Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Research On the Central Fund of Canada Screams "Buy Precious Metals and Miners"!

Commodities / Gold & Silver Stocks Feb 21, 2010 - 06:33 PM GMT

By: Adam_Brochert

Commodities

Best Financial Markets Analysis ArticleI was doing some research on the Central Fund of Canada (ticker: CEF), which is a form of "paper" Gold and silver with a long track record and a much better counterparty risk profile than dangerous Gold ETFs like GLD. Now, CEF generally holds about 60% Gold and 40% silver, so it is not a "pure" Gold fund. I don't recommend paper Gold to anyone before they have established a physical position in Gold as an insurance policy that can always be cashed in when needed. I am not affiliated with nor am I recommending for or against CEF - you must due your own due diligence!


However, I discovered a potentially useful buy and sell signal in the precious metals markets using the premium/discount levels of CEF relative to the Gold price. There is no guarantee this will work in the future, but I found it fascinating and wanted to share it. It seems to actually work best with the silver price, but also works fairly well with Gold and the Gold mining indices.

There are times when CEF trades at a "premium" to the Gold price and times when it trades at a "discount" to the Gold price. When speculative juices and interest in the precious metals patch are running high, a premium tends to develop for silver relative to Gold (and CEF usually only holds around 60% Gold and the other 40% in silver). A lack of speculative interest in the precious metals sector tends to cause the opposite. In a way, then, this is a sort of silver:Gold ratio. However, there is also a component of "froth" or disinterest in the CEF built into this CEF:Gold ratio, as the fund can trade at a premium or discount to the NAV of the underlying metals held by this instrument. Other factors I haven't considered may also be important. Regardless of why it works, its record is impressive so far in this secular silver and Gold bull market.

As with most ratio charts or indicators, extreme measurements tend to have the most predictive value. Plotted below is an 8.5 year chart to encompass the entire silver bull market that began in late 2001. The blue area plot is the CEF divided by the Gold price (i.e. CEF:$GOLD ratio chart) and superimposed is a black linear price chart of silver ($SILVER).




And here's the CEF:$GOLD ratio chart (blue area plot) versus the $XAU Gold mining index (black linear plot) over the same time period:

Will the current signal, which is the 4th strongest of the ongoing secular silver bull market, be proven valid or will it fail here? Those who have read my rants lately know where I stand. I think we're set for another big bull run and I remain stubbornly bullish here. For more bullish data, look here. The breakout over $1000 was an historic psychological moment in the Gold secular bull market and the new psychological floor for the Gold price is $1000/oz.

People who say that silver has been lagging and thus the current Gold bull move is suspect don't understand silver at all and should be ignored. Silver makes big, fast moves at the end of a precious metals run and can play catch up quickly - VERY quickly. We haven't hit the CEF:$GOLD ratio levels that have ended previous big moves in silver or Gold. I think we will before this bull thrust completes.

After a breakout following an 18 month consolidation at and below the $1000/oz level, a 3 month rally of 20% in the Gold price ain't enough of a run. There's more to come in my opinion before a significant longer-term correction will occur. I predict new highs in Gold, Gold mining indices and silver before the spring is over. All surprises should be to the upside in the precious metals patch. Of course, I am all in on precious metals and mining shares from the long side and thus as biased as possible...

Visit Adam Brochert’s blog: http://goldversuspaper.blogspot.com/

Adam Brochert
abrochert@yahoo.com
http://goldversuspaper.blogspot.com

BIO: Markets and cycles are my new hobby. I've seen the writing on the wall for the U.S. and the global economy and I am seeking financial salvation for myself (and anyone else who cares to listen) while Rome burns around us.

© 2010 Copyright Adam Brochert - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in