"The history of Eureka lies in its future." - Lambert Molinelli, 1878

DISCLOSURE

The author/editor of the Eureka Miner owns common shares of local mining stocks, McEwen Mining (MUX) and General Moly (GMO). Please do your own research, markets can turn on you faster than a feral cat.

Friday, December 27, 2019

Gold $1,520, Silver $18.1, Copper $2.85 Giddy-up! Happy New Year Miners!

Main Street Eureka (December 2010)
Eureka, Nevada

Friday, December 27, 2019 AM

Follow the ole Colonel on twitter @Eurekaminer

Next Week Target Gold Price: $1,510 per ounce, Target Silver Price: $17.92 per ounce.


An easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most

Happy New Year Miners!

We're closing the year with our favorite metals catching a gear higher. Earlier this morning Comex February gold touched $1,519.9 per ounce, March silver scored $18.05 per ounce and the red metal came within a whisker of yesterday's high of $2.8565 per pound. The  S&P 500 and other major stock indexes remain in record-breaking mode (today's new intraday high 3,247.93). We'll see how the markets close but things are looking up as we enter a new decade next week.

Kitco News did not conduct a survey today, so I'll leave you some thoughts for 2020. I believe there is more than a good chance that gold will break $1,600 by mid-year. Let's make it a beer bet:

Gold will break $1,600 per ounce before the 4th of July 2020

You may ask why I'm not even more optimistic about gold's level - some experts are a predicting prices north of $1,600. The yellow metal can't escape the headwinds of rising equity markets (see Chart to Watch below) but is also buoyed by residual U.S./China trade issues, next steps in the Brexit saga, new threats from North Korea and escalating  tensions in the Middle East (enough booger bears for now!). So far, the coming election year and Washington impeachment drama have not affected gold prices...yet. 

I'm betting the push-pull of bearish and bullish forces will bring higher gold prices in the first-half of 2020.

My top six things to watch for the New Year (this list was five things when I sent out my mailer, I added a sixth Saturday morning):
  1. Copper prices -  I'd like to see the current rally push us above $6,500 per tonne ($2.95 per pound). A fall below the $6,000-level ($2.72) would be a bad sign, U.S./China trade Phase I in trouble perhaps.
  2. Chinese yuan - strengthening below 7 USDCNY is a good sign that their economy and trade are on an improving track (today 6.9954). Sustained weakening above the 7-level is a red flag. 
  3. U.S. dollar - will it remain strong or begin a period of decline? Foreign demand for Treasury debt has kept the dollar strong but rising U.S. deficits and countries trying to move away from dollar dependence (e.g., China, Russia) are countervailing forces not to be ignored. The U.S. Dollar Index (DXY) made its high September 30 this year and has been in a downtrend of lower-lows since (99.38 September high, 97.71 today). This reports tracks the Invesco DB US Dollar Index Bullish Fund (UUP) (27.01 September high, 26.10 today, Weekly Summary below). Finally, overseas interest in Treasurys has been fueled by negative interest rates abroad. This report monitors the German 10-year bund (Weekly Summary) as a benchmark for foreign Treasury demand. The bund yield is currently -0.26% compared to a Treasury yield of 1.87% giving the U.S. debt still an attractive 2.13% differential.
  4. Interest Rates - there is an almost uncanny relationship between the yield on the benchmark U.S. 10-year Treasury and the copper-to-gold ratio (CGR, Weekly Summary). I've written about this extensively since 2017 ( see The Colonel's Latest Kitco News Commentaries below). Bottom line, a rising CGR signals higher interest rates for 2020.
  5. Real rates - The 10-year inflation adjusted Treasury yield, or real rate, is the difference between the nominal yield and inflation expectations (aka 10-year "break-even" rate). Since gold is a non-interest bearing assets it performs best when real rates are near zero or negative. This report tracks real rates (Weekly Summary) and inflation expectations (Inflation Watch). Since gold is often considered an inflation hedge it is prudent to track both. In 2020, inflation may pick up (gold bullish) but if interest rates rise faster, an increasing real rate dampens interest in in the yellow metal (gold bearish). Presently, real rates are near-zero (+0.13%) and inflation expectations are a modest 1.74%.
  6. Gold-to-S&P 500 ratio (AUSP) - Gold's relationship with equities is key to monitor. Gold lost value to the S&P 500 from Donald Trump's election until October of 2018. Since then it has regained value in a trend of higher-lows (see Chart to Watch below). We enter 2020 with that trend higher challenged. Falling below trend would be a very bearish sign for gold.
Predictions aside, 2020 will no doubt be an exciting year in the markets. Get ready for a roller-coaster ride, pardner. I remain bullish gold!

