Even though the Dow Jones Index lost 1,031 points on Monday and another 400+ points so far today, this is mere peanuts when we take into account what is coming in the following weeks and months ahead. Because China accounts for 21% of Global GDP and it supplies a lot of goods, parts, and consumables around the planet, a severe contraction will impact the rest of the world in short order.
The one thing that I will share is that if you want to wait to prepare for this until some local, state, or regional government comes in and locks down your town, city, or area… then you are behaving UNWISELY. Of course, the situation may not get that bad, but there is nothing wrong with a little insurance, just in case.
The Precious Metals Will Do Did Exactly What They Were Designed To Do… PROTECT WEALTH
The gold price could correct lower, or move sideways, but as the global supply chain contagion continues to spread, I believe we are going to see the price move higher. So, the next important level for gold is $1,800. But, when gold finally goes above the all-time high of $1,900, it’s OFF TO THE RACES.
As for silver, there is a TRADING WAR taking place at the important $18.50 Resistance Level. Once silver breaks through this level and closes above it on a monthly basis, I believe it will quickly move up to the next resistance level of $21.50:
Silver COT Report
Gold COT Report
ALERT: The Precious Metals Heading Into An Entirely New Market
Looking into the future, I see the precious metals heading into an entirely new market, much different than today. My past analysis has based this on our future energy predicament, but it seems that this current contagion is speeding up the process… IN A BIG WAY.
While the Chinese Oil industry may continue to import oil, refine it, and then store it as finished products, the economy isn’t consuming it. So, if the IEA is forecasting that China’s oil demand will be down 435,000 barrels per day (bd) in Q1 2020, I wonder what planet they are receiving their data or maybe what they might be smoking. Again, Bloomberg reported a 20% decline in demand, 3 million barrels per day at the beginning of February. And, if we look at the charts above, China’s daily passenger traffic is still down about 80%.
China’s Estimated Oil Demand
Mar 2020 = 14 mbd
Avg Q1 2020 = 11.5 mbd
If we subtract 11.5 mbd from 13 mbd for Q1 2019, that equals a decline of 1,500,000 bd for Q1 2020, not the 435,000 bd stated by the IEA. Now, I don’t believe China consumed 13.5 mbd in January because if you look at the chart above, passenger traffic was also down considerably in the last week of the month. Note, these are just my approximations. Again, even if China’s Oil Industry is importing oil and refining products, the Chinese people aren’t consuming much gasoline, diesel, or jet fuel.
BINGO… outcomes this article today, No Financing And No Demand: Chinese Refiners Run Into Trouble:
Refiners, both private and state, have already reduced their run rates in response to the slump in fuel demand resulting from the outbreak, and now they have deepened these cuts, Bloomberg reported last week.
What happens if the situation in China doesn’t improve in March. PSA, an automobile manufacturer in China, just announced it is extending the shutdown of its auto-plant until March 12th. Even if the Chinese people return to work in March, how many are going to show up?? I doubt China’s oil demand in March will reach anymore than 9-10 mbd at most. If this is true, then total oil demand for China would be closer to 10 mbd in Q1 2020, or 3 mbd less, nearly seven times lower than the forecast by the IEA.
PRECIOUS METALS ALERT: Be prepared for investors to significantly increase their purchases of physical gold and silver. Demand could go crazy in a relatively short period of time. This is what happens when individuals realize overnight they need something quickly. Here’s a picture of a long line of people in South Korea waiting to get into the supermarket:
Steve St. Angelo, SRSrocco Report