Gold Silver Ratio Highest In 25 Years -Price Surge Next?
Value Walk May 26, 2019 by Jacob Wolinsky
The gold to silver ratio is the highest it has been since 1993. We cover the price movements of gold, silver, platinum, palladium, the U.S. Dollar Index, Equities markets, and more.
Welcome to the Golden Rule Radio this week is a historic week in the metals market. Why guys the gold silver ratio baby. Yeah yeah yeah. Yeah. It pushed above eighty nine. Just about love eighty nine and that's the highest it's been since 1993. So what does that mean.
Silver is very undervalued. Just the price of silver in the mid for teens 14-40 ish today on Wednesday recording looks like it wants to turn around. It looks like it is ready to go higher. It's been holding right around here at this fourteen forty level. One thing to note on the daily chart is that the RSI did not break below 30 on the daily chart when it hit its low here. So obviously the trend is still down with Silver but it looks like it could easily turn around here and start moving higher and therefore tighten that gold silver ratio the gold price has held above its previous low around the twelve seventy level and we are watching it closely because this is the seasonal time where we're expecting a bottom with gold in between now and in July. So we're looking at hopefully a little bit of weaker levels in the mid twelve hundreds to have some buying opportunities but we may not get it but that's what we're watching.
Sure and our seasonal pricing seems to be going away. I mean May's almost over I guess we still got June and July for the summer months but we get into the Indian wedding season here later this year and that always ends up pushing the metals prices back up. So following that Indian harvest Indian wedding season the gifts given and you always see a little bit of pop in price in the meantime. Yeah I think we're all kind of in agreement that we see gold possibly if not likely continuing to push down although it seems to be having a little bit of trouble getting below these 2070 marks that's actually encouraging to me.
So how does this correlate to to the U.S. dollar. I mean we're now above 98 on the index again we haven't seen that very frequently at all here. Do you expect that to coincide with the dollar rally this summer.
Dollar to me sort of looks like a like a raccoon inching its way towards a picnic trying to grab something. I mean you look at this movement up in the dollar it's been very slow very measured up and down up and down building this compressing wedge.
I still think the dollar's coming up into a 100 to build that big multi-year head and shoulders pattern where in the world did you hear that analogy of a restaurant industry tour how to seed a racket doing this. His brain works definitely. Absolutely fantastic.
We've got hawks and doves and bears and bulls and now raccoons.
I think the point here is that raccoons head towards trash and they'll eat out of the trash. And therefore I think the dollar will ultimately be trash. However the dollar looks like it wants to actually go a little bit higher it's back above 98 as Terry said and I wouldn't be surprised to see the dollar gaining some strength.
Yeah and if we see consistent interest rate policy you should see consistent movement in the dollar right.
I think so and I don't think that there's going to be a substantial downturn in the dollar until there's weak monetary policy. You know certainly a reversal in interest rates if we if we get that into some point in the coming months and 2019. Well that could certainly be the trigger. But until then there's no reason on the world scene for it to not go to 100.
Exactly yeah. Our interest rate is higher you know than than the other competitive markets.
And since we live in a world where nothing makes sense anymore I mean a increase in the interest rates which I mean mathematically or at least long term you would assume is good for the dollar and dollar value probably ends up causing a decline in the value of the dollar. Just given the way markets work today.
Yeah things are backwards. I mean it's like the recent news that 43 percent of Americans polled think that socialism is a good direction for this country to take. If that's not a reason to buy gold I'm not sure what is. But you know we may be in a holding pattern here for 16 18 months pending the election cycle. Also you know there's more than just the monetary cycles financial economic cycles. There are political cycles and this is going to be a rocky road. A lot of impeachment talk if that gets legs that could also be something that drives gold higher.
Let's move over to the other white metals platinum and palladium this week since the last recording palladium had a solid couple of days had a really good conversation with a client today just his theory interestingly enough was that palladium is just not on the radar of the manipulators and is palladium representative of what silver and platinum and gold would be doing if if unhindered. But anyway just throwing that out there. We did see some strong rallies we've rolled over a little bit today Miles won't you walk us through that that palladium chart.
