After an interesting move last week where we saw gold' and silver' pull back likely due to the sell off with volatility products such as SVXY' and others, as risk traders were called to cover their margin requirements we have seen gold' rebound as it moves to retest the upper channel. This was only a temporary pullback but moving forward into the summer we may have a catalyst that takes us through this ceiling which may be the start of the next bull run.
We have a significant fundamental development politically coming up in November which is the mid term election cycle. It appears that we are seeing some early signals that there may be a change of congressional control by the democratic party and smart money is already positioning itself accordingly. Even though the economy is firing on all eight cylinders the recent selloff in equities may be a signal that the democrats may gain control, and with Donald Trump having almost three years left as President, we may see a lot of gridlock and little done. As much as the Democrats want to push through an infrastructure bill as was part of Clinton's platform, I doubt they want to give Trump any political momentum going into the Presidential election. This is not about political views, but how it affects our positioning going forward.
Gold has been steadily increasing over the past year with higher highs and higher lows in a nice upwards channel. The dip in Nov/Dec correlated around the time the tax bill was being passed in congress, but has since moved higher. Keep in mind this is not news, but a fundamental change for the economy. However silver has done quite the opposite and has been in a decreasing slowly over the past year. What gives? First of all gold is generally held by large banks, Institutions, and larger investors as a hedge and safe haven play. Silver is for the average guy or retail investor. I am going to assume larger players are moving from stocks to gold' in front of the upcoming election. So I see a higher move in gold' moving into the summer months where campaigns will be in full force. The target levels are 1400-1450 which would be about a 10% move from here. I look for this move to bring the avg investor back into the metals market and silver' with a 20-22 target level breaking the down trend.
From the chart below the Gold/Silver ratio has risen above the 80 level four times. In my opinion Silver' is still undervalued to gold and I am still in accumulation mode for silver. With gold' at 1425 and silver' at 22 we would have a ratio of around 65 which is the median level longer term as shown below. This is a 31% move for silver. I like the risk reward in silver much better than gold here.
You would think that with the US' having a strong economy, interest rates moving up, the dollar would be rising. It simply is not as shown below. This is most likely the turmoil in politics, the upcoming election, and additional deficit spending. This upcoming election cycle will provide some clarity but until then investors are already starting to hedge into safe haven investments. I believe the dollar continues downward going into the summer testing the 80 lower channel.
Bottom line: As an investor I want to be positioned for either outcome. As it stands currently the risk/reward is clearly in favor of stacking silver right now. Regardless of the turnout Silver' is trading closer to its support line and gold is testing the resistance level. The G/S ratio still favors silver over gold here, and even if gold' pulls back I will be happy to switch flip some silver into gold at a lower level near 65.
90% silver melts at 11.9 at time of writing so halves at 12.50-13.00 for dimes quarters 13-13.50 for halves. Dealers have a bid of 11.60 and ask of 11.70 for $1000FV.
21 Morgans in AU+ condition 20-22
Pre 21 Morgans Au+ 26-28
Silver rounds/bars are trading around 50-75 cents over spot
Engelhard and JM bars $1-2 over spot
We have a significant fundamental development politically coming up in November which is the mid term election cycle. It appears that we are seeing some early signals that there may be a change of congressional control by the democratic party and smart money is already positioning itself accordingly. Even though the economy is firing on all eight cylinders the recent selloff in equities may be a signal that the democrats may gain control, and with Donald Trump having almost three years left as President, we may see a lot of gridlock and little done. As much as the Democrats want to push through an infrastructure bill as was part of Clinton's platform, I doubt they want to give Trump any political momentum going into the Presidential election. This is not about political views, but how it affects our positioning going forward.
Gold has been steadily increasing over the past year with higher highs and higher lows in a nice upwards channel. The dip in Nov/Dec correlated around the time the tax bill was being passed in congress, but has since moved higher. Keep in mind this is not news, but a fundamental change for the economy. However silver has done quite the opposite and has been in a decreasing slowly over the past year. What gives? First of all gold is generally held by large banks, Institutions, and larger investors as a hedge and safe haven play. Silver is for the average guy or retail investor. I am going to assume larger players are moving from stocks to gold' in front of the upcoming election. So I see a higher move in gold' moving into the summer months where campaigns will be in full force. The target levels are 1400-1450 which would be about a 10% move from here. I look for this move to bring the avg investor back into the metals market and silver' with a 20-22 target level breaking the down trend.
From the chart below the Gold/Silver ratio has risen above the 80 level four times. In my opinion Silver' is still undervalued to gold and I am still in accumulation mode for silver. With gold' at 1425 and silver' at 22 we would have a ratio of around 65 which is the median level longer term as shown below. This is a 31% move for silver. I like the risk reward in silver much better than gold here.
You would think that with the US' having a strong economy, interest rates moving up, the dollar would be rising. It simply is not as shown below. This is most likely the turmoil in politics, the upcoming election, and additional deficit spending. This upcoming election cycle will provide some clarity but until then investors are already starting to hedge into safe haven investments. I believe the dollar continues downward going into the summer testing the 80 lower channel.
Bottom line: As an investor I want to be positioned for either outcome. As it stands currently the risk/reward is clearly in favor of stacking silver right now. Regardless of the turnout Silver' is trading closer to its support line and gold is testing the resistance level. The G/S ratio still favors silver over gold here, and even if gold' pulls back I will be happy to switch flip some silver into gold at a lower level near 65.
90% silver melts at 11.9 at time of writing so halves at 12.50-13.00 for dimes quarters 13-13.50 for halves. Dealers have a bid of 11.60 and ask of 11.70 for $1000FV.
21 Morgans in AU+ condition 20-22
Pre 21 Morgans Au+ 26-28
Silver rounds/bars are trading around 50-75 cents over spot
Engelhard and JM bars $1-2 over spot
Comment:
Comment:
Keep in mind it is valentines day and nothing better than gold for your significant other. Yes Jewelry is a great way to invest into gold and silver. Understand jewelry stores have a huge markup generally, especially the name brands. If you do not know a dealer that sells jewelry wholesale the next best thing is your local pawn shop.
14k gold melts at around $39/Pennyweight (DWT). Paying a small 5-20% premium over melt. Using the lingo also implies you know what your talking about.
18k gold melts at around $50/DWT.
You can pick up jewelry often at pawn shops at a $2DWT premium. But as it is Valentines day you will probably pay more. Insure it is tested before leaving! Most have a metals detector which they use for testing, and look for the marking using a jewelers loupe.
14k gold melts at around $39/Pennyweight (DWT). Paying a small 5-20% premium over melt. Using the lingo also implies you know what your talking about.
18k gold melts at around $50/DWT.
You can pick up jewelry often at pawn shops at a $2DWT premium. But as it is Valentines day you will probably pay more. Insure it is tested before leaving! Most have a metals detector which they use for testing, and look for the marking using a jewelers loupe.
