Fed Crisis Will Send Gold & Silver Through the Roof!

Craig Hemke (00:03)
Well, welcome back to Sprott Money, SprottMoney.com. We've reached the end of September, fully 75 % through the way of the year 2024. We're gonna wrap up the month. We're gonna wrap up the quarter as we record this. It's actually the end of September. It's Monday the 30th. This is your monthly wrap up. I'm your host, Craig Hempke. And joining us is a fellow contributor to Sprott Money, my old friend, David Brady. Nice to see you.

David Brady (00:32)
thanks for having me back, Craig.

Craig Hemke (00:34)
David, I just appreciate all that you do. know everybody at Sprout Money appreciates all that you do. You write an article every week that can be found at SproutMoney.com under the Insights tab. You're also a good follow on X for people that want to be kept up to date on a daily basis. What's that Twitter handle again? Help me with that one.

David Brady (00:52)
at Global Pro Trader.

Craig Hemke (00:55)
Global pro trader all one word right? Alright so if you're on X and you should be because it's a great source for any kind of breaking news. You're going to get it way faster there than you're going to get it you know in the mainstream media. Shoot David a follow because he will keep you up to date on his thoughts really every single day and of course be sure to thank Sprott Money for all this content they put out all through this month and they'll put out all through next month as well SprottMoney.com

David Brady (00:56)
greater.

Absolutely.

Craig Hemke (01:25)
where you can go for great deals at any time on physical precious metal. Every order over 500 bucks gets shipped to you fully guaranteed and for free. So always go to SproutMoney.com whenever you're looking to add some physical metal. And why wouldn't you be looking to add some? We've had, David, what a great year this has been for both metals. But let's start with this month that was, you know, the last, I remember writing on my site, the last five Septembers, the average

down move and gold was around three percent and so I thought well you know maybe we're due for a pullback. Obviously we didn't get one. How do you feel about things as we wrap up the month and the quarter and we look ahead to the rest of the year?

David Brady (02:08)
Well...

That's a loaded question but I'll answer it. The Fed could raise by 50 basis points. It was somewhat telegraphed. Many expected including myself 25 but they went full 50 basis points. But I was saying for a while, least a few months, that Powell has been putting lipstick on a pig with regard to the economy. Because if you look at all the details below the hood, under the hood,

Craig Hemke (02:11)
Hahaha!

David Brady (02:40)
all alone defaults, credit card balances, foreclosures, corporate bankruptcies. If you looked at the details, ignore GDP, you would see things are crumbling. then so when he raised 50 basis points, yeah, I was a little surprised. Yeah, sorry, a cut.

I was a surprised at the extent that he could rates but maybe it was his admission that things were much worse than he's been saying.

And not only that, Craig, and you're aware of this as well and many of your listeners are, they've also tipped their hat to say that they're going to cut another two times, 25 basis points before the end of the year. So my question is, did you finally wake up? Are you admitting what's going on? Or is there something brewing that we're not aware of that you all of a sudden are slashing rates? What's next? They cut QT, move back to QE.

My point is, if you look back at history, and you know all this, every time the Fed starts easing, it's only good for gold and silver. And I can list them off. Recent, the most long dated. You've got the 2020 crash. What happened next? See ya. 2018, when Pell pivoted in December, saying there would be no more rate hikes, basically. Off it went. 2007, 2008, gold.

jumped in I believe it was October 2008, six months ahead of QE. I think gold itself is telepathic. And then you've got the dot-com bust when the Japanese rode to the rescue with their QE by pumping dollars into the stock market in the US. On each and every occasion if you look at what gold and silver did at the same time,

So we're in an easing cycle now. So that's the background that we have. And then you have to consider that the Chinese, I'm sure you're more aware of this than I am, the Chinese have been loading up on gold. India has been adding as well and in silver. But certainly you can see it clearly in the chart, it's going north.

Craig Hemke (04:47)
Okay

David Brady (05:04)
And one of the tells is, look at the amount that the banks are short in gold, record short, since records began in 2006 as of last week and for quite some time. And then look at the funds, the money managers. There's a big gap between the two. Who's filling that gap?