Sure and I mean platinum is made so much ground over the last month against palladium it's complete.
Silver Speculators Say It’s Time To Start Buying
BY JOHN RUBINO ◆ MAY 25, 2019
The gold futures market took a big step towards bullish — or at least neutral — in the past week. Speculators (usually wrong at big turning points) scaled back their long bets while commercials (usually right at turning points) reduced their net short positions.
This is progress, but still leaves speculators long and commercials short. The message: wait a few more weeks for 2019’s best entry point.
But silver’s story is a lot more interesting. In that market, speculators are now aggressively net short.
Note that in September 2018, the last time speculators were comparably net short (visually, with the gray bars below the above graph’s center divide), silver was putting in a bottom that preceded a nice run through February of 2019.
This divergence between gold (wait and see) and silver (start buying now) is confirmed by the gold/silver ratio, which is at a multi-year high, implying that silver is undervalued relative to gold. Past spikes in this ratio have preceded precious metals bull markets in which silver outperformed gold.
Jamie Dimon warns US-China trade fight becoming a ‘real issue’ that could deter investment
CNBC May 28, 2019 By Hugh Son
Dimon said that the trade dispute is a “real issue” that could damage corporate confidence.
“Trade has gone from being a skirmish to being far more important than that,” Dimon said. “If this goes south in a bad way, and you have other surprises, that could be part of the thing that changes confidence, changes peoples’ willingness to invest.”
“I think trade is a real issue,” Dimon said Tuesday at a conference in New York. “Trade has gone from being a skirmish to being far more important than that. If this goes south in a bad way, and you have other surprises, that could be part of the thing that changes confidence, changes peoples’ willingness to invest.”
Dimon, the longest-tenured CEO among the U.S. megabanks, was answering a question about the risks that could end the current economic expansion. The next recession will probably be caused by a confluence of factors that catch investors off guard, like impacts from the trade war or rising interest rates, he said. While U.S. growth could be in the last legs of its growth, that period could last years, he said.
“You’re already starting to see businesses starting to think about moving their supply lines,” Dimon said. “That can obviously slow down business investment and cause uncertainty of all different types.”
The U.S.-China trade dispute, which has been simmering for the past year, took a turn for the worse this month after President Donald Trump announced he was boosting tariffs on $200 billion of Chinese goods to 25% from 10%. The news roiled global stock markets as China responded with its own heightened tariffs. Then the U.S. announced restrictions on Chinese telecommunications manufacturer Huawei, effectively banning it from buying parts from American firms.
Chinese authorities are weighing whether they will retaliate further against the U.S., and Chinese President Xi Jinping ramped up his rhetoric on the trade warby saying China is embarking on a “new Long March, and we must start all over again!”
Dimon also reiterated a warning he has made before: If bad news happens during an actual economic downturn, markets might respond violently. In his mind, the stock meltdown late last year was an example of the markets’ brittle nature.
“I’m just telling people, we should be prepared that when we actually have a bad environment, it’ll be that and worse,” he said. “The markets will be worse off than people think and that can cause people to panic a little bit faster than they should.”
Separately, Dimon also weighed in on the CEO search currently under way at Wells Fargo. Former CEO Tim Sloan announced in March that he was stepping down immediately, bowing to pressure from regulators and politicians who were frustrated at the pace of change at the bank.
“I think Tim Sloan was doing a good job but I think it’s not responsible for a company — this is my own view — to have a CEO leave with no plan in place,” Dimon said. “How can the regulators be pushing something irresponsible? So I don’t know if it was a board-level decision, I don’t know if they felt pressure from whatever, but it’s not the way to run the railroad.”
— With reporting by CNBC’s Dawn Giel.
Morgan Stanley says economy is on ‘recession watch’ as bond market flashes warning
PUBLISHED 5 HOURS AGO UPDATED 23 MIN AGO
Renewed trade tensions and a slump in economic data put U.S. profits and economic growth at risk, Morgan Stanley warned Tuesday.
“Numerous leading companies may be starting to throw in the towel on the second half rebound--something we have been expecting,” the bank writes.
