A recession is set to occur by 2024, but there is a silver lining for precious metals and the US dollar.
That is according to Jeff Christian, managing partner at the CPM group.
Christian spoke to David Lin, anchor and producer for Kitco News. Christian believes that a recession will likely occur by 2024, which will affect the silver market.
“You’d see less industrial use of the metal in a recession, but that’s a relatively less important factor in terms of the price. The price would probably rise sharply because of safe haven investor demand … silver prices tend to do well moving into a recession and into the early portion of a recession, ”he said.
When it comes to inflation, Christian is not optimistic that the Federal Reserve can cool prices by hiking interest rates.
“Well, the Fed’s got some problems,” he said. “A lot of the inflationary pressures are coming from the supply side, and supply tends to be less responsive to interest rate changes … and those things have been compounded by zero COVID policy in China, by the Russian invasion of Ukraine, and by a variety of other things. ”
Christian said that Biden’s infrastructure spending will have opposite short-run and long-run effects on inflation.
“In the long run, the infrastructure spending will bring down inflation because it will make delivery more efficient … [but] initially infrastructure spending has an inflationary implication because it pushes up the demand, ”he said.
Despite his bleak inflation outlook, Christian suggested that the US dollar will continue to rise relative to other currencies.
“There’s a lot of money pouring into the US dollar to invest in treasuries, because they have a higher yield than their competition … That’s probably going to continue … So the dollar is rising partly because it has a higher interest rate, and partly because other economies are in worse shape than the US economy, ”Christian said.
Recent moves by Russia, China and Saudi Arabia to de-dollarize do not trouble Christian.
“There are a lot of people who theoretically would love to move away from the dollar. And… in the next several decades, we probably… will move to a multi-polar international currency regime. But that’s going to take a lot of international cooperation, which is deteriorating like water in the desert right now, ”he said.
Christian stated, “Anyone who invests based on a belief that the dollar is imminently going to collapse is destined to lose money.”
If the US dollar rises, Christian believes that gold will also increase in price.
“Gold and the dollar are the two safe haven assets that people run to in times of uncertainty,” he said. “[T]he reality is that two-thirds of the time, gold doesn’t trade opposite the dollar. ”
He is also skeptical that China or other nations will create gold-backed digital currencies.
“[The] Chinese government and the People’s Bank of China have no interest in having any sort of convertibility of yuan to gold because that’s what destroyed France, and it’s what destroyed England, and it’s what hit the United States, ”he said.
To find out Jeff Christian’s silver and gold price outlook for the next year, watch the above video.
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