GOLDSILVER RATIO NOW AT HISTORIC LEVELS
Updated
Wow!
The last time there was as large a disconnect between gold and silver was never, the closest we have come is briefly in 1991-2, and again in 1941. The gold silver ratio has now seemingly surpassed those previous peaks.
Over the previous few years, silver has loosely tracked the rise and fall of gold - while consistently under-performing. However, last week or two gold set a number of 7 year highs while silver continued to correct. Now, either gold has become the best thing since floating soap or investors, increasingly without reasonable options (think negative real and negative nominal bond yields, a over-extended equity market built on debt fuelled share buy-backs and cheap credit now in correction territory, gold USD1700 an ounce), might be looking around for good deals in commodities / hard assets (they wont it in housing that's for sure). It doesn't leave many options if you take bonds, equities, gold, and property off the table does it?
I bought silver in the first place because I felt that it was undervalued relative to gold, and intended to trade in silver for gold once the goldsilver ratio got below 45. This was always a trade, and not a short-term one either (original horizon set at 2-5 years). So I found low premium dealer with ultra-low storage charges and started to buy regularly. I will be adding about 10-20% this week when we see price in my blue "buy box" range. I have some concerns relating to the fact that silver is primarily an industrial metal, and I don't think people yet grasp the degree to which the economy will be shuttered in the US shortly - personally I assume the shut-down will be more extensive than anything seen in multiple generations. However, I see silver and also Platinum benefiting from purchases by investors faced with almost certain losses in equities and certain losses in bonds looking towards silver after seeing gold as a little too expensive. Remember, money-printing will go into even higher gear soon, and may include helicopter drops (as seen recently in Hong Kong), and we are basically in potential hyperinflation territory. Is inflation possible? Well, we will see as those shop shelves become more and more sparse as manufacturers, shippers, and logistics operations go off-line. Jeez, sorry I didn't mean to go all post-apocalypse. Anyway, people will see relative value in silver vs gold and start buying - so Investment demand could very easily take up any slack from Industrial demand, considering the amounts of money in play. I was interested in miners, but is on hold right now because miners are just as exposed to this outbreak as anyone else and they rely heavily on corporate credit markets - which may freeze up.
The last time there was as large a disconnect between gold and silver was never, the closest we have come is briefly in 1991-2, and again in 1941. The gold silver ratio has now seemingly surpassed those previous peaks.
Over the previous few years, silver has loosely tracked the rise and fall of gold - while consistently under-performing. However, last week or two gold set a number of 7 year highs while silver continued to correct. Now, either gold has become the best thing since floating soap or investors, increasingly without reasonable options (think negative real and negative nominal bond yields, a over-extended equity market built on debt fuelled share buy-backs and cheap credit now in correction territory, gold USD1700 an ounce), might be looking around for good deals in commodities / hard assets (they wont it in housing that's for sure). It doesn't leave many options if you take bonds, equities, gold, and property off the table does it?
I bought silver in the first place because I felt that it was undervalued relative to gold, and intended to trade in silver for gold once the goldsilver ratio got below 45. This was always a trade, and not a short-term one either (original horizon set at 2-5 years). So I found low premium dealer with ultra-low storage charges and started to buy regularly. I will be adding about 10-20% this week when we see price in my blue "buy box" range. I have some concerns relating to the fact that silver is primarily an industrial metal, and I don't think people yet grasp the degree to which the economy will be shuttered in the US shortly - personally I assume the shut-down will be more extensive than anything seen in multiple generations. However, I see silver and also Platinum benefiting from purchases by investors faced with almost certain losses in equities and certain losses in bonds looking towards silver after seeing gold as a little too expensive. Remember, money-printing will go into even higher gear soon, and may include helicopter drops (as seen recently in Hong Kong), and we are basically in potential hyperinflation territory. Is inflation possible? Well, we will see as those shop shelves become more and more sparse as manufacturers, shippers, and logistics operations go off-line. Jeez, sorry I didn't mean to go all post-apocalypse. Anyway, people will see relative value in silver vs gold and start buying - so Investment demand could very easily take up any slack from Industrial demand, considering the amounts of money in play. I was interested in miners, but is on hold right now because miners are just as exposed to this outbreak as anyone else and they rely heavily on corporate credit markets - which may freeze up.
Comment
The goldsilver ratio was higher in the midst of the Great Depression, but we seem to have exceeded 1941 level and blew past 1991 levels easily. Silver is screaming BUY like no other financial assets are.While I am also forming a bullish view around Platinum, I do not regard it as a financial asset per se as the demand is almost all based on what it can do i.e. what chemical reactions it can catalyse, platinum alloys that go into missile nosecones etc - not as a traditional store of wealth.
Comment
C'mon $16! Still waiting to add 13-15% in the next few days and another 12% (on weakness) next month. The silver market is 8% the size of the gold market but I still think the best argument for silver is: there are simply very few traditional safe havens left at prices that appeal to value investors:BONDS - negative real and possibly negative nominal soon - the best possible result is not to have lost money at the end, forget about making money on bonds,
UTILITY STOCKS - up ~300% in the last 10 years - much faster than gains in earnings,
GOLD - may well be a little over-valued in the short to medium term and will undergo some turbulence as people are forced to sell to fund other positions. I am not selling gold, as it isn't a trade - it's insurance (and real money).
PROPERTY - US property at all time high prices.
FOREX? JPY or CHF likely to appreciate - but seriously, trading FOREX isn't most peoples ideas of a low risk endeavour.
Please let me know if anyone has any ideas about sectors / equities / securities / metals that haven't been affected by this recent sell-off.
Comment
Mutter mutter swear curse, well this safe haven is taking a beatingTrade active
This isn't a trade - but I marked it as active. Because my time horizon is relatively long I will keep buying. If I can get a decent win within 3-5 years I am happy.Comment
bullionstar.com/blogs/bullionstar/gold-shortages-price-of-physical-gold-decouples-from-paper-gold/ There are shortages of physical bullion reported in New Zealand, Singapore, and the U.S. as well, increasing premiums and spreads due to cost / difficulty of re-supply. They posit that the futures contract price and the price of physical bullion (if you can find any) are now uncorrelated.
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