Wilson adds that market risks have been reflected in the bond market, pointing to an unusual phenomenon in government debt yields.
The stock market and economic outlook in the United States are “deteriorating,” according to an analysis from one of Wall Street’s top investment banks.
Renewed trade tensions and a slump in economic data — ranging from falling durable goods and capital spending to a downshift in the services sector — has put U.S. profits and economic growth at risk, Morgan Stanley warned Tuesday.
“Recent data points suggest US earnings and economic risk is greater than most investors may think,” wrote Michael Wilson, the firm’s chief U.S. equity strategist.
Specifically, the stock strategist highlighted a recent survey from financial data firm IHS Markit that showed manufacturing activity fell to a nine-year low in May. That report also revealed a “notable slowdown” in the U.S. services sector, a key area for an American economy characterized by huge job gains in health care and business services.
Many recent reports reflect April data, “which means it weakened before the re-escalation of trade tensions,” Wilson continued. “In addition, numerous leading companies may be starting to throw in the towel on the second half rebound--something we have been expecting but we believe many investors are not.”
Wilson was one of the most bearish stock strategists last year, defending his initial S&P 500 call of 2,750 for year-end 2018 without adjusting it throughout the year. By the end of the year, his call was the most accurate of any strategist tracked by CNBC.
He’s stood by his gloomy case for 2019, often warning that investors could be caught in a “rolling bear market ” for the next several years. The market has thus far outpaced Wilson’s models for 2019, with the S&P 500 up 11.7% and the Dow Jones Industrial Average up 8.6% year to date.
The stock market sold off Tuesday, adding to steep losses for the month of May. The Dow fell 237 points and the S&P dropped 0.8% during the session; they are down 4.6% and 4.8%, respectively, this month.
Still, many economists are predicting an anemic second half of the year. For their part, Morgan Stanley economists have lowered their second-quarter U.S. GDP forecast to 0.6% from 1.0%. That comes after J.P. Morgan last week cut its own second-quarter outlook to 1% from 2.25%.
“The April durable goods report was bad, particularly the details relating to capital goods orders and shipments. Coming on the heels of last week’s crummy April retail sales report, it suggests second quarter activity growth is sharply downshifting from the first quarter pace, ” the economists wrote.
Companies ranging from manufacturers like Deere and Polaris Industries to computer chip maker Microchip and toolmaker Snap-On have all bemoaned the Trump administration’s escalated trade war with China and have warned it could impact their business. The White House bumped the tariff rate on $200 billion of Chinese imports to 25% from 10% earlier this month, drawing a similar response against American goods from Beijing.
While the number of companies explicitly airing their trade grievances remains comparatively small, they likely represent a larger number of American companies set for pain as bilateral tariffs threaten their bottom lines.
“Regular readers are likely familiar with our view that the US economy is vulnerable to a more significant slowdown due to overheating last year from the fiscal stimulus,” Wilson wrote. “This led to labor cost pressures for corporations, excessive inventories and an overzealous capex cycle that is now reverting to the mean, which means well below trend spending for several quarters.”
Those market risks have been reflected in the bond market, Wilson added, pointing to an unusual phenomenon in government debt yields.
When investors believe the economy is set for healthy growth, those that buy debt from the U.S. government for years are compensated with better interest rates than those who loan money for a matter of months. Under those normal circumstances, the plot of Treasury interest rates slopes upward, with investors earning more for holding debt for 10 years rather than a few months.
That usual upward slope can change, however, when investors think economic output growth is likely to fall. That occurred earlier this year, when the yield on the benchmark 10-year Treasury yield first dropped below that of the 3-month Treasury bill, a sign many on Wall Street read as a recessionary signal.
The curve flattened further Tuesday as the 3-month bill yielded 2.356% and the 10-year note yielded 2.269%.
Some investors wrote it off, saying “it’s different this time” thanks to the Federal Reserve’s lingering quantitative easing or by how quickly the curve appeared to correct to a steeper shape. But Morgan Stanley’s deeper dive into the data — controlling for the Fed’s tinkering — reveals a “much different picture.”