Who's the buyer on the other side? It's China, India, maybe there are other big countries involved, maybe Russia, but they're helping as well. So from my perspective, long, medium term, longer term, which is what is most important, is that the only way is up unless we get a banking crisis, stock market crash, or both. Now, in my opinion, that's a win.

not an if, it's a when. But everybody has been prognosticating about this since October of 23. The likes of Wilson and Polanovich, I think they've been demoted or fired because they were consistently a bear and it's just gone, the stock market I'm referring to, just keeps going up. But it's obvious to anybody with half a brain, in my opinion, that they're extreme overvalued these stocks. It's a very narrow breadth.

and like NVIDIA is the poster child of that. It's only a matter of time before they sink. And my two cents on that, that's the only big potential drag on gold and silver in the near future. But I don't expect it until after the election. I'll be shocked if they do it before. But I expect it makes more sense to me to do it afterwards.

At that point I expect gold like always and silver the worst case you get a brief but sharp drop lower and then gold and silver take off again. We saw the second one in 2020 we saw the same thing in 2008. We saw the same thing in 2000 when after the brown bottom. So there's no reason to expect it to be any different this time and that's the only major big item I will say.

I can see that could take down gold and silver but only briefly. in essence what I'm saying is it's up up up to the right. We'll get pullbacks across along the way. Short term long term. No short term yes. Other than that big event banking crisis and stock market crash. I'm only looking up but I'm looking forward to being able to take advantage.

of that drop in gold and silver of stocks crash because it will be the last great buying opportunity. Now there are short term pullbacks. There always are. I'll give you a case of point. In the rally from 2008 to 2011 in gold and silver you had more than 25 pullbacks in just those three years and yet the chart was doing this.

This is how it So you'll get pullbacks along the way but what I would recommend your listeners do is use trailing stops. That minimizes any losses in case we do get a big downdraft but it also allows you to stay in the bull market and participate in the gains going forward. And that's what I'm using right now.

So you're seeing gold and silver coming off as we speak. mean, 2700 was always going to be a tough level. And then silver getting up to the 32s, also getting a little ahead of its skis. But again, I think this is just a garden variety pullback right now. I think 3000 in gold is a lock and we could go to 3540 in silver.

don't get shaken out use trailing stops if you do stop out and goes back above the support level that you stopped out below buy back in but if it does continue lower you're out and it's texture gains and then I'll stop there and let you ask me something

Craig Hemke (09:46)
What do you think you mentioned silver David and I know a lot of folks watching continue to stack silver and have for over a decade or longer like I have and I mean like we're still a long ways from all time highs but even in the short term you know gold and silver rallied silver kind of caught up in May but now here we are gold is a good couple hundred dollars higher than where it got to in May and yet silver I can't even get back to where it got to in May.

David Brady (09:48)
Yeah.

Mm-hmm.

Yeah.

Craig Hemke (10:16)
What do you attribute that lack of tagging along?

David Brady (10:22)
Well, first and foremost, I mean, if the Chinese are involved and I there's plenty of evidence to show that they're focused on gold. He who owns the gold sets the rules. Then the next best thing is silver. And you know this as well as I do. If you go back to major bull markets in the metals, silver tends to lag at the beginning. But then when everybody else wakes up to what's happening, they're running down to their bank and say with their thousand dollars saying, hey, I want to buy gold.

and the teller on the other side starts laughing at them and says that won't buy one coin well what can I get what can I get they say well I can give you 20 silver coins I'll take those so the that's why it's called the poor man's gold the people wake up to it and then they all race down to the brokers the banks and so forth

and they realize that gold is out of their range and they start buying silver and that drives it up because and you see at the end of the day and I like these stats I quote them a lot 1974 to 1980 silver went up 24x sorry gold went up 24x silver went up 36x from 2000 to 2011 gold went up 8x silver went up 12x

So yes, it may lag, but ultimately it outperforms And I think the other, this is where you and I are aligned, the other issue is gold is a bigger market than silver. So to the extent that the bullion banks want to keep a cap on something, it's easier to do it in silver than it is in gold.

