Author Archives: Keith Weiner

     

 

 

The Seeds of the Next Bust Are Closer to Sprouting

The price of gold was up this week, by $10 and that of silver by ¢6. Something is brewing in the fundamentals that we haven’t seen since… last year. We will show a picture of this, below.

There are many problems with assuming a rising stock market means a growing economy. We’ve written many times about the much-greater growth of debt, i.e., borrowing to consume, which adds to GDP.

 

S&P 500 Index, monthly – the huge rally since 2009 was accompanied by the weakest economic recovery of the post-WW2 era. Evidently, the stock market does not necessarily reflect economic growth. Very often numerous other factors prove to be far more important drivers of stock prices. A pertinent example is Venezuela’s soaring stock market, which is up by 88,500% in the past year alone (this is not a typo). Meanwhile, the country’s economy is contracting since 2014, with the slump accelerating to a stunning -16.5% y/y in both 2017 and 2018. The S&P 500 Index is an island of sanity by comparison, at least superficially (the ceteris are of course not paribus). [PT]

 

Read the rest of this entry »

     

 

 

Coffee, Milk and Gold

Last week was holiday-shorted due to Good Friday (it’s not an official holiday in the US, but it is in the UK. And this week’s report is a day late due to Easter Monday). The price of gold dropped $15, but the price of silver rose ¢4. Perhaps silver traders got word that we are paying interest on silver, which gives people a reason to hold silver? J

 

A silver bar plus interest…  [PT]

 

Read the rest of this entry »

     

 

 

Is Silver Hard of Hearing?

The price of gold inched down, but the price of silver footed down (if we may be permitted a little humor that may not make sense to metric system people). For the gold-silver ratio to be this high, it means one of two things. It could be that speculators are avoiding the monetary metals and metal stackers are depressed. Or that something is going on in the economy, to drive demand for the metals in different directions.

 

As a rule the gold silver ratio acts as a proxy for credit spreads – this is attributable to the fact that silver prices are partly driven by the metal’s large industrial demand component (by contrast, the vast bulk of gold demand consists of monetary or investment demand; industrial and fabrication demand in the gold market are negligible by comparison). In the chart above we compare the gold-silver ratio to the IEF-JNK ratio, which serves as a proxy for corporate credit spreads (note: “unadjusted” means that only prices are compared, not total returns – interest payments received by holders of IEF and JNK are not included). An interesting divergence has emerged since the 2014-2016 oil patch mini-bust – while the gold-silver ratio is streaking to new highs, the IEF-JNK ratio has established a lower high in late 2018. We believe this is mainly due to the massive distortion of credit markets in the wake of the QE and ZIRP/NIRP policies pursued by the world’s largest central banks. One of these markets is wrong and it is a good bet that the market that has been manipulated by central bank interventions is the one that is giving a false signal. [PT]

 

Read the rest of this entry »

     

 

 

A Worrisome Trend

If you read gold analysis much, you will come across two ideas. One, inflation so-called (rising consumer prices) is not only running much higher than the official statistic, but is about to really start skyrocketing. Two, buy gold because gold will hedge it. That is, the price of gold will go up as fast, or faster, than the price of gold.

 

CPI monthly since 1914, annualized rate of change. In recent years CPI was relatively tame despite a vast increase in the money supply. However, relative prices in the economy were massively distorted as a result of the latter – and this is driving ever larger boom-bust cycles. [PT]

 

Read the rest of this entry »

     

 

 

Digital Asset Rush

The only part of our April Fools article yesterday that was not said with tongue firmly planted in cheek was the gold and silver price action (though framed it in the common dollar-centric parlance, being April Fools):

 

“Gold went down $21, while silver dropped about 1/3 of a dollar. Not quite a heavy metal brick in free fall, but close enough.”

 

Bitcoin, hourly – a sudden yen for BTC breaks out among the punters. [PT]

 

Read the rest of this entry »

     

 

 

Keynesian Rot

The prices of the monetary metals rose $11 and ¢27 last week. The supply and demand fundamentals is the shortest section of this Report [ed note: we are excerpting the supply-demand section for Acting Man – readers interested in the other part of the report can find it here].

 

The eruption of Mt. St. Helens in 1980 – prior to the cataclysmic event, numerous small earth quakes and steam venting from fissures warned that something big was about to happen, even if no-one suspected the actual magnitude of the outbreak. The eruption was so powerful that a fairly large chunk of the mountain went missing in the proceedings. There are always accidents waiting to happen out there somewhere, and the modern-day fiat money system is clearly one of them. There will be warning signals before it keels over – in fact, the final cataclysm usually happens fairly quickly, while the period that leads up to it tends to be a drawn-out affair. [PT]

 

Read the rest of this entry »

     

 

 

The Week Ends with a Surprise

The weekly closing prices of the precious metals were up +$5 and +¢11. But this does not tell the full story of the trading action. Prices were dropping until Friday. More precisely, Friday 8am in New York, or 1pm in London.

