Gold Stays Cold; Silver Gets Sold; Their Ratio Behold!

May 19, 2019

Gold's year-to-date track per the above Scoreboard is but a mild downward drift, quite akin to that which 'twas to this point in 2018, and certainly not as were the more robust upside progressions across the same stint in 2017 and 2016.

To be sure, (or perhaps better stated not so sure), this past Monday Gold awoke from its comatose state to briefly levitate up through its 1300 gate, only to then lifelessly succumb through four consecutive falling sessions in settling yesterday (Friday) at 1277.4 for a wee weekly loss of -0.7%. In tandem with this came a message from a "mo-mo" member of our Investors Roundtable maligning Gold as a "barbaric relic", for which the mining grind of metal into rock makes one's "ears hurt".

'Course, such pain pales in comparison to that from Sister Silver: she recorded a net loss for the week of -2.6% -- nearly four times that of Gold -- settling at 14.390. Thus in doing the math for the Gold/Silver ratio:

1277.4 ÷ 14.390 = 88.8x

That is a millennium-to-date high, (which for you WestPalmBeachers down there means 'tis the ratio's loftiest level since at least 01 January 2001). Prior to that, MacroTrends puts the highest-ever reading at 99.5x in January 1991, which was preceded by readings in the 97x area during 1940-1941. As volatile as is the ratio's history, its mid-point over the past 100 years is essentially 'round 50x, and from 2001-to-date the average is 64.3x, (the lowest reading therein being 31.7x on 28 April 2011 upon Silver's all-time closing high of 48.470). Behold:

Clearly not as dramatic to behold are Gold's weekly bars, wherein for the past five weeks price has pretty much remained as if strapped to a fence across the purple upper boundary of The Box (1280-1240). Yet across it all, the dashed diagonal trendline's rising slope has been steepening of late:

But we do not find price itself steepening across the last 21 trading days (one month) for Gold nor the S&P 500. Here are their percentage tracks, the net change for Gold being nothing (no surprise), but actually down some 2% for the S&P500. How odd:

However, continuing to curb its own move down, and in fact consolidating, is the Economic Barometer, boosted this past week by a bevy of positive, albeit "soft", metrics. To wit, there were substantive increases for May in the New York State Empire Index, Philadelphia Fed Index, and University of Michigan Sentiment Survey, the latter posting its best reading since January 2004; May also brought the highest level year-to-date in the National Association of Home Builders Index. As for April, actual Housing Starts and Building Permits improved, although the month's Retail Sales slipped (blame it on Mr. Tax?) whilst Industrial Production fell the most since August 2017. But net it all out and the basing Baro bounced:

Next we see what was for Gold below left but a short-lived bounce and for Silver below right nary a bounce per their daily bars for the past three months-to-date along with their baby blue dots of 21-day linear regression trend consistency. And 'tis not the prettiest of pictures given Gold's "Baby Blues" reversing lower yesterday without having achieved the +80% level which otherwise typically confirms an uptrend, whilst Silver's price bars may soon appear to disappear sub-chart... Ouch!

'Tis thus expectedly obvious per the 10-day Market Profiles for Gold (left) and Silver (right) that we find each one's white bar of present price buried near, if not at, the bottom:

To close, regular readers have witnessed in recent weeks our citing Barron's silliness in telling us precisely why "The Dow" changes by the exact amount it does each day. We might opine that such stupidly childish reporting would infer that there actually isn't any market at all, for there'd be no one taking the other side of the trade given the change being for a sole reason. But this past week became infused with a little FinMedia competition, specifically with respect to Thursday's market.

■ According to Barron's: "The Dow Rose 215 Points Because Trump May Yet Pull Off a Trade Deal."

■ According to Reuters: "Wall Street closed higher on Thursday as upbeat earnings and strong economic data put investors in a buying mood."

Well: who's right?

We ain't takin' sides beyond the fact that the market is never wrong, its "change" always resulting from bazillions of daily decisions. And yet, beyond this humble page, scant few if any show concern over the S&P trading at twice its earnings support whilst Gold trades at half its value by currency debasement alone. In which asset shall you be when both regress to the mean? (Hint-hint, nudge-nudge, elbow-elbow...)


In 1792 the U.S. Congress adopted a bimetallic standard (gold and silver) for the new nation's currency - with gold valued at $19.30 per troy ounce