GOLDSILVER med term swing strategy and possible resistance
Updated
Hello,
Thanks for viewing.
This is a combined post (slash essay);
1. Trading the valuation oscillation between silver and gold for profit / accumulation, and
2. Possible signs of resistance on gold stretching its relative valuation on silver.
Some of it will probably mirror well-established strategies, re-state some more obvious aspects, but hopefully, may be of value.
1. I am a relatively new entrant to the market, this is how I intend to weight my purchase of precious metals; Above gold-silver ratio (GSR) of 80 to buy exclusively silver / sell gold and to reverse the trade below a GSR of 45. Based on this chart there would have been a number of entry and exit points over the past 21 years. Each would have allowed for profit and or to accumulate additional precious metals. So right now, I am weighting my purchases very heavily in favour of silver (the only reason why I am still buying any gold is for peripheral reasons such as receiving favourable terms on gold at the moment, high liquidity, and ease of transport). If I had access to a physical market with greater liquidity, more favourable terms, and had zero concerns about possibly picking up and moving at short notice, I would be buying 100% silver.
Some trades using this strategy may result in a financial loss e.g. if both gold and silver drop further in price (until at a GSR of below 45) - but silver is nearer its base-line and doesn't dip as far in % terms I may sell silver for a $ loss in order to purchase a larger quantity of gold vs the quantity available for the equivalent $ value as when I purchased my silver. I am relatively comfortable that silver is near / very near its bottom - in the majority of US mines it is already produced below the minimum sustaining cost (of course this does not mean that the price cannot decline further).
Due to the local physical bullion market (buy price well above spot price and unfavourable buy-back terms) for silver being unattractive in my current location I am buying silver elsewhere using bullionstar.com in Singapore as it allows small purchases (1 gram minimum) very low premiums (7.56%) on certain items, and reasonable buy back terms (current spread 5%). If they prove to be a reliable partner, it will also solve any storage and security issues as they offer vault storage for low fees (the % fees are low BUT the min daily storage fee means that your charges are higher in % terms (than their quoted % rate) until you hold around SGD36,000 of siver or SGD77,000 of gold). When gold drops below a GSR 45 I will be able to trade back to dollars, or more likely convert into gold.
What will I get for my troubles (minus storage fees and spreads) in 2 to 5 years? Around twice the amount of physical gold bullion that I could get for my money now. One more swing of the pendulum and I could expect around 4x the amount originally invested back in silver. Rinse and repeat. Yes, physical metals are not dividend or interest bearing - but they are profit generating while being an effective inflation / fiat devaluation hedge (as seen in Argentina, Turkey, and Venezuela recently). While deflation seems more likely than inflation recently as the world struggles to stoke inflation I certainly feel better in times of uncertainty with silver, gold, and bitcoin as part of a diversified portfolio.
2. The GSR currently seems on the high side. Historically, relative values tend not to remain above 90 for long periods. I expect 90 - 91 (wave 1 and wave (i) 1.618 extensions) to offer resistance against further rises based on wave extensions, and failing those, 93 is a feasible end-point (Wave (1) 1.618 extension). There is reasonably strong bearish divergence shown on the RSI and I would be looking for higher highs to display as lower highs on the RSI after one more touch of the short-term trend-line. Hopefully, I have presented a plausible EW count for the present move.
Thanks for viewing
Thanks for viewing.
This is a combined post (slash essay);
1. Trading the valuation oscillation between silver and gold for profit / accumulation, and
2. Possible signs of resistance on gold stretching its relative valuation on silver.
Some of it will probably mirror well-established strategies, re-state some more obvious aspects, but hopefully, may be of value.
1. I am a relatively new entrant to the market, this is how I intend to weight my purchase of precious metals; Above gold-silver ratio (GSR) of 80 to buy exclusively silver / sell gold and to reverse the trade below a GSR of 45. Based on this chart there would have been a number of entry and exit points over the past 21 years. Each would have allowed for profit and or to accumulate additional precious metals. So right now, I am weighting my purchases very heavily in favour of silver (the only reason why I am still buying any gold is for peripheral reasons such as receiving favourable terms on gold at the moment, high liquidity, and ease of transport). If I had access to a physical market with greater liquidity, more favourable terms, and had zero concerns about possibly picking up and moving at short notice, I would be buying 100% silver.
Some trades using this strategy may result in a financial loss e.g. if both gold and silver drop further in price (until at a GSR of below 45) - but silver is nearer its base-line and doesn't dip as far in % terms I may sell silver for a $ loss in order to purchase a larger quantity of gold vs the quantity available for the equivalent $ value as when I purchased my silver. I am relatively comfortable that silver is near / very near its bottom - in the majority of US mines it is already produced below the minimum sustaining cost (of course this does not mean that the price cannot decline further).
Due to the local physical bullion market (buy price well above spot price and unfavourable buy-back terms) for silver being unattractive in my current location I am buying silver elsewhere using bullionstar.com in Singapore as it allows small purchases (1 gram minimum) very low premiums (7.56%) on certain items, and reasonable buy back terms (current spread 5%). If they prove to be a reliable partner, it will also solve any storage and security issues as they offer vault storage for low fees (the % fees are low BUT the min daily storage fee means that your charges are higher in % terms (than their quoted % rate) until you hold around SGD36,000 of siver or SGD77,000 of gold). When gold drops below a GSR 45 I will be able to trade back to dollars, or more likely convert into gold.
What will I get for my troubles (minus storage fees and spreads) in 2 to 5 years? Around twice the amount of physical gold bullion that I could get for my money now. One more swing of the pendulum and I could expect around 4x the amount originally invested back in silver. Rinse and repeat. Yes, physical metals are not dividend or interest bearing - but they are profit generating while being an effective inflation / fiat devaluation hedge (as seen in Argentina, Turkey, and Venezuela recently). While deflation seems more likely than inflation recently as the world struggles to stoke inflation I certainly feel better in times of uncertainty with silver, gold, and bitcoin as part of a diversified portfolio.
2. The GSR currently seems on the high side. Historically, relative values tend not to remain above 90 for long periods. I expect 90 - 91 (wave 1 and wave (i) 1.618 extensions) to offer resistance against further rises based on wave extensions, and failing those, 93 is a feasible end-point (Wave (1) 1.618 extension). There is reasonably strong bearish divergence shown on the RSI and I would be looking for higher highs to display as lower highs on the RSI after one more touch of the short-term trend-line. Hopefully, I have presented a plausible EW count for the present move.
Thanks for viewing
Trade active
Only slightly went above 93 and then dipped strongly due to the faster rise of silver VS gold. I am considering increasing my silver purchases.Trade active
Correction: Not all trades following this strategy would have returned a profit - or at least not a benefit that was evident at the time of the trade.For example, around April 2011, silver approached its top (a few months before gold topped). So setting silver near the top and buying gold while it was on its way to its all time high was good short-term, after Sept 2011 gold entered a period of deep and extended consolidation. However, the depth of the consolidation was considerably less than the drop of silver - so it would have at least retained value better.
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