We have made a contrarian call for a falling silver price and a rising gold to silver ratio for years. This ratio has risen a lot during this time. Are we ready to change our call yet?
Sort of like all those do it yourself Gold Mining shows hitting the reality television scene pretty much nailing the near term top in the gold market.
This week, the gold-silver ratio promptly moved up +2.3%. As readers will recall, we have been calling for a ratio value over 80 for a while.
For a long time, we called for a big drop in the silver price. It stubbornly did not, or when it did drop it soon recovered. In the end, we were right and the silver bulls were wrong.
The cobasis briefly peaked around 11% (from around 0.5% previously).
Last week, we asked if silver would have a 14 handle again. This week, the market answered yes we can! How did we know? By looking at supply and demand.
We will be the first to admit that yield curve inversion is not the only factor causing recessions, but through the credit channel it can be an important contributor. Depending on the importance of the credit channel, the Federal Reserve, by pegging the short term rate at zero, have essentially removed one recessionary market mechanism that used to efficiently clear excesses within the financial system. While stability obsessed Keynesians on a quest to the permanent boom regard this as a positive development, the rest of us obviously understand that false stability breeds instability.
If you’re sophisticated and have a bit of luck, you could end holding your gold exposure at zero or even make a profit.
The dollar dropped about half a milligram gold, and 50mg silver.
But who wants to read about the universal currency falling, failing? Few people are so barbarous as to think of the dollar’s value as being priced in terms a monetary metal.
Forget China, Volkswagen, Glencore, Noble, and pretty much everything else. The only catalyst that matters for today's price action has just been revealed. Earlier today, Dennis Gartman, whose flop-flip-flop-flipping calls on stocks, commodities and everything else have become a blur, just went mega bearish, and is predicting that the S&P has some 400 points of imminent downside.
Don't trade yesterday’s news. There was backwardation. However, it's a sensitive indicator and you need an updated picture before buying after a sizeable price move.
The VIX term structure has been inverted (spot higher than 3rd futures) for 17 days - that is the longest period of backwardation since August 2011, when uncertainty soared around the USA credit rating downgrade. In fact, much of the VIX term structure is higher today than it was at the peak of the crisis on Black Monday as both government shutdown and Fed rate hike fears dominate the forward curve...
"One-by-one, the oil-majors will start to participate, then others will follow. While it might take some time to establish itself due to choppy markets and regulatory hurdles as well as the fact that it would introduce a foreign exchange element to crude futures, it is overdue for a Chinese contract to established."
Following our detailing the Comex gold futures to deliverable physical gold ratio that is now north of 200:1, several correspondents noted that "they are probably bluffing...based on JPMorgan's previous lies, the real number is likely significantly higher than 200:1." History tells us that all Ponzi schemes and market interventions fail, and it appears we are on the cusp of a massive failure in the scheme to cover up the truth about the precious metals market.