This financial market is weird, really contra dictionary. The S&P 500 is at an all-time-high, the 30 year treasury yield is at a 30 year low, gold and silver are breaking out. This is not a normal market. What’s your preference? We now ours.
Stocks are expecting economic growth while bonds say there will be a recession. Stocks are anticipating inflation, bonds deflation. Gold, silver and commodities are saying there will be stagflation. That’s 3 different scenario’s and 2 will be biting the dust. It all depends on timing. Bonds could be right, but when? Stocks could get inflation, but within how many years? It’s a difficult situation for investors. At that point, you have to take a look at the market. And the market is telling us gold will be right. What you see next is gold breaking out versus stocks AND bonds.
This is a very powerful sign.
Gold’s U-turn is confirmed on this long-term chart by David Tablish. The price of gold put in a very strong bottom around $1,000. You can also see the MACD giving a buy signal at the beginning of 2016, the first since 2011. Extra confirmation came from the RSI and Slow STO, all technical patterns indicating gold hit rock bottom at $1,050.
And what is silver telling us?
We mentioned earlier silver could have more room to run, till $25 on the short run, but 3 or 4 digit in the long run. Silver is always lagging gold, but it’s catching up quick. While investors ran towards GLD at the beginning of the year, smart money recently started discovering silver. iShares silver SLV holdings were 10.000 tons at the beginning of the year. At this moment it’s around 10.620. That’s not as impressive as the GLD rise from over 600 tons till almost 1.000 tons.
But last week, there was an 150 ton increase at SLV in one day. That’s the strongest day since 2014. This means it’s all just beginning for silver. Once the market believes the gold bull run is for real, they start buying the white metal hand-over-fist.
And this jump in the price of silver and silver holdings is the real stuff. For this, you just have to look at the gold-silver ratio, which broke down of the multi-year uptrend. As you can see in the chart, this gold-silver ratio is falling towards 60x, and probably 50x. If you consider a steady to slightly higher gold price from the current level, silver is most likely going to 25 USD (and higher) over the next weeks.
This is major news! Not only for the gold market as a whole, but for the silver mining sector specifically. Most of these miners were not profitable, but that changed literally overnight. With 20 USD silver, these companies are generation enormous free cashflows and yielding royal profits of their shareholders. Quite a different picture from a few weeks ago, when most silver miners were still operating at a loss.
> The domino’s are falling. Click here to read our Guide to Gold and protect your wealth