Happy New Year!!!


The Colonel's Latest Kitco News Commentaries

Please checkout my latest Kitco News columns on the stunning relationship of copper and gold prices with interest rates:






Here is the latest model of U.S. Treasury yields based on the copper-gold ratio (click on image for larger view):

10-year U.S. Treasury Yield based on Copper-to-Gold Ratio

In the above chart, model coefficients were calculated at last Friday's close (12/20). Note how well the model and actual yields track for this morning's data (within 0.6 basis points). New coefficients will be computed next Friday.

Weekly Summary

Here is a weekly summary chart of gold and my 16 favorite market variables. They are grouped in categories "Commodities", "Interest Rates", "Indexes" and "Currencies" of 4 variables each. Over time, each variable has played some part in the gold story. It is prudent to monitor all 16 to understand the key price drivers that are currently active for the yellow metal. Importantly, this is not a unique collection of variables but one that works well for the ole Colonel

Because The Eureka Miner is a morning report, Friday AM prices are compared with the closing prices of the previous week (click on charts for larger size):


This weekly chart of comparative value tracks the value of gold relative to key currencies, commodities and indexes :


Silver Watch

Comex silver returned to $18 per ounce territory this week.

Please check this out if you get the silver bug:

How to Invest in Silver (Debbie Carlson, U.S. News & World Report, August 1, 2019)

How to smartly buy gold and silver:

How to Mine Physical Precious Metals for an IRA (Debbie Carlson, Barrons, Sept. 8, 2019)

The gold-to-silver ratio (GSR) set a new high July 11 at 91.3 ounce per ounce - a trend down from this top is bullish for silver if the Lustrous One rallies. 

At 84.26, silver is historically very, very cheap relative to gold!

The 10-year average GSR is much lower at 67.7 ounce per ounce.

The 3-month beta with gold is an attractive 1.83 (i.e. on average the daily % rise or fall of silver price is 1.83 times that of gold).

(click on image for larger size)

Gold-to-Silver Ratio

Note that this week, the GSR is right at the long-term trend line of higher-lows established in April 2011 when silver flirted with $50 per ounce. A GSR falling below this trend is bullish silver.

Historical note:

In the past, when gold and silver were legal tender (see gold overview link below headline photo), it was important to set a value relationship between them. In 1792, the U.S. fixed its price at 15:1. This means that 1 troy ounce of gold was worth 15 troy ounces of silver. Over the years, as this ratio has changed, precious metal investors have used it as a signal of when to buy.

Stay tuned.

Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year. Expectationsaree on the rise again from the October, 2019 low.

10-year Inflation Expectations

Note: In the above chart inflation expectations peaked April 23, 2018 at 2.18%. May 29 broke a trend line of higher-lows. This week, expectations  are presently 1.74% as of Thursday up from the October 3 low of 1.48%. 

Many believe, including the ole Colonel, that gold price is more sensitive to inflation expectations than other measure of inflation. My January Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


 Old Glory
Eureka, Nevada

Chart to Watch

Here's a chart to watch for 2019 (Click on the image for a larger size):

Gold-to-S&P 500 Ratio

An important gold ratio is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016 (0.6849). It bottomed December 20, 2016 (0.4973) trended higher but then bearishly reversed into a downward channel bottoming again October 1, 2017 (0.4063). Currently this AM the AUSP is at 0.4677 and far below the high of 0.5409 set at the close December 21, 2018. Importantly, the ratio has left the downward trending channel with a new trend of higher-lows starting with the October, 2018 low. That trend is now challenged (red arrow & circle).

Cheers,

Colonel Possum & Mariana



Photos by Mariana Titus if not otherwise noted

Friday, December 20, 2019

Gold $1,483, Copper Pauses, Silver Shows Strength; Merry Christmas Miners!

Pancake Quarries (2013)
Fire bricks for Eureka's lead/silver smelters came from here
Pancake Range, White Pine County, Nevada

Friday, December 20, 2019 AM

Follow the ole Colonel on twitter @Eurekaminer

Next Week Target Gold Price: $1,485 per ounce, Target Silver Price: $17.29 per ounce.


An easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most

Merry Christmas Miners!