Especially if the Chinese are buying gold, it's hard for the COMEX to compete and the bullion banks. silver? It's day will come, for sure. But I think there's more of a focus on gold by the big players outside the COMEX and the LME. That's the primary reason, but history shows that silver will catch up. I what is the GSR right now? 9200 or something like that? Yeah, yeah.

Craig Hemke (12:31)
like that.

David Brady (12:33)
So the long term average is around 40, 30, 40 but if you go even longer it's 15 to 1. I don't doubt that that's going to happen again when everybody wakes up to this and they basically burn the dollar. We'll see what happens.

Craig Hemke (12:41)
Mm-hmm.

Well, and you make points, great points about, you know, any bull market, it's not just green candle after green candle after green candle, right? You get bull flags along the way and pull backs and then, you know, I always describe the COMEX as being two steps forward, one step back. Everybody rushes in, you get this big move up, but then price stalls and some of that money rushes back out and then it starts moving higher, you know, and you get a series of higher highs and higher lows.

One of the things in the short term though, and maybe this is one of our other things we should make sure we discuss this month, is the move in the dollar index. It seems as if so much high frequency trading, algorithm trading during COMEX hours is linked to moves in the dollar index. Some days it's almost tick for tick. The dollar goes up and gold and silver go down. The dollar is...

David Brady (13:29)
Yes.

Craig Hemke (13:47)
At least in the short term, of perched upon what would appear to be pretty important support between about 100 and 100.5. I'm sure you're watching the dollar index. What do you see and what do you think the implications would be should the dollar index start to break down and lose that 100 handle?

David Brady (13:54)
Mm-hmm. Yep.

Actually I'm on record for saying, maybe it was early, for over a year now my target on the downside was 94 to 92 in the Dixie. We've been oscillating between, as you pointed out, to 103, 104, it's actually the peaks are getting lower and lower. But I still think that we're going to get down there. Could we get another pop in the short term? Yes. But...

Craig Hemke (14:25)
Mm-hmm.

David Brady (14:37)
I mean pop, it's only to like 102, 103 maybe but I'm much more certain about the bottom being around somewhere between 94 and 92 but once we hit that target

I expect a big value in the Dixie and it's not because the Dixie is a great currency and it's the reserve currency of the world it's because of as I like to say it's like comparing Charmin Ultra paper to the Walmart brand in terms of comparing one currency against another and I don't use any expletives here but you know what I mean

the main contingent component of the Dixie is the Euro. I think the Europe is going to get into trouble and the Euro specifically is going to get into trouble and that's what's going to cause the dollar to rise 110, 120 but first we're going down and that'll support the move up in gold and silver. But at the same time my point was that when you're comparing one currency against the other the two of them are

not worth the money in your pocket

fiat currencies in general are going to run into trouble. So when you're comparing, you're saying all the dollars doing great and so forth, what against the euro? mean, how's it doing against the peso? If we're on the topic, you know, so to answer your question, I think we're doing a little oscillating here right now, but we will have a dip down to 94 to 92 in my opinion. And then that's when gold is around 3000, maybe 3100, silvers,

probably knocking on the door of 40 and then you'll get a turn up and you'll get a turn down in gold and silver because we need a decent pullback because if you look at the chart of gold since October 23 and arguably September 22 it's straight up you know so something has to give and for me it's a bottom in the dollar is one of them that's a big one and let's see what happens with Europe what does Europe do when

Craig Hemke (16:48)
Yeah.

David Brady (17:03)
Do they start cutting rates at a more accelerated pace than the Fed? That would do it. Or maybe their banking system collapses before the US's, who knows? But that's my reason. It's nothing specific to the US like that's driving the Dixie higher. It's something elsewhere. that would be Europe. That's my two cents.