 

Gold and silver – back in demand on Friday… [PT]

 

Read the rest of this entry »

     

 

 

Rise of the Zombies – Precious Metals Supply and Demand

Last week, the prices of gold and silver fell $35 and ¢70, respectively. But what does that mean (other than woe unto anyone who owned silver futures with leverage)?

The S&P 500 index and the euro was up a bit, though the yuan was flat and copper was down. Most notably, the spread between Treasury and junk yields fell. If the central banks can lower the risk of default premium, they can make everything unicorns and rainbows again extend the aging boom a while longer.

 

Non-Zombie vs. Zombie enterprises, via BIS and OECD. The Zombies won’t be able to withstand rising interest rates, which will unmask the misallocation of capital in the economy fostered by the extremely loose central bank policies of recent years. [PT]

 

Read the rest of this entry »

     

 

 

Feel Good Now, Pay Dearly Later

The prices of the metals were up somewhat last week, gold +$7 and silver + ¢13.

The price of the S&P 500 index was up, as was the price of oil and copper, and the price of the euro, pound, and yuan. And bitcoin. Even the Treasury bond posted slight gains (i.e., there was a slight drop in yields).

 

There’s a reason why they call it the “everything bubble”. Its demise won’t be pretty, hence the recent frantic back-pedaling by assorted central bankers who tried to look “tough” for a second.  [PT]

 

Read the rest of this entry »

     

 

 

Intermarket Correlation Dance

Monday was Martin Luther King Day in the US. The price of gold dropped six bucks last week. The price of silver fell 26 cents, a greater percentage.

The price of gold can sometimes correlate well with the price of stocks. For example, from April 2009 – July 2011. The price of gold went from $892 to $1,626, while in the same time period the S&P went from 841 to 1,289. The percentages are different — gold’s was 82% and the S&P’s 53% — but they moved together. And now, they seem to be inversely correlated.

 

In the short term, the gold-SPX correlation has clearly turned negative (in fact, a negative correlation is generally thought of as “normal”). Over the short to medium-term, the correlation is cyclical, but it is indeed negative over the long term. The forces driving the cyclical element of the short-term moves are an agglomeration of contingent circumstances, time leads and lags and perceptions. The latter include the choices of market participants regarding which of the macroeconomic gold price drivers to particularly focus on. [PT]

 

Read the rest of this entry »

     

 

 

Something Odd is Happening

The price of gold went up two bucks, while that of silver fell ten pennies. Something’s odd about how the metals have traded. Back when the market thought that the Fed was tightening, the prices of gold and silver were rising. Silver is now about a buck higher than its Oct-Nov trading range.

 

A timeline of brief bubble trouble followed by bubble restoration via Hedgeye. It starts in early December (upper left corner) when Santa refuses to provide rising stock prices… Collective Wall Street yammering soon ensues and the socialist central planning agency at the center of our so-called market economy is begged to intervene… After consulting its crystal ball, it decides to make a “coo” sound in late December (lower right corner), and presto – everything is fixed! Oddly enough, gold seemed to like the less accommodative Mr. Powell better. This does actually make sense on one level, but one would normally expect gold to like the prospect of a retreat from a tightening cycle even better. We do have some ideas on that topic, which we plan to discuss in an upcoming Acting Man gold update. [PT]

 

Read the rest of this entry »

     

 

 

Fundamental Developments – Silver Looking Frisky

The price of gold went up four bucks, and the price of silver rose 32 cents. Silver has been going up in gold terms since the middle of last week, when the gold-silver ratio peaked at just under 87. It closed this week at just under 82 (a lower ratio means silver is more valuable).

 

Silver: more valuable since last week, both in absolute and relative terms. Just avoid dropping it on your toes – it’s still just as heavy as it always was. [PT]

 

Read the rest of this entry »

Most read in the last 20 days:

  • Workers of the World, Unite!
      A Jolly Little War The dawn of war is a time of simple clarity and purpose.  Good guys vs. bad guys.  Cowboys vs. Indians.  Confederates vs. Yankees.  Coppers vs. robbers.  It’s a time when lines are drawn, songs are sung, and drums are beaten with gaiety and confidence.   A jolly little trade war – easy to win, according to the CiC [PT]   Indeed, calls for ‘a jolly little war’ are always greeted with merriment and optimism.  This also goes for the...

Support Acting Man

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!