By Monetary Metals
The interplay between gold and silver & their fundamentals
The price of the dollar was down 50mg gold, to 27.8mg, or if you prefer 0.04g silver to 2.18g. Why do we measure the volatile dollar in terms of gold and silver? There’s nothing else to measure it, certainly not the dollar-derivatives called euro, pound, franc, yen, and yuan.
In the common tongue, gold was up $20 and silver rose 25 cents.
More importantly, we want to know what happened to the fundamentals. Read on for the only proper fundamental analysis of the gold and silver markets… [biiwii edit: well Keith, let’s not get carried away; let’s just stick with “sound source of information…” as touted here]
But first, here’s the graph of the metals’ prices.
The Prices of Gold and Silver
Continue reading Sign of Silver Turn?
By Monetary Metals
The fundamental price of the gold-silver ratio went up again
No doubt, many people were excited on Thursday to see a spike in the silver price. The big news almost seemed like it would be a spike in the silver price. We were not quite so exuberant, tweeting (follow us on Twitter @Monetary_Metals):
“What happened to silver supply and demand fundamentals this morning?!”
We expected it to be a teaser for today’s Report. However, the silver market took back the entire price move, and more, in about 13 hours. Here is a close-up, showing Thursday morning (Arizona time) through Friday around noon.
The Silver Price Spike
Continue reading Silver Flash in the Pan
Here is a monthly chart of USD we have used in NFTRH. The bull market began back in 2011 as the last inflation hysteria blew out. The key rally came in spring/summer of 2014 when a majority were still touting the death of the dollar and the rise of the euro. At that time I had targeted the euro to extinguish at around 140 +/- (it topped at 139.93 in early 2014, close enough for government work) using monthly charts but had no idea how strong the dollar would then become.
We charted its early rally by daily charts and then made kind of a big deal about it when it broke out above the first support level (then resistance) noted below. This went hand in hand with strengthening signals in the economy. USD has since gone on to establish new support levels and currently targets 105 (+/-) by holding support levels to its big breakout pattern. All good, yeh?
Yeh. Except that the economy is now ‘servicing itself’ as we have shown that health services, leisure and entertainment services and various other services, i.e. the back end of the economy, are doing all the lifting now. Manufacturing is flagging, exports too. The question is how long can this be sustained?
Under a certain scenario, the US dollar will run with the gold sector. That is why, while maintaining a bearish stance on the sector, I certainly do not fear the strong dollar as a gold bug. We are in the process of weeding out the charlatans, the easy answer brigade, the “Chindian Love Trade” promo and all the other noise. When the relentlessly strong USD wears at the economy and stock market, the right scenario will be in play. Here is a cute little chart we showed in NFTRH 369…
As gold rises vs. silver amid global economic stress, the US dollar is naturally supported because it is after all, the other Horseman.
Draw your conclusions. I’ve already rambled beyond what I thought would be a quickie chart update. Dinner’s ready.
 By the way, you might want to check out this NFTRH 363 excerpt in which we go through some of Martin Armstrong’s views on gold and talk probably a little too much about my own. Macrocosm Revisited
I have had a target on the gold-silver ratio of low 80’s to 90. Then on Friday the GSR did this, putting that target in question (it hit 81, but I was thinking higher).
Here it is today, converted to GLD-SLV…
Continue reading Key Moment for Gold-Silver Ratio
Now that the US stock market has gotten in sync with the rest of the world in its ups and downs, it also joins the rest of the world in generally (and loosely; it’s not a minute-by-minute relationship) being inverse to the Gold-Silver ratio (GSR, AKA the “metallic credit spread” –Hoye).
Here is the daily view of the GSR, showing a gap up and spike that came with the stock market’s big disturbance and a consolidation down that has come with its relief bounce. This is a bullish chart and so, it is a short-term bearish chart for US and global stocks. GSR broke out and is bullish while above the MA 50’s, MACD and RSI are positive and AROON is trend up.
GSR weekly is fully bullish as well. It adds a long-term up trend to the daily chart’s bull features. You can see the long and grinding journey upward GSR has taken since it was drubbed in 2010 (into 2011) by full frontal QE, as silver exploded vs. gold and the ‘inflation trade’ took off in 2010 and eventually blew out (in spring of 2011).
GSR monthly offers a different view however, as it is nearing historical resistance. Maybe when this resistance is hit it will hold and those who have, shall we say cheered so long and hard for silver can finally deliver the ultimate “I told you so!” after 4+ years of futility.
The bottom line is that the Gold-Silver ratio indicates more short-term problems in US and global stock markets, commodities and even potentially the precious metals themselves. But the bigger picture view at least offers a line in the sand (long-term resistance) where an ‘inflation trade’ may finally get going again.
That scenario could be the product of a saturation of the non-stop inflation that has been promoted in the US and globally by policy makers, with a global deflationary backdrop hiding its effects. Alternatively, it could be the product of panic by the US Central Bank, should the stock correction get serious enough. The entire recovery out of 2009 has been, after all, about risk ‘on’ asset market speculation and wealth effects.
Whatever it is, you can bet that political animals and powerful policy makers alike do not want to see the Gold-Silver ratio break out of its big picture limits.
Well, of course change is coming to the macro markets. It has come every day since the beginning of time and today is different than yesterday. But I mean a change in the market’s character is likely coming in 2015.
NFTRH notes the divergent Horsemen, Gold-Silver Ratio and USD, and also cryptically notes that people need to have the proper market interpretations at the ready in 2015. It was just 6 months ago that we started managing a bounce in the roundly reviled USD in NFTRH. Now look at it, everybody’s bullish the buck.
The stock market is down big today. Oooh, that’s scary, eh? Well no, not until it breaks some parameters. Interestingly, some of my non-gold stocks are very green today. I think (think, mind you) that the market is just cleaning out the pipes as sentiment got over bullish again over the holidays. Those gaps need filling, after all.
But if and when it does go bearish for real I’ll plan to short this pig with conviction. Right now the only thing I am short is junk bonds and that is working well. I find it really interesting that everything is down in the face of the strong dollar but the precious metals. That is exactly according to NFTRH’s plan on the big picture. Exactly. In the near or intermediate-terms, other things can and will happen. But today is a microcosm of what I’d expect the big picture to look like under a strong dollar regime.
Meanwhile, the Gold-Silver ratio says Uncle Buck may be readying to take a break. It’s either that or the GSR will get back in gear and croak everything. I think the former may be in play.
Today the 2 Horsemen rode newly brave bulls back out of town.
The news driven short covering rally yesterday was impressive and now momo’s are being punished. Makes sense.
Continue reading NFTRH; USD & Other Indicators