Gold Comes a Bit Undone, but Silver’s Selling is Overdone!

Market Analyst & Author
May 14, 2023

A mere four weeks ago we penned our 700th missive entitled “Gold: The Next All-Time High is Nigh”.  And as you nauseatingly know from just prior to this past week, Gold came within four wee points of so doing in reaching 2085 on 04 May, (the All-Time High of course still 2089 from 07 August 2020).

Since however, our “Nigh” has gone somewhat awry, Gold having just recorded a wimpy week of net -9 points in settling  yesterday (Friday ) at 2016.  Regardless, from the 04 May high of 2085 to this past week’s low of 2006 was Gold’s coming a bit undone to the tune of -3.8% in less than seven trading days. 

But the more morose lowlight was the comprehensive shellacking of Silver, her selling overdone indeed!  And it all happened in just these last two trading days, Silver settling at 24.13 to close out her week.  ‘Twas quite untoward to take in:  for at Wednesday’s settle (25.63) the Gold/Silver ratio was 79.5x; 48 hours later ’twas 83.5x!  Such two-day increase of 4.0x hasn’t occurred in better than two years (since 03 February 2021)!  Moreover, from Thursday’s high to Friday’s low, Gold dropped -2.0% … but Silver was chopped liver at one point to the tune of -7.0%!  “Hold the onions!”  Behold the two-day percentage tracks for our metals’ triumvirate of Gold, Silver and Copper from this past Thursday through Friday (15-minute data):

Oh to be sure, Cousin Copper is somewhat the culprit here.  Just as Gold is money, we consider Silver as same.  But we’ve seen at times over the years our Sister Silver discard her precious metal pinstripes for her industrial metal jacket when on occasion Cousin Copper comes calling.  Yet clearly per the above graphic, let’s just say the white metal’s dalliance with the red metal this time ’round was rather excessive (understatement), whether measured by Copper’s percentage decline, Gold’s modest decline, and/or the Gold/Silver ratio itself.  So say it loud, say it proud:  “Got Silver?  Further as is our wont to point out — given the century-to-date average Gold/Silver ratio of 67.5x — were Silver priced today by that metric, she’d be +19% higher than her current 24.13 at 29.86.  Reprise:  “Got Silver?

As for the yellow metal, it recorded an “inside week”, (i.e. a “lower high” and “higher low”).  Not to get too deep into the statistical weeds as we turn to Gold’s weekly bars from one year ago-to-date, but you may find this tidbit of interest.  In reviewing the prior ten parabolic Long trends (from as far back as January 2018), upon Gold therein printing an “inside week”, price’s “median maximum” gain in the ten ensuing weeks was 64 points (which from here at 2016 would be 2080), and price’s “average maximum” gain in those same stints was 108 points (which from here at 2016 would be 2124).  Thus specific to that construct playing out, ’tis fair to still say that a new Gold All-Time High remains nigh.

And to that end, the current trend remains Gold’s friend.  As of course does currencies’ debasement.  Yes, ’tis true that from 1980-to-date the supply of Gold itself has increased +123% … but the supply of U.S. Dollars alone (“M2″ basis”) across those same 43 years has increased +1,198%.  That is 10x the supply increase of Gold.  “Got Gold?”  And conservatively taking the average price of Gold for the year 1979 (such as to avoid 1980’s Gold price spike) of 310: 10x that is 3100.  Reprise: “Got Gold?”  We do right here:

“When it all goes wrong” indeed.  How’s that avoidance of StateSide “debt default” working out?  So far ’tisn’t.  “There goes the credit rating…”

“But mmb, it says here: ‘The validity of the public debt of the United States … shall not be questioned.'”

Excellent, Squire, to see you’re keeping up with the 14th Amendment [Section 4].  Anything there about the validity of folks’ bank deposits?  How about the validity of stock prices given stratospheric price/earnings ratios?  Again bearing in mind Jerome Cohen’s writing “In a bear market many stocks will sell at 5 to 7 times earnings, while in bull markets the average level would be about 15 to 18 times earnings” we’ve this rip from the website’s Valuation and Rankings page for the S&P 500:

Then too we’ve the Economic Barometer which for the third consecutive week regained some ground.  In fact the only real stinker was Friday’s marked decline in the University of Michigan’s “Go Blue!” Sentiment Survey, its initial June reading falling fourth most since the April 2020 onset of COVID.  To be sure, when concern arises as to whether that ever-reliable U.S. Treasury Interest cheque shall arrive in the mail — or not — sentiment clearly sags.  ‘Course with our “live” P/E for the S&P itself at now 52.6x, alternatively one can cash out before it all goes wrong there as well:

Next let’s drill down (quite literally for Sister Silver) into the daily bars across the past three months-to-date with Gold on the left and with Silver on the right.  Fairly stark difference there, the rightmost couple of days for Silver versus Gold.  Did we mention Silver’s selling as being overdone?  Absolument!

Then too we’ve the 10-day Market Profiles for the yellow metal (below left) and the white metal (below right).  Whilst Gold rests just below trading resistance in the denoted 2020-2032 range, a swift Silver climb to her 25.85 line would be ever so sublime, for we anticipate ’tis just a matter of time before the precious metals further their shine:

In closing it out this time ’round, what with all the talk of StateSide “debt default”, this past week (as we’ve done over the years) we perused the Budget of the U.S. Government for Fiscal Year 2024.  If you’ve never so done, we encourage you to so do, especially if you pay federal tax.  Amongst the double-columned 185 pages and the many “Seriously?” items therein comes this allocation for the Office of Refugee Resettlement (ORR).  ‘Tis allocated $7.3B to help resettle up to 125,000 refugees in 2024 … which of course works out to $58,400/refugee.  That’s darn good dough if you can get it!  Better still:  get some Gold, and Silver too!

 

Cheers!

…m…

www.TheGoldUpdate.com
www.deMeadville.com

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Mark Mead Baillie

Mark Mead Baillie has had an extensive business career beginning in banking and financial services for two years with Banque Nationale de Paris to corporate research for three years at Barclays Bank and then for six years as an analyst and corporate lender with Société Générale.
 
For the last 22 years he has expanded his financial expertise by creating his own financial services company, de Meadville International, which comprehensively follows his BEGOS complex of markets (Bond/Euro/Gold/Oil/S&P) and the trading of the futures therein. He is recognized within the financial community of demonstrating creative technical skills that surpass industry standards toward making highly informed market assessments and his work is featured in Merrill Lynch Wealth Management client presentations.  He has adapted such skills into becoming the popular author each week of the prolific “The Gold Update” and is known in the financial website community as “mmb” and “deMeadville”.
 
Mr. Baillie holds a BS in Business from the University of Southern California and an MBA in Finance from Golden Gate University.


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