Firstly, we'd like to say that our thoughts are with the coastal states of the Eastern US, as Hurricane Florence approaches. Stay safe. Our thoughts are also with those who lost loved ones in 9/11. It is hard to believe that day happened 17 years ago!
This week's article is all about recent Gold and Silver developments. We'll be looking at everything affecting prices including; geo-political events, price patterns, interest rates, central bank commentary and other commodity fundamentals.
We can’t predict the future but we can read the signs. And, to be honest, Gold and Silver are such timeless investments, even if the short-term signs were not ideal, it is the historical investment of kings, queens and empires.
1) The Gold to Silver Ratio
The price ratio between these two precious metals has now risen to a 23-year high of 84. This simply means you can purchase 84 ounces of Silver for the price of 1 ounce of Gold. And yet, “The Roman Empire officially set the ratio at 12:1, and the U.S. government fixed the ratio at 15:1 with the Mint Act of 1792,” (Investopedia). So, it is clear that Silver is currently at a 23-year price ‘low’ compared to Gold. Following on from our recent article on the recent strengths of Silver, this is a sign that it is a good time to invest in Gold’s humbler sister.
2) Is Gold About to Form a Double Bottom?
This is when the price of Gold falls, rises, then falls again, in short succession. The two ‘bottom’ prices often match, forming a near perfect W. It is one of the patterns price strategist use to ‘guess’ when to buy. The ‘resistance’ of that bottom price is often hard for the price to fall through, hence giving a clear price signal. It has been argued in the financial markets, that Gold is approaching its second ‘bottom’: “Gold markets fell initially during the day on Monday, bounced again, then fell again, only to bounce later in the day. In other words, we have a lot of volatility in the market…that could be forming a bit of a double bottom,” (FX Empire).
3) After the downturn, the upswing
There is no denying that the Gold price has not recovered it’s high of £1014 per ounce, since July 2016. This can be discouraging to clients who have entered the physical metals market in the intervening months. Yet, to buy during a price suppression is actually a smarter move than waiting until the headlines are singing Gold’s praises. It is always worth remembering that, “history proves that commodity market prices are highly cyclical. In other words, extended price downturns will lead to extended price upturns,” (Kitco). Watch this long-term cycle to give yourself and your family a heads up on Gold price directions.
4) Oil Prices Rise
We haven’t explored this connection for some time. Rising oil prices signify rising global tension. And rising global tension indicate rising Gold prices. That’s a crude summary, (excuse the pun) but oil prices have risen sharply this week, due to the bomb blast in Saudia Arabia. “The latest attacks come at a crucial time when confidence was returning to the sector. Fears that the war would spark turmoil in the Middle East, which supplies two-fifths of globally-traded crude, have appeared to be exaggerated but could yet resurface,” (Daily Mail). A price correlation on which to keep an eye.
5) Former CEO of Barclays says “Raise Interest Rates”
It’s always sound financial acumen to gauge in which direction interest rates are traveling, if nothing else for our personal peace of mind. We might think everyone owes a mortgage debt and therefore get comfortable holding debt as a ‘way of life’. But the ‘Wealth in Great Britain’ survey of 2010, only the second survey of its breadth in UK history, found that actually only 37% of Britons had a mortgage and of those, the average debt was only £75,000. At the time, The Guardian also produced a thorough summary of the Office of National Statistic findings and it is an interesting shorter read in its own right. It is always worth focusing on paying down debt at the same time as investing, if financially feasible. We could even use any rises in the Gold price to sell our metals for a short period of time, to slice a few years off the mortgage term, then use the monthly funds that are then freed up, to form a regular Gold and Silver investment plan. Be aware of the trap of rising interest rates that is coming, and think through some innovative financial ideas of doing things a little differently to avoid you and your family hitting a tighter and tighter squeeze at the end of the month.
6) Russia and China War Games Ramp Up
For those of our readers who follow geo-politics as another clue to the Gold price, I was surprised myself to learn this week that “The Vostok 2018 military exercise kicked off in Russia's far east on Tuesday, involving 300,000 troops and close to 40,000 military vehicles. It's been billed as the most expansive war games on Russian soil since 1981 under the Soviet Union. It further includes 1,000 aircraft, two Russian naval fleets and all airborne units, along with a contingent from China, and a Mongolian troop deployment. Controversially, China is to deploy an unprecedented number of its People's Liberation Army (PLA) troops and equipment numbering in the thousands, which also constitutes the first time a country not from the former Soviet bloc has conducted joint games with Moscow and on Russian soil,” (Zerohedge).
7) Be Careful of 'Short Term-ish'
I love this phrase. And it’s so true. This time of year many traders are giving their market portfolios an Autumn clean, while also trying to improve short-term results to ensure they get rewarded with year-end bonuses. This means behaviour shifts from the long-term humbler vision of the tortoise, to the behaviour of the hare. I’ve often found that physical Gold and Silver investors remind me of the wiser tortoise, willing to put in the long-term persistence and patience needed to hold an asset of inherent value, throughout the drama of the short term storms. Read more about the price of Gold has changed over the last 45 years here.
8) “The Fed Has Burst The 'Everything' Bubble”
I’ll end this week’s communication with a second phrase that made me chuckle. This phrase first gained traction last year and has resurfaced this week through an article published originally by Phoenix Capital, but kindly reprinted in Zerohedge without need for a financial subscription:
“The Fed has burst the 'Everything' Bubble. No one has noticed it. Indeed, everyone in the US seems to be blissfully unaware. But the reality is that the massive bubble created between 2008 and 2018 is in the process of bursting. And the Fed was the needle. If you think I’m being dramatic, consider what has happened around the world in the last nine months. While US stocks have continued to move higher courtesy of capital flowing into the US as a result of the Fed’s policies, the rest of the world is entering a meltdown. China’s stock market is down 10% year to date. But if you go from the 2018 recent highs, Chinese stocks are down OVER 24% - meaning they are in a full-fledged bear market.”
It’s everything I was saying back in 2011 when I first started writing for Bleyer. Once a bubble burst it can’t be unburst and truth as they say always rises to the surface.
I’m entering my last 2 weeks working for Bleyer, after being with you - the reader - for 7 years. Together, we’ve enjoyed an extremely wide range of topics, from financial to geo-political. I’ll use these last 2 weeks to highlight the key themes for you to watch over the coming months and on into the future of hopefully safe and prosperous financial investments. It’s been a joy to often meet you in person and a passion to help protect you, my fellow travellers, on this journey against the shocks of financial suffering. Thank you for all your support, it’s been my pleasure to write for you all in mind.
Call one of the Bleyer team if you wish to know more about owning or increasing your personal store of physical Gold and Silver bars and coins on 01769 618618 or [email protected].