Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver Eyes Fourth Quarter Rebound

Commodities / Gold & Silver 2019 Oct 04, 2019 - 08:38 AM GMT

By: MoneyMetals

Commodities

Precious metals markets enter the often favorable fourth quarter trading season with the potential to reinvigorate their major uptrends.
Despite posting impressive gains in the third quarter, gold and (especially) silver finished it on a downbeat note.

On Monday, sellers smashed silver spot prices down 3.6% to test the $17.00/oz. level.

The disappointing finish to the month and the quarter does raise the possibility that momentum selling could continue to drag prices lower in the near term. However, quarter-end profit taking and portfolio shuffling by institutional futures traders could also work in favor of an immediate price bounce.



The big question is whether silver’s strong breakout this summer to multi-year highs was a fluke… or a prelude to bigger things to come.

At the time, multiple indicators pointed toward it being the real deal – the first big impulsive wave within a larger new cyclical bull market for silver. Price itself is the most important technical indicator, and the silver price had broken out of a long consolidation phase to spike up just shy of $20.00/oz by early September.

The subsequent pullback came as no surprise to our readers. We warned on August 29th, with silver rallying above $18.50/oz, that it “may finally be due for a pause, if not a pullback.” We noted that a gauge of weekly upside momentum was “in extremely overextended territory.”

Now that some of the overenthusiastic speculators who entered the market at higher prices have been washed out, we suspect that the remaining bulls have strong hands and will tend to be buyers rather than sellers on any further price declines.

Ratio Trade Opportunities in Silver and Platinum

We will be watching the gold:silver ratio closely during days when precious metals markets rally for confirmation that silver is leading.

In a healthy bull market for the metals, silver leads on both the upside and the downside – both rallying and declining more sharply than gold.

As silver prices surged earlier in the year, the gold:silver ratio declined rapidly from a quarter-century high of over 93:1 to as low as 80:1. In September, the ratio spiked back above 86:1 as silver sold off.

The chart of the gold:silver ratio appearing below suggests we could soon see a turn in favor of silver. In recent years, the ratio has tended to key off its 200-day moving average. It ran straight into that line on Monday.

old / Silver Price Chart (September 30, 2019)

The 200-day moving average is starting to point down for the first time since 2016. That suggests the major trend for the gold:silver ratio is also down – which, again, would be bullish for silver in particular and precious metals in general.

Another ratio that tells an interesting story is that of gold:platinum.

Earlier this year, gold commanded a historically large premium over platinum (1.8:1). Up until the current decade, the norm was for gold to trade at a discount to platinum.



Fundamentally, the platinum market has suffered from softening automotive demand as automakers have favored palladium for use in catalytic converters. Palladium, which historically traded at a discount to platinum, now trades at a premium to both platinum and gold.

At some point, the value proposition offered by platinum should become compelling to both industrial consumers and precious metals investors. But at this particular point, the beaten down metal shows no technical signs of trending higher against either palladium or gold.

The most compelling ratio trade in the metals space at the moment appears to be to favor silver over gold.

Conservative investors will want to still hang on to a core gold position. However, more aggressive investors who are inclined to trade might consider selling gold in exchange for silver.

If the gold:silver ratio trends in favor of silver in the months and years ahead, the magnitude of the move should be more than large enough to offset the transaction costs associated with switching in and out.

For example, if the ratio falls to 32:1 (a level last seen in 2011), then silver would nearly triple in value versus gold. At 32:1, a $1,600/oz gold price would imply $50 silver.

Of course, it’s more likely that gold would show significant nominal appreciation on the way to a 32:1 gold:silver ratio. A $2,500 gold price would imply $78 silver – more than 4.5 times today’s spot silver quote.

These are not price forecasts, but rather just illustrations of potential price scenarios that (among many others) could play out over time. As always, precious metals investors should retain a long-term perspective and be prepared to weather near-term volatility.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2019 Stefan Gleason - 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.


© 2005-2022 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