Morgan Stanley’s analysis shows the adjusted yield curve first inverted in November and has stayed in negative territory ever since.
“The adjusted yield curve inverted last November and has remained in negative territory ever since, surpassing the minimum time required for a valid meaningful economic slowdown signal,” Wilson wrote. “It also suggests the ‘shot clock’ started 6 months ago, putting us ‘in the zone’ for a recession watch.”
Gold and silver advance, buoyed by U.S. stock market weakness
Published: May 29, 2019 10:20 a.m. ET
By RACHEL KONING BEALS NEWS EDITOR MarketWatch
Precious metals gain despite relative firmness for dollar index
Gold and silver futures regained positive ground Wednesday, inversely tracking weaker trade for stocks and other so-called risk-on markets.
Gold for June delivery on Comex GCM19, +0.33% rose $4.80, or 0.4%, to $1,281.90 an ounce, while July silver SIN19, +0.52% gained 8 cents, or 0.6%, to $14.40 an ounce. On Tuesday, prices logged their lowest settlement of 2019 so far.
Gold has turned lower by 0.3% month to date. Silver, tagged with both investing and industrial use, has exhibited greater volatility around the U.S.-China trade discussions; it added 1.2% for last week, though its monthly drop so far stands at about 3.9%.
The yellow metal is “building on last week’s gain and the one-week high is due to robust Indian demand, stocks falling due to fears of a protracted U.S.-China trade war and poor economic data from the U.S., EU and globally,” Mark O’Byrne, research director at GoldCore, told MarketWatch. “Heightened political and geopolitical uncertainty is also supporting gold.”
U.S. stocks headed lower on Wall Street Wednesday as worries about trade tensions and the outlook for global growth weighed on equity markets and sparked continued buying interest in government bonds.
U.S.-China trade tensions remained a factor, analysts said, after Chinese state media reports underlined the country’s scope to use rare-earth minerals, used in the production of everyday devices, such as mobile phones, computer memory chips and rechargeable batteries, as an economic weapon.
Metals gained even as the U.S. dollar DXY, +0.12% ticked higher Wednesday relative to its peers, a break in the typically inverse relationship between the U.S. unit and precious metals priced in dollars. The 10-year Treasury TMUBMUSD10Y, -1.74% yield continued to trade in the red as bond prices gained, with the yield at its lowest since October 2017.
Gold and other commodities priced in dollars can typically be hurt by a firmer greenback, making them more expensive to users of other currencies, and vice versa. And, lower yields on bonds can be beneficial to assets like gold by reducing the opportunity cost of holding nonyielding metals.
Morgan Stanley Says U.S. Yield Curve Now Clearly Spells Downturn
By Anchalee Worrachate May 29, 2019, 5:46 AM PDT
Bank’s adjusted metric has been inverted since December 2018
Soft economic data in U.S. point to rising stock volatility
Make no mistake, the Treasury yield curve really is flashing recession angst -- and the trade war is merely a sideshow.
While a key slice of the curve has inverted this month for the first time since March, an “adjusted” curve that accounts for quantitative easing and tightening has been persistently inverted for the past six months, according to Morgan Stanley.
In fact, the bank’s metric inverted back in December, well before the most recent escalation of U.S.-China trade tensions, and has maintained its shape ever since, strategists led by Mike Wilson point out.
That suggests investors who are looking to a trade resolution as a salve for the world’s economic woes may be pinning their hopes in the wrong place.
“Get ready for more potential growth disappointments even with a trade deal,” the strategists wrote in a May 28 report. They see a risk of the S&P 500 Index falling to 2,400 from around 2,800 thanks to the softening data.
Cited culprits for falling bond yields range from tensions in global commerce, relentless hedging demand to growth angst. Nearly $11 trillion worth of fixed income securities are now yielding below zero, the most since 2016, Bloomberg data show.
There’s no shortage of evidence pointing to economic woes, Morgan Stanley points out. U.S. data from durable goods to capital spending and PMIs lagged market consensus last week -- all of them reflecting activity in April, before the latest round of trade escalations.
In China, the economic outlook deteriorated this month after April’s weaker-than-expected performance. Expectations for price growth, as proxied by five-year, five-year forward inflation swaps, are falling in the U.S. and the euro area.
