Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Another Stock Market Selloff Could Drive More Bullion Buying

Stock-Markets / Stock Markets 2020 May 07, 2020 - 03:16 PM GMT

By: Avi_Gilburt

Stock-Markets

Investors got a look at first quarter GDP, and it wasn’t pretty. The U.S. economy contracted by 4.8%, even worse than the 3.3% decline anticipated by economists.

In addition to that bad news, 4 million more Americans filed for unemployment last week. More than 30 million people have lost jobs over the past 6 weeks, and the situation is only getting worse.

The S&P 500 lost 2.8% on Friday.

Perhaps equity investors are beginning to wonder if share prices, which have moved relentlessly higher in recent weeks, accurately reflect the dismal economic data.


Warren Buffett certainly is. The famed investor announced his company, Berkshire Hathaway, had sold all of its holdings in four U.S. Airlines and sounded a generally bearish tone in his annual letter to shareholders.

A new wave of selling and turmoil in the stock markets could drive a new wave of demand in the physical gold and silver. It is something for gold bugs to watch closely.

Physical inventories remain tight, and premiums are already high. A new rush of buying will only exacerbate the scarcity problem in coins, bars, and rounds.

Silver is historically cheap relative to gold. The gold/silver ratio – the gold price divided by the silver price – reached all-time highs in March. Today the number of ounces of silver it takes to buy one ounce of gold is at 113 – very close to those highs.

Metals investors are wondering whether or not opportunity is knocking.

The fact is that silver has looked like a bargain relative to gold for a long while.

The gold/silver ratio consistently fluctuated between 70 and 90 over recent years. Even those levels were high relative to the historical average.

Unfortunately markets these days are far more likely than ever to punish people for making perfectly rational investment decisions.

The gold/silver ratio in the high 80s at the beginning of 2020 implied silver was the greater bargain, but investors who bought silver instead of gold lost ground when pandemic panic hit.

Many who would have considered silver a “no-brainer” versus gold at current prices are now second guessing. They wonder if something has changed.

Is silver going to trade primarily as an industrial metal? Is gold the only real safe haven asset or effective hedge against dollar devaluation?

While it is possible that investment trends and psychology have shifted permanently, we highly doubt it. Silver is underperforming in the paper markets only and those markets are disconnected from reality.

Investment demand for physical silver has never been higher. This is true both in the retail bullion markets and in the futures markets where there has been a huge spike in the number of contract holders standing for delivery.

Meanwhile, the inventory of actual bars in COMEX vaults relative to the number of paper ounces being traded just keeps dwindling.

There is plenty of demand for silver as a safe-haven – you just can’t tell by looking at the paper price. Consider that while the ratio of paper gold to paper silver is 113:1, the ratio is far lower when it comes to actual coins such as the American Eagle. The price of one gold American Eagle is equivalent to that of only 77 silver American Eagles.

Seasoned precious metals investors continue to favor silver here, even if they have been penalized for making that choice in recent years.

Despite the poor showing of silver in the broken paper markets, silver’s fundamentals will surely improve as the economy gradually reopens and industrial demand recovers.

And if the recent bull run in gold is the start of something much bigger, silver is very likely to outperform before that run is over.

By Clint Siegner

MoneyMetals.com

Clint Siegner is a Director at Money Metals Exchange, perhaps the nation's fastest-growing dealer of low-premium precious metals coins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon, puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

© 2020 Clint Siegner - 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

6 Critical Money Making Rules