Monday, April 23, 2018

Silver - The Big Selling Has Just Started

Gold bulls are definitely excited. As the chart below shows, most recently gold and the goldollar index got very close to their strong resistance. What is important, both instruments did it in tandem:

source: Simple Digressions

Additionally, a silver / gold ratio made impressive breakout supporting a bullish thesis on the precious metals market:

source: Simple Digressions

However, my advise is simple: do not even touch this market. In my opinion, a prudent speculator should stay away from gold in particular. Why? Well, in the long term there is no pivotal change here - gold still cannot break above its resistance at $1,350 - $1,375 per ounce and each short-term upswing is followed by a counter-action. In other words, in the long-term we see the same old story (consolidation period) and in the short-term the game is quite primitive: buy gold when it is 2% - 3% down from the recent ultra-short-term top and sell when it hits the $1,350 - $1,375 zone.

Last thing - a few days ago JP Morgan started its typical game. After a long period of silver accumulation the bank (or, better said, somebody storing silver in the JP Morgan warehouse at the COMEX) started selling silver bullion. This game is also very simple - the excited silver bulls started buying silver bullion en masse and higher demand was met with appropriate supply. As a result, in just four days the bank withdrew 3.0 million ounces of silver from its warehouse:

source: Simple Digressions

In other words, silver bulls should keep in mind that there is somebody to satisfy their hunger. What is more, he has a lot of silver...

Wednesday, April 11, 2018

Will the Gold Break At Last?

Today gold was at a tiny distance from breaking above its strong resistance level but...it failed.

However, the current move still looks good:




 source: Simple Digressions

The chart shows the goldollar index and gold prices. Note that this time both instruments go in tandem, which validates the current move in gold prices.

Thursday, April 5, 2018

Note To The Subscribers - The Fourth Issue Of Newsletter Has Been Dispatched

The fourth issue of the Simple Digressions Newsletter has been dispatched. Please, find it enclosed in your e-mail boxes.

Thursday, March 29, 2018

And They Are Still Hoarding Silver

This year, up to now, JP Morgan has hoarded as many as 20.4 million ounces of silver in its COMEX warehouse:


source: Simple Digressions

Interestingly, the JPM warehouse has been reporting higher silver stocks since 2015 (no matter at what price the silver was trading). If they continue hoarding silver at the same pace as in 1Q 2018, at the end of 2018 they would have had around 200 million ounces of silver (now there are 140 million ounces at JPM warehouse).

For better comparison, SLV, the world's largest private owner of silver bullion, holds 318 milion ounces of silver now (JPM Morgan also has its silver stake there).

Well, it is a lot of silver (global annual mine production is around 900 million ounces) so the question is:
Why are they doing it?

Wednesday, March 28, 2018

What I Am Looking At While Waiting For A Major Breakout In Precious Metals (Or For Godot*...)

In my opinion, there is a good chance that precious metals will finally break above the latest cyclical tops established in July / August 2016.

However, to do it, gold has to be stronger than the US dollar using an absolute measure. Or, in other words, applying the concept of the goldollar index:


source: Simple Digressions

As the chart shows, most recently gold and the goldollar index have bounced off their strong resistance (two horizontal lines and blue arrows). In my opinion, a major breakout will be only valid when both instruments break above their resistance at the same time (more or less). It means that a prudent speculator should closely watch the way gold and the goldollar index perform.

As always, the devils is in the details but at this point the issue is quite simple. As long as gold and the goldollar index do not break together - be careful.

* - "Waiting for Godot" - a play by Samuel Beckett

Sunday, March 11, 2018

Is It The Best Time For Commodity Investing?

In the long-term investing one has to keep in mind a typical sequence:

During economic expansion the first asset class to top are treasuries. Then the stocks are topping and, finally, commodities.

Look at the chart below:


source: Stockcharts.com

The chart shows this rule in practise. If I am correct, treasuries had topped in 2016 (blue circle). The stocks are probably topping now (the green circle), even  despite the latest all-time high made by Nasdaq 100.

Finally, commodities, represented by the CRB index (unfortunately this index is overweighted by oil), are breaking above the long-term resistance level at 195 (the red circle).

Summarizing - if I am correct, now there is time for commodity investing...

Friday, March 9, 2018

Prepare For A Major Breakout In Precious Metals

It looks like we are ahead of a major breakout in precious metals. Look at the chart below:


                                  source: Stockcharts.com

The chart shows a popular precious metals performance measure - a silver / gold ratio. As you surely know, gold and silver prices go in tandem but silver overperforms gold during a bull market and under-performs during a bear market in precious metals.

That is a theory. In practise, very often the ratio is a lagging indicator. For example, in the beginning of this bull market in gold (no, I am not kidding - in my opinion, we are still in a bull market in precious metals) the silver / gold ratio was going down (January - March 2016). Then it followed the rule and went up.

Interestingly, in July 2016 the ratio printed its cyclical top and since then it has been going down sending us a message that not everything was good with the precious metals market. And yes, since July 2016 gold was not able to break above the latest cyclical top at $1,350 - $1,375 per ounce.

These days the ratio is once again very close to its multi-year bottoms (red and blue circles on the lower panel of the chart). However, the latest bottoms (red circles) were established when gold prices were very close to their bottoms as well.

This time (the blue circles) the ratio is at one of  its lowest levels but gold is not.

In my opinion, very soon the ratio should start another move up (if history repeats). It means that gold should follow the ratio but this time the move in gold should start from the current level ($1,330 an ounce). 

If I am correct (and lucky), we should see a major breakout in gold (and silver ) prices soon.