Craig Hemke (17:27)
Yeah. Well, and as we wrap up the wrap up, David, it has gotten late. mean, today, as we record this is the last day of September. So we might as well just take a quick second look ahead into October to what's on your mind. You mentioned keep an eye on Stonks. This is usually, you know, seasonally a challenging month. We'd be watching noise out of the Fed. We'd be watching maybe some of the.

David Brady (17:33)
Ha ha.

Craig Hemke (17:56)
economic indicators out of the US. What are some most prominent things for not only what you'll be watching, what other people should watch here in October?

David Brady (18:05)
Yeah, I don't think as I said, I don't think we're going to get a stock market crash in October, nothing is guaranteed. But I'll be shocked if they do it ahead of the election. Absolutely, you know, the Fed would be accused or.

you know, not supporting the market going into it so that when the stock market, you know that elections are decided by the economy, at least they used to be. And if you get a stock market crash, that's going to hit a lot of people. So you basically handed Trump the presidency at that point. So I think it'll be after that. I expect some volatility in the short term. But again, the trend is extremely strong and it's up to the right. You will get pullbacks. And I think when we get

to 3,300 that's when something is going to give. They're not going to let it just keep going straight up. And the same in silver if it gets up to the 40s. I don't know what the precise trigger would be to bring that down but probably a...

rebound and the Dixie could do it. We'll be looking at the Fed and if they follow through on the two rate hikes. If they do it should continue to benefit gold and silver but the problem I have with this and I'd love to get your two cents on this as well Craig is isn't that already kind of priced in at this point because they told us maybe 15 basis points is still

left on the table but I think this rally is a bit long in the tooth right now. Could we go higher? Absolutely. That's why I say trailing stops. Don't try to guess which way or the other. Just follow the trend. Stop out if it breaks your level. And if it goes back above it, buy back in. That's my two cents. But I don't think the stock market are

Could there be a banking crisis? Yes, based on the latest data I'm seeing with regard to interbank lending, it's getting scary. It's getting 2007 like. So can they control it? Can they prevent it? I don't know. If they can prevent it, they will, I think, because again, the election's coming. But if they can't and it starts to blow up, that'll do it. You know, short term, short term, it'll drag down gold and silver. It always does.

but it won't last long and I'll be waiting to buy it. But other than that don't see anything else. don't think world peace is going to show up tomorrow. That will cause everything to drop a little I'd say. no I can't put my finger on anything specific. I just expected to keep doing this until something major happens.

and I don't expect that until after the election. So should be an easy ride for some short-term pullbacks as far as I'm concerned.

Craig Hemke (21:15)
sage advice from a wise old grizzled analyst. I joke because if I hadn't shaved this morning, I'd have about the same color beard as you do. I just knocked that off earlier. David, you do great work. And again, I only follow a handful of folks on X myself, but David's one of them. So I encourage you to check if you're on that platform at global protrader. But also you write something on

David Brady (21:21)
I don't know.

you

Craig Hemke (21:44)
Really almost every week. Usually, what they post, a Thursday or Friday? David's usually kind of later in the week. Yep, so just bookmark the spropmoney.com website. And I mean, you need to go there whenever you're looking for physical metal, but go there every late in the week and hit that insights tab and you'll see David's latest thoughts. And it's always gonna be very valuable when you do so. So David, thank you so much for your time.

I just always ask everybody on their way out help Sprott Money cast a wide net of distribution and Rising Tide floats all boats higher. The more people get talking about the precious metals is better for everybody. So please on whatever platform you've been watching hit the like or the subscribe button and amazingly every every single like and subscribe helps get you up in the algo rankings and get that get this information out to a wider audience. So please do that on the way out.

and then please be sure to check back. October is going to be a busy month and we're going to have a whole bunch of content on this channel so make sure you keep your eyes open for it as we go through the month. David thank you so much for your time it's always so great to visit with you and I'm sure we'll do this again soon.

David Brady (22:55)
Yeah, I look forward to it. Thanks, Greg.

Craig Hemke (22:57)
And from all of us at Sprout Money, SproutMoney.com, thanks for watching and we look forward to a very busy month of October.

David Brady (23:04)
Cheers.