Precious metals and other metals and commodities continue to be buffeted by global and national economic, financial, political, and social challenges. There are some clearer views of things will evolve, but there remains enormous uncertainty.

The Congressional Budget Office released its April update on the U.S. economy, deficit, and debt. The deficit is now projected at $3.7 trillion dollars this year, with an enormous plunge in economic output and Great Depression era unemployment in the cards. The report is available here.

https://www.cbo.gov/publication/56335

The International Monetary Fund meanwhile released its revised projections for global and national GDP for 2020 and 2021 earlier this month. The summary is available here.

https://www.imf.org/en/Publications/WEO/Issues/2020/04/14/weo-april-2020

CPM continues to receive queries about the outlook for the economy, for financial markets, currencies, equities, interest rates… all of those things that condition fabrication demand and investment demand for gold, silver, platinum group metals, and other commodities.

We do not have a lock on perfect foresight, and explaining the recent strength in U.S. and many other stock markets around the world is somewhat baffling to all of us. One explanation, perhaps the best, is that investors have put money into stock markets reflecting a ‘where else are you going to put your money’ attitude. Interest bearing assets? Currency of choice?

That said, stock markets now have reached a critical point and time. The DJIA, S&P500 and some other stock market indices have recovered around 50%, more or less. Insofar as so much money is driven by computer generated models based on past price behavior and that one of the key concepts of the Dow theory of technical analysis is a 50% retracement… these markets now are in a position where asset allocators have to decide whether there is another leg down or if this is a real recovery. If one were foolish enough to take economic considerations into account, in fact, one could easily argue that the answer is “yes:”  US equity markets easily could drop sharply over the next couple of months as the full impact of the global lockdown comes home to roost and even the densest among us are forced to accept that this will not be over by Easter, or Memorial Day, or the 4^th of July, only to be followed by a recovery in stock prices during the third and fourth quarters, as the liquidity from a $3.7 trillion dollar Federal deficit comes sluicing into the markets. So, in that scenario, the DJIA could plunge to a new low around 15,000, and then stage a rally in the second half of the year to back toward where it started 2020. The SP500 would have a downside target around 1800 in this scenario.