Sunday, April 24, 2016

Developments in the Gold and Silver Markets

I don't do many articles on the gold and silver markets here because the topic seems to generate a lot of emotions for some reason and this blog is trying to attract the interest of people new to the topics covered here. Constant controversy makes it hard to discuss issues with someone trying to learn about these topics for the first time.

With that said, the precious metals markets are a key part of what we do cover here. When we see sharply rising prices for gold and silver in terms of what they cost in US dollars, it is an important signal to keep an eye on. We have said many times that if we do get the kind of new major financial crisis that Jim Rickards and others are expecting, the potential for major systemic change that will impact all of us will greatly increase. A sharply falling US dollar and/or sharply rising prices in US dollars for gold and silver could indicate the conditions for such a crisis are in play.

Below is a bullet point list of some of the recent developments in the gold and silver markets and after that a few comments.

- Deutsche Bank settles gold and silver price fixing litigation - the signifigance here is that DB not only will settle for price fixing, they agreed to point a finger at other major banks involved in price fixing in gold and silver. GATA views this news as partial vindication for their claims that the gold and silver markets have been manipulated. They still believe the major manipulation (gold price suppression) is done by central banks.Russia chimes in with this article in The Sputnik News.

- Opening of new Shanghai gold exchange - this news was mostly ignored in mainstream financial media in the west, but gold and silver advocates view this as an important change in the market for the future. Andrew Maguire talks about that in this interview. John Embry of Sprott Assets also talks about it in this interview. Money manager Stephen Leeb also talks about it here. These interviews will give you a feel for the importance that gold and silver advocates are placing on this event. It will be interesting to see if it has the impact these advocates are anticipating.

- The massive rally no one knows about (in the general public). It's always interesting to me how financial media will talk endlessly about the US stock market going up, but seems to completely miss gigantic moves up in the gold and silver markets when they do happen. If there were a stock sector that has gone up around 100% in about three months, would you be interested to know about it? I bet most people would be surprised to know that the HUI index that measures gold and silver mining stocks has gone up that much since January of this year ( doubled from 100 to 200 - see this chart as of 4-22-16). Meanwhile the Dow Jones index is up a little over 15% during the same time. Which one got all the media coverage?

- Silver moving to take the lead in the gold and silver market. While gold has made a strong move up so far in 2016, we are starting to see silver outperform gold quite a bit lately. This has resulted in the gold to silver ratio dropping from a high near 84 (84 ounces of silver to buy one ounce of gold) to around 72 as of 4-22-16 (see this chart). I expect to see this ratio continue to fall in the future meaning that silver would go up more in % terms than gold. Retail demand for silver eagles from the US mint also is on a record breaking pace this year so far. Other mints around the world are experiencing similar high demand.

My added comments: Earlier this year I noted that it seemed as though the silver market may have bottomed out in late 2015 (see silver chart here). The upward trend this year is beginning to add confirmation to that possibility. What that means for the average person is that if you want to include some actual physical silver as part of an emergency cash reserve fund you may want to not wait a lot longer. I am NOT talking about trying to trade silver (or gold) short term. They are volatile markets at times and will go up and down all the time in the short term. A long term physical holding as part of an insurance emergency cash reserve is a completely different idea and is perfectly reasonable option for the average person to consider.

Added note 4-26-16: 40 year veteran precious metals dealer Bill Haynes is reporting very high retail demand for gold and silver which he says means prices will be heading higher. In the past Bill has demonstrated that he has a pretty good feel for how the retail market will impact prices so his comments are worth listening to.

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