You, you, you need to just. You, you need to recalibrate your portfolios. You know, whether it's every six months or one year.
And I think that's the biggest thing people don't do properly. And if you recalibrate your portfolios, you'll make adjustments throughout the life span of your portfolio. So if the metals do take off, uh, they'll probably represent a percentage of your portfolio that is higher than. What your goal is. And in that context, you sell some of that position and vice versa.
If the market goes down, your portfolio position in the metals will probably be underweight. In which case you buy more. And if you use that concept, whether it's in the metals or in the equities or in the bond market, uh, as, as a balanced portfolio approach, you'll tend to liquidate into strength and buy into weakness.
And that's the only way I can explain it. Now, if, if some guy comes to me and says, well, you know, I want to buy gold because I, you know, it's going to double, okay, go to the casino, play black or red, you know? And, uh, uh, yeah, it might, but it might not. Uh, I mean, you know, these analysts that have been saying since 1978, gold going to 10,000, $20,000 an ounce, some of them are still walking around.
Yeah. At least they might be a walkers today. Uh, but they're still walking around and they're still spelling the same stuff and maybe there'll be right, but. God almighty. I mean, I'm not buying something on the anticipation. That's going to go up 500%. I'm I'm looking at it as a, as an investment that should form part of your portfolio.
If you're looking for me to tell you that Gold's going to $10,000 announced I'd strongly recommend you don't listen to any of my comments. Cause I'm never going to say that. Yeah. Well that last point, I mean, this is more philosophical, but you wouldn't would you want. Goal to go to $10,000. What does that mean for the rest of the economy?
Well, you know, that's the other argument I go to, I go to conferences and sometimes I need to wear a flak jacket because sometimes I'm, I'm more bearish than bullish in the short term again, because psychologically I'm a trader, I'm not, uh, uh, you know, I'm not speaking to an audience from an investors perspective.
Uh, but I say to people, so you want gold to 10,000? Yeah, because the whole system is going to collapse and I'll be able to use gold as a barter. And I'm saying, do you really want that? And they asked me, what do you mean? Do I want that? And I said, well, picture yourself in a position where the entire financial system is collapsed and there is no medium of exchange and you have a gold bar and you need gasoline for your generator, or you need food.
And you think if you went to your neighbor's house and offered him a one-ounce gold bar, he would give you gas, Selena food. I think not. You're going to have, I have to barter with something that this person can use as well. Now, again, we're talking Armageddon where the whole financial system has collapsed.
So why would you want gold to be at 10,000 or $20,000 an ounce? Because everything else you own, your real estate, your, your, uh, 401k would all be decimated. Now if you're a hundred percent goal, that'd be great. But I mean, that's, that's a big gamble, man. You know, that's like going to a casino, putting all your money on one number on roulette and taking the spin and hopefully it goes right.
Well, I think, uh, some people say the whole, market's a big casino, but that's a discussion for another day. If you don't have to. I want to thank you so much for a, well, not just today, but all the interviews given us, uh, this year, uh, it's been a great year for, uh, for, for news. And, uh, I want to thank you so much for being a part of it.
Well, I appreciate it. And happy holidays to everyone. Take care. Thanks for watching. I'm David Lin, stay tuned for more. .