“We think this means the U.S. economic slowdown and rising recession risk is happening regardless of the trade outcome,” the strategists write.
The gap between 3-month and 10-year rates dipped to minus 12 basis points on Wednesday, the most negative since March, when this closely watched segment of the curve inverted for the first time since 2007.
Morgan Stanley warns its adjusted yield curve also suggests stock volatility is set to rise. The Cboe Volatility Index, or VIX, is sitting at around 18, above its one-year average of 16.
The curve “generally does a good job of telling us what to expect for the VIX,” according to the report. “Recession or not, we believe U.S. equity market volatility is likely to pick up significantly over the next 6 months.”
Gold Prices Could Hit $5,000 Says Billionaire Thomas Kaplan - Bloomberg Interview
Neils Christensen Wednesday May 29, 2019 Kitco
You can add another billionaire to the bullish gold camp as Thomas Kaplan, chairman and chief investment officer of Electrum Group said in a recent interview with Bloomberg that gold is on the cusp of a new decade long bull market.
The investor and philanthropist made the comments in an interview with David Rubenstein on Peer-to-Peer Conversations, to be aired on Bloomberg TV Wednesday evening.
In a preview clip of the interview Kaplan, who is also chairman of Novagold Resources (NYSE: NG, TSX: NG) said that because of economic fundamentals gold prices could rally as high as $3,000 to $5,000 within a decade.
Although Kaplan is bullish on gold, he also said that he could see lower prices in the near-term.
“You could easily see gold prices $100 lower before it catches a wave and rallies a few thousand dollars,” he said.
His comments come as gold prices have been stuck in a tight range between support at $1,270 an ounce and resistance at $1,300 an ounce. Currently, gold prices are struggling to catch a bid even as U.S. bond yields have dropped to their lowest level since mid-September 2017. June gold futures last traded at $1,282.60 an ounce, up 0.44% on the day.
Kaplan is just the latest fund manager to jump on the gold bandwagon. Earlier this month, SEC filings showed that Ray Dalio’s hedge fund Bridgewater Associates increased its holdings in both SPDR Gold Shares (NYSE: GLD) and iShares Gold Trust (NYSE: IAU) in the first quarter of 2019.
David Einhorn, founder of Greenlight Capital also reiterated his positive sentiment for gold in a conversation with Kitco News during the Sohn Investment Conference.
“I hold gold, and I am never going to get rid of it. I hope that I never have to use it,” he said.
Jeffrey Gundlach, founder of DoubleLine Capital. He also expressed a long-term affinity for the yellow metal during the conference. “I love gold. I have owned gold since it was trading at $300,” he said.
The U.S. owns the world’s most gold. Here’s who comes in second
Published: May 30, 2019 4:03 p.m. ET
If you’re looking for a central bank full of gold bugs, start in the U.S. and Germany.
The U.S. owns the most gold of any country, according to an analysis of data from the International Monetary Fund, published on HowMuch.net.
The U.S.’s reserve of gold equals 8,133 tonnes, worth more than $373 billion.
Germany comes in second, with 3,369 tonnes, worth more than $154 billion.
The IMF itself (although it is not a country, it placed itself in the ranking) holds the third-most: 2,814 tonnes, worth more than $129 billion.
Other countries might be catching up to the U.S. Russia and China rank sixth and seventh, respectively, but they are also some of the most aggressive buyers in recent years, according to the IMF.
Those countries have had concerns about relying on the dollar as a reserve currency, as well as holding European currencies, amid a possible U.K. exit from the European Union, or Brexit, and uncertainties in other countries have caused tension.
Slow economic growth around the world, plus slow trade in equity markets, have also contributed to higher gold prices, experts have said.
When (Not If) Silver Has a "Bitcoin Moment"
David Smith FX Street May 30, 2019
In mid-May 2019 the leading cryptocurrency, Bitcoin (BTC), was trading around $5,600. At $4,000, a prominent technician predicted it was gearing up for a run to $6,500. Yet when it reached $5,700, he recommended selling because of a technical "non-confirmation."