Gold demonstrated resilience this week around $1,480 per ounce as the copper rally continues above $6,0000 per tonne ($2.72 per pound). As I write, Comex February gold is trading at $1,483.2 per ounce and March copper is pausing at $2.8110 per pound. Silver gained noticeable strength on gold this week, up 1.4% in comparative value (see second chart below). If you happened to buy silver in the sixteens, this is a good sign. March silver is currently $17.27 per ounce.

The biggest market mover continues to be the Phase I U.S./China trade deal. Here are my latest thoughts from my early morning input to the Kitco News Weekly Gold Survey:

With recent soaring domestic equities, gold faces significant headwinds. Importantly, the gold-to-S&P 500 ratio (AUSP) broke a trend line this week of higher-lows established from October 1, 2018 [see chart below]. However, one must question the sustainability of this stock rally. Volume in the S&P 500 is trailing off and there may be end-of-the-year profit taking next week.

Furthermore, the primary impetus for this stock surge has been agreement on the Phase I U.S./China trade deal which also rallied copper and strengthened the Chinese yuan. This morning's trading suggests that the copper rally is taking a pause and the yuan has weakened above the key 7 USDCNY level again. If the new deal proves to fail expectations, the relationship between gold and the S&P 500 could quickly reverse. For these reasons, I suspect Comex gold will benefit from a weakening of the current "risk-on" sentiment finding comfort around $1,485 per ounce next week with silver following at $17.29 per ounce.

Copper, the yuan and the AUSP will all be key to monitor. 

From an interest rate perspective, even with a trend higher in global yields, a bullish environment remains for a non-interest earning asset like gold. Negative or near-zero interest rates for major countries and very low real rates in the U.S. are still in place.* 

* 10-year bonds: German Bund -0.24%, France +0.06% and Japan 0.00%; 10-year U.S. real rate +0.13%

The Colonel's Latest Kitco News Columns 

Please checkout my latest Kitco News columns on the stunning relationship of copper and gold prices with interest rates:






Here is the latest model of U.S. Treasury yields based on the copper-gold ratio (click on image for larger view):



Weekly Summary

Here is a weekly summary chart of gold and my 16 favorite market variables. They are grouped in categories "Commodities", "Interest Rates", "Indexes" and "Currencies" of 4 variables each. Over time, each variable has played some part in the gold story. It is prudent to monitor all 16 to understand the key price drivers that are currently active for the yellow metal. Importantly, this is not a unique collection of variables but one that works well for the ole Colonel

Because The Eureka Miner is a morning report, Friday AM prices are compared with the closing prices of the previous week (click on charts for larger size):


This weekly chart of comparative value tracks the value of gold relative to key currencies, commodities and indexes :


Silver Watch

Comex silver has returned to $17 per ounce territory this week.

Please check this out if you get the silver bug:

How to Invest in Silver (Debbie Carlson, U.S. News & World Report, August 1, 2019)

How to smartly buy gold and silver:

How to Mine Physical Precious Metals for an IRA (Debbie Carlson, Barrons, Sept. 8, 2019)


The gold-to-silver ratio (GSR) set a new high July 11 at 91.3 ounce per ounce - a trend down from this top is bullish for silver if the Lustrous One rallies. 

At 85.88:1, silver is historically very, very cheap relative to gold!

The 10-year average GSR is much lower at 67.6 ounce per ounce.

The 3-month beta with gold is an attractive 1.89 (i.e. on average the daily % rise or fall of silver price is 1.89 times that of gold).

(click on image for larger size)

Gold-to-Silver Ratio

Historical note:

In the past, when gold and silver were legal tender (see gold overview link below headline photo), it was important to set a value relationship between them. In 1792, the U.S. fixed its price at 15:1. This means that 1 troy ounce of gold was worth 15 troy ounces of silver. Over the years, as this ratio has changed, precious metal investors have used it as a signal of when to buy.

Stay tuned.

Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year. Expectationsaree on the rise again from the October, 2019 low.

10-year Inflation Expectations

Note: In the above chart inflation expectations peaked April 23, 2018 at 2.18%. May 29 broke a trend line of higher-lows. This week, expectations  are presently 1.77% as of Thursday up from the October 3 low of 1.48%. 

