Posted on July 22, 2020 by Tom Linzmeier, Editor/LivingofftheMarket.com
Prices are going parabolic – overpriced, ready for a correction but giving no indication the bull run is close to ending. There is a short squeeze related to July futures closing contracts. August could produce a pull-back related to the short squeeze ending.
MarketWatch: Published: July 21, 2020
Between now and tomorrow morning you will see of bullish announcements like above.
And yes, the price is going parabolic. Gold and silver miners have been hot as well. For the miners, Fixed Costs as established and Variable cost are very modest. This means that rising silver and gold physical prices are nearly “pure” profit. Enjoy ’em if you got’ em. Should you buy now if you don’t own silver or gold miners? Probably but be tempered and long term. But a little and be prepared to buy more in a correction. Yes, we believe there is a multi-year rally in front of us. Government around the world have not stopped printing money. Today move is likely on the heels of the EU’s recent decision:
PRESS RELEASE:
Monetary policy decisions
16 July 2020 – At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:
(1) The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.50% respectively. The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
(2) The Governing Council will continue its purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,350 billion. These purchases contribute to easing the overall monetary policy stance, thereby helping to offset the pandemic-related downward shift in the projected path of inflation. The purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions. FULL PRESS RELEASE LINK
Most of you know, we are not gold or silver life-long promoters we have been talking gold and silver since mid-2015, however. That was the beginning of the technical emergence from a basing chart pattern as well as incredibly low valuations on the mining stocks. They are still not over-valued but will be subject to sharp pull backs and then run again upwards again. We suggest a dollar cost averaging approach with buying on weakness to build your position. Trading oriented personalities will need to exercise discipline with entry and exit points coupled with your risk management policy.
Silver is hot and a bit frothy… however gold is breaking out (Chart below) as well. Silver is priced close to historic lows in the gold silver ratio. As long as gold is doing well there is little reason for silver to not do well. Silver is the more volatile and speculative.
The all-time high price on silver was $49.75 per oz and Gold all time high was $1,920 per oz.
The gold/silver ratio at the high on each is: 38.59 oz of silver to buy one oz of gold. Today’s gold/silver ratio is 86.48.
Said another way: Silver is 57% below its all-time high. Gold is 4% below its all-time high. Silver typically lags in upward moves to gold but closes out with an explosive move bigger than gold percentage wise.
This my friends, is why so many are bullish on silver. A lot of catching up to do to catch gold.
Chart prices are in USD.