As if on cue, BTC began an epic upside run, easily slicing through his initial target! Following an $8,600 print, the price cratered to $6,600, then back to... $8,400! Who knows where it will be when you read this, but I suggest that there is something important to be learned here…
The moral of this little tale is that when holding a position like physical metals, which has gone through a lengthy underperformance, the tendency is to liquidate it at the first sign of a strong price rise.
But you might also be selling out of what becomes an epic bull run. There's just no way to know for sure ahead of time.
It's absolutely vital to "take some profit" as long as you distinguish between "speculative" and Core holdings. Don't sell the Core until you feel strongly that the secular run is coming to an end.
In 1999, Warren Buffet publicly stated that he believed the stock market bull was over. It lasted another year, but since he "got out too soon," he was able to side-step the carnage that followed.
A number of years from now, evidence may indicate you should sell all but your insurance portion. Even if the top is higher, but you manage to take a big bite from the middle, that's great!
I personally knew of such a "sandwich trader' – a Canadian who bought silver futures and physical metal at $7, selling ALL of it at $18. Of course, the price eventually went to $50 in early 1980, but he never looked back; never tried to buy in again. By sticking to his plan, he literally made and kept millions.
Others, who got in much higher (or lower but never sold) saw silver decline precipitously from $50 to $10.80, and then rally to $25 (the classic 50% retracement), before slowly sinking to $4 over the next two decades.
Could Silver experience one (or more) "bitcoin moments"? I believe the answer is "yes."
Conceptually, some similar elements are in place. From mid-2011, silver has experienced a lengthy, corrosive decline. In December 2017, after bitcoin topped near $20,000, it (like silver) established a series of lower lows and lower highs under a flood of negative press - classic behavior during an entrenched bear phase.
No one has predicted that silver will go to zero like they have for bitcoin (because silver literally cannot), but a chorus of worn-out bulls and perma-bears still opine that the metal is either destined to flat-line forever or have any rally capped by "da boyz" on Wall Street or the Federal Reserve.
If you feel this way, consider that silver alone among the metals has yet to exceed all-time nominal highs above its futures basis $52.
More to the point, don't forget the twin cautionary points long espoused by David Morgan:
First, that the market is ultimately more powerful than any opposition arrayed against it.
And Second, that as much as 90% of the total move in a bull run takes place during the last 10% of the time involved.
Let me add a third factor to David Morgan's take which we fully discuss in our book, Second Chance...
We have not yet seen a public-participation mania blow-off to signal culmination of the final and most explosive phase of a secular trend that's been backing and filling for almost two decades – a topic to which I've devoted several essays at Money Metals during my five years as a contributor.
You can – and should – do the research yourself, but I will say without equivocation, that the most explosive, most profitable phase yet (for the reasons David Morgan has repeatedly stated) lies directly ahead.
It might take 3 to 5 years to fully play out, or as many as 10, but it's on the way.
I see newly visible meaningful data points indicating that the onset of a powerful, enduring next leg up is germinating right now. It could announce itself as a "bitcoin moment" – likely just one of several big spikes on the way to three-digit silver.
Imagine the following scenario....
Silver prints a new intermediate, several days' low under $14 on the charts, then moves back up for awhile into wide-ranging "get nowhere" prices.
One day (probably in a Sunday evening market session) the price jumps seventy-five cents, and during the next few days, rockets upward several dollars, running to a two-week close above $25 the ounce.
It then proceeds to collapse back to $20, a classic 50% Fibonacci retracement level.
Now what? Do you buy $5-6 higher (at more expensive premiums and questionable supply) than you could have just a few weeks before? Or hope this is just a "bull trap" that retreats back to $14?
So you wait. What if you're wrong, and silver vaults to a new multi-year high at $27... on its way to $40 (or higher)?
Lest you think this is not possible, consider that the historic 1979-80 moon-shot saw several four-dollar silver intraday fluctuations – at a time when the purchasing power of five dollars now required just one dollar back then!
So, don't sit around with "not enough" – or not any – physical silver (and gold) until a "bitcoin moment" in the metals takes place.