Many believe, including the ole Colonel, that gold price is more sensitive to inflation expectations than other measure of inflation. My January Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


 Old Glory
Eureka, Nevada

Chart to Watch

Here's a chart to watch for 2019 (Click on the image for a larger size):


Gold-to-S&P 500 Ratio

An important gold ratio is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016 (0.6849). It bottomed December 20, 2016 (0.4973) trended higher but then bearishly reversed into a downward channel bottoming again October 1, 2017 (0.4063). Currently this AM the AUSP is at 0.4610 and far below the high of 0.5409 set at the close December 21, 2018. Importantly, the ratio has left the downward trending channel with a new trend of higher-lows starting with the October, 2018 low. That trend is now challenged (red arrow).

Cheers,

Colonel Possum & Mariana



Photos by Mariana Titus if not otherwise noted

Friday, December 13, 2019

Gold $1,479 on Phase I Trade; New Hope for Mt. Hope

Mt. Hope at 8,000 feet (2013)
Eureka, Nevada

Friday, December 13, 2019 AM

Follow the ole Colonel on twitter @Eurekaminer

Next Week Target Gold Price: $1,465 per ounce, Target Silver Price: $16.83 per ounce.

An easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most

Here's a column by renowned commodities journalist Debbie Carlson on how to smartly buy gold and silver:

How to Mine Physical Precious Metals for an IRA (Debbie Carlson, Barrons, Sept. 8, 2019)

Morning Miners,

What a week!

Impeachment hearings, the U.K. vote for Boris Johnson making Brexit a near certainty in January and a Phase I U.S./China deal moving towards signature this weekend. And, there may be new hope for General Moly (GMO) and the Mt.Hope molybdenum project.

By far, the biggest market mover is the trade deal. It made gold prognostication for next week a challenge as reflected in my early morning input to the Kitco News Weekly Gold Survey:

Market flux as I listen real time to the Chinese debrief the status of the U.S./China trade negotiation. The Chinese say that the Phase I deal is on and "major progress has been made." An earlier President Trump tweet introduced uncertainty on tariff reduction. Comex gold has now retreated to the $1,470-level , copper has recovered earlier morning losses and it appears equities are back in rally mode. 

This report has said for sometime that there are two key market variables that will signal real trade progress: the Chinese yuan must stay below the 7 USDCNY-level and copper prices need to sustain above $6,000 per tonne ($2.72 per pound). Copper was the first to move above threshold and the yuan dropped below 7 USDCNY Thursday - the interim trade deal seemed to moving in the right direction. Until a deal is signed these are the two variables to continue watching.

Worst case for the yellow metal, I continue to believe there is a floor for gold prices around $1,450 per ounce. If the new deal largely fails expectations, gold could move back to $1,480 per ounce in the near term - perhaps higher by the close of 2019. I'll take the middle ground and say Comex gold should find stability at $1,465 per ounce next week with silver following at $16.82 per ounce.

From an interest rate perspective, even with a trend higher in global yields, a bullish environment remains for a non-interest earning asset like gold. Negative or near-zero interest rates for major countries and very low real rates in the U.S. are still in place.* 

* 10-year bonds: German Bund -0.27%, France +0.02% and Japan -0.03%; 10-year U.S. real rate +0.14%

February Comex gold touched $1,491.6 per ounce yesterday then plummeted to $1,465.5 early Friday as market participants tried to read the Chinese tea leaves. This morning there has been some more ping-ponging around with the yellow metal trading at $1,479.0 as I write this column a few hours after the above Kitco input. 

Although we know that the Sunday 15% tariff bump probably won't occur, it is less certain that the details of what was agreed on are clear. Expect more volatility. The positive news is that progress in negotiations appears to be moving in a good direction.

Thawing in U.S./China trade relations may be also supported by the General Moly (GMO) standoff with Chinese partner AMER being resolved. AMER provided initial financing for the Mt. Hope molybdenum project but defaulted during the more tense moments of the U.S./China trade saga. It looks like the deal is back on:


Chief Executive Officer Bruce D. Hansen commented, “On behalf of the Board, we thank Amer for its continued support of the Mt. Hope Project. This further investment by Amer in our Company underscores the economic appeal of the Mt. Hope Project and provides the capacity to pursue strategic alternatives and raise additional capital.”

General Moly (GMO) trading this morning at $0.2495 per share this morning after a pop on the announcement Tuesday.

Molybdenum price (as of 12/10/2019) is $26,000 per tonne or $11.79 per pound (source: Metalary)

The Colonel's Latest Kitco News Columns 

Please checkout my latest Kitco News columns on the stunning relationship of copper and gold prices with interest rates:





Weekly Summary

Here is a weekly summary chart of gold and my 16 favorite market variables. They are grouped in categories "Commodities", "Interest Rates", "Indexes" and "Currencies" of 4 variables each. Over time, each variable has played some part in the gold story. It is prudent to monitor all 16 to understand the key price drivers that are currently active for the yellow metal. Importantly, this is not a unique collection of variables but one that works well for the ole Colonel

Because The Eureka Miner is a morning report, Friday AM prices are compared with the closing prices of the previous week (click on charts for larger size):


This weekly chart of comparative value tracks the value of gold relative to key currencies, commodities and indexes :


Silver Watch

Comex silver has been in $16 per ounce territory this week.

Please check this out if you get the silver bug:

How to Invest in Silver (Debbie Carlson, U.S. News & World Report, August 1, 2019)

The gold-to-silver ratio (GSR) set a new high July 11 at 91.3 ounce per ounce - a trend down from this top is bullish for silver if the Lustrous One rallies. 

At 87.12:1, silver is historically very, very cheap relative to gold!

The 10-year average GSR is much lower at 67.6 ounce per ounce.

The 3-month beta with gold is an attractive 1.9 (i.e. on average the daily % rise or fall of silver price is 1.9 times that of gold).

(click on image for larger size)

Gold-to-Silver Ratio

Historical note:

In the past, when gold and silver were legal tender (see gold overview link below headline photo), it was important to set a value relationship between them. In 1792, the U.S. fixed its price at 15:1. This means that 1 troy ounce — the long-used standard for measuring precious metals — of gold was worth 15 troy ounces of silver. Over the years, as this ratio has changed, precious metal investors have used it as a signal of when to buy.

Stay tuned.

Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year. 

10-year Inflation Expectations

Note: In the above chart inflation expectations peaked April 23, 2018 at 2.18%. May 29 broke a trend line of higher-lows. This week, expectations  are presently 1.72% as of Thursday up from the October 3 low of 1.48%. 

Many believe, including the ole Colonel, that gold price is more sensitive to inflation expectations than other measure of inflation. My January Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


 Old Glory
Eureka, Nevada

Chart to Watch

Here's a chart to watch for 2019 (Click on the image for a larger size):


Gold-to-S&P 500 Ratio

An important gold ratio is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016 (0.6849). It bottomed December 20, 2016 (0.4973) trended higher but then bearishly reversed into a downward channel bottoming again October 1, 2017 (0.4063). Currently this AM the AUSP is at 0.4664 and far below the high of 0.5409 set at the close December 21, 2018. Importantly, the ratio has left the downward trending channel with a new trend of higher-lows starting with the October, 2018 low. That trend is now challenged (red arrow).

Cheers,

Colonel Possum & Mariana



Photos by Mariana Titus if not otherwise noted

Friday, December 6, 2019

Gold Dips to $1,463 on Surprisingly Solid Jobs Numbers

McCoy Hill & Goodwin Canyon (2014)
Major William W. McCoy and C.C. Goodwin
were early mining pioneers of Eureka, Nevada

Friday, December 6, 2019 AM

Follow the ole Colonel on twitter @Eurekaminer

Next Week Target Gold Price: $1,450 per ounce, Target Silver Price: $16.46 per ounce.

An easy-to-understand overview on gold (32 slides, read explanation below each slide): History of gold and which countries have the most

Here's a column by renowned commodities journalist Debbie Carlson on how to smartly buy gold and silver:

How to Mine Physical Precious Metals for an IRA (Debbie Carlson, Barrons, Sept. 8, 2019)

Morning Miners,

After a long time out, The Eureka Miner returns with a slightly different focus and format. My emphasis will be primarily gold and silver prices supplemented by occasional stories about local mining and other minerals of economic interest in Northern Nevada. I will present much of the same data in a more compact way with links to my periodic Kitco News commentaries (please checkout the commentary links and new weekly summaries below).

The Monthly nonfarm employment report blew expectations out of the water this morning, adding 266,000 jobs instead of 181,000. Average hourly earnings were up a healthy 0.2% and headline unemployment is a low 3.5%. So far, so good.

The good report did, however, put pressure on gold and silver prices.

Comex Gold (February contract) morning low post-report $1,463.3 per ounce (7:00 am Eureka Time)

I explain what is going on in my input to the Kitco News Weekly Gold Survey:

Today's surprisingly strong jobs report is an albatross around the neck of our favorite metal - at least for the short-term. This morning's robust advance in domestic stocks and steep decline in gold and silver prices is a not an unexpected reaction but the sustainability of the equity rally has yet to be proved. There is still enough uncertainty about the outcome of a U.S./China interim deal to moderate gold's decline. I think it likely that the stock rally will continue into next week and the yellow metal will retest the $1,450-level. 

Silver will follow gold lower to $16.46 per ounce providing a buying opportunity for the patient silver investor. The silver 3-month beta with gold is an attractive 1.9 for those that believe that gold will end the year higher [see silver discussion below].

With regard to the on-again, off-again U.S./China deal, there are two market variables to monitor. The Chinese yuan is still above the key 7 USDCNY-level and copper remains below $6,000 per tonne ($2.72 per pound). I view a strengthening yuan below 7 and sustaining copper prices above $2.72 are necessary signals, beyond just political words, to justify optimism on an imminent U.S./China deal. This puts a solid floor underneath gold prices around $1,450 per ounce [see summary charts below].

From an interest rate perspective, even with a trend higher in global yields, a bullish environment remains for a non-interest earning asset like gold. Negative or near-zero interest rates for major countries and very low real rates in the U.S. are still in place.* 

* 10-year bonds: German Bund -0.29%, France +0.02% and Japan -0.02%; 10-year U.S. real rate +0.14%

The Colonel's Latest Kitco News Columns 

Please checkout my latest Kitco News columns on the stunning relationship of copper and gold prices with interest rates:





Weekly Summary

Here is a weekly summary chart of gold and my 16 favorite market variables. They are grouped in categories "Commodities", "Interest Rates", "Indexes" and "Currencies" of 4 variables each. Over time, each variable has played some part in the gold story. It is prudent to monitor all 16 to understand the key price drivers that are currently active for the yellow metal. Importantly, this is not a unique collection of variables but one that works well for the ole Colonel

Because The Eureka Miner is a morning report, Friday AM prices are compared with the closing prices of the previous week (click on charts for larger size):


This weekly chart of comparative value tracks the value of gold relative to key currencies, commodities and indexes :


Silver Watch

Comex silver fell into $16 per ounce  territory this week.

Please check this out if you get the silver bug:

How to Invest in Silver (Debbie Carlson, U.S. News & World Report, August 1, 2019)

The gold-to-silver ratio (GSR) set a new high July 11 at 91.3 ounce per ounce - a trend down from this top is bullish for silver if the Lustrous One rallies. 

At 88.1:1, silver is historically very, very cheap relative to gold!

The 10-year average GSR is much lower at 67.6 ounce per ounce.

The 3-month beta with gold is an attractive 1.9 (i.e. on average the daily % rise or fall of silver price is 1.9 times that of gold).

(click on image for larger size)


Gold-to-Silver Ratio

Historical note:

In the past, when gold and silver were legal tender (see gold overview link below headline photo), it was important to set a value relationship between them. In 1792, the U.S. fixed its price at 15:1. This means that 1 troy ounce — the long-used standard for measuring precious metals — of gold was worth 15 troy ounces of silver. Over the years, as this ratio has changed, precious metal investors have used it as a signal of when to buy.

Stay tuned.

Inflation Watch

Inflation expectations made a high April 23, 2018 above trend lines of higher lows (dotted lines, click on chart for larger size). Those trend lines were broken dramatically to the downside late last year. 


10-year Inflation Expectations

Note: In the above chart inflation expectations peaked April 23, 2018 at 2.18%. May 29 broke a trend line of higher-lows. This week, expectations  are presently 1.67% as of Thursday up from the October 3 low of 1.48%. 

Many believe, including the ole Colonel, that gold price is more sensitive to inflation expectations than other measure of inflation. My January Kitco News commentary explains the importance of tracking "real rates" which are a function of inflation expectations:


 Old Glory
Eureka, Nevada

Chart to Watch

Here's a chart to watch for 2019 (Click on the image for a larger size):


Gold-to-S&P 500 Ratio

An important gold ratio is gold-to-S&P500 or AUSP. The ratio bottomed in early-December of 2015 and reversed to a bullish trend, peaking February 11, 2016 (0.6849). It bottomed December 20, 2016 (0.4973) trended higher but then bearishly reversed into a downward channel bottoming again October 1, 2017 (0.4063). Currently this AM the AUSP is at 0.4663 and far below the high of 0.5409 set at the close December 21, 2018. Importantly, the ratio has left the downward trending channel with a new trend of higher-lows starting with the October, 2018 low. That trend is now challenged (red arrow).

Cheers,

Colonel Possum & Mariana



Photos by Mariana Titus if not otherwise noted