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First Of The Three Hard Questions Than Every Serious Gold And Silver Investor Must Ask

Gold, silver and miners have been moving strongly this year.  What is not to like for a precious metal investor – negative interest rates, volatility in fiat currencies, slowing global growth, Brexit, conjecture that central banks are running out of ammunition, racial tensions, terrorism, conjecture that inequality may lead to riots, coup in important NATO ally Turkey, massive inflow of refugees, and other geopolitical issues.

The media is full of news and articles hammering the message that finally everything is good-to-go for the precious metals. A dissenting view is very hard to find.

It is precisely at a time like this that serious precious metal investors need to ask themselves hard questions.  It is always easy to go with the flow.  My over 30 years in the markets and life time’s work has taught me that going with the flow often causes big losses and most money is made by asking questions that no one is asking. 

The All Important Chart And Undeniable Facts

In asking hard questions, an important issue that every serious gold and silver investor faces is that media is full of opinions by gurus that are neither grounded in hard data nor are unbiased. 

Let us start with undeniable facts that are shown on the chart.  The chart is of the gold ETF GLD (ticker symbol: GLD) and popular silver ETF SLV (ticker symbol: SLV)

Please click here for a large chart as there is a lot of detail on the chart of interest to precious metal investors.

Here are the undeniable facts from the chart.

  • Gold took off in early 2016 when Japan adopted negative interest rates.  A vast majority of the media has given negative interest rates as the main reason for the current run up in gold and silver.
  • Back in 2010 when the bull market in precious metals accelerated, silver took the lead and gold lagged. 
  • In 2016, silver take off lagged gold.
  • Denmark adopted negative interest rates in 2012. 
  • European Central Bank adopted negative interest rates in 2014.
  • Swiss National Bank adopted negative interest rates in 2014.
  • Sweden adopted negative interest rates in 2015.
  • During the time Denmark, ECB, Switzerland and Sweden were propagating negative interest rates and interest rates elsewhere were falling, gold continued to fall precipitously as shown on the chart.  The period is marked by a red trend line on the chart.
  • During the period described above, the fall in silver was much steeper than gold. 

The First Hard Question

Here is the hard question that every serious gold and silver investor must answer, “Why did Gold and silver continue to fall as negative interest rates propagated through Europe over a period of about three years, but when Japan adopted negative interest rates gold and silver took off?

Here are three additional secondary questions that thoughtful precious metal investors should ask.

First, what is so special about Japan?

Second, why did silver take-off lag gold this time when historically silver tends to lead?

Third, what does silver lag portend for the future?

The Answer

Original precious metal research is a big part of our work at The Arora Report.  I continuously receive a large number of emails from precious metal investors.  Without a doubt, many precious metal investors are very intelligent and they will likely figure out the answers to the questions posed above.  Do not worry if you cannot figure out the answers, I will provide answers in the next article.

More On The Chart

The background colors on the chart are automatically generated by a combination of some of our algorithms; green is bullish, maroon is bearish, and blue is neutral. The chart analyzed here is only in one time frame.  Similar signals are automatically generated on yearly, quarterly, monthly, weekly, daily, hourly, and 15 minute charts.  Combination of these signals is then input into another algorithms that has many additional inputs such as relationship between currencies, interest rates, sentiment, money supply, global geopolitical picture, global GDP growth, inflation in key countries, leading indicators of inflation, risk appetite, etc. 

Some of the inputs are adaptive, i.e., their weight changes based on conditions and co-relations. The adaptive nature of the algorithm has been the most important reason behind consistently accurate calls on gold and silver by The Arora Report over the years.  Experience has shown that algorithms that are static stop working after a while because market conditions change.   For this reason, investors and traders should avoid algorithms that are fixed.

Current Ratings On Gold And Silver.

Of course, our timing models on gold and silver are much more sophisticated and take into account many more factors.  Here are our current ratings.

  • Negative in the very, very short-term.
  • Suspended in the very short-term, a lot depends upon Chinese day traders. There is simply not enough data to rigorously model their behavior.
  • Negative in the short-term.
  • Mild Positive in the medium-term.
  • Mild Positive in the long-term.
  • Positive in the very long-term.

These ratings are reviewed daily and changed frequently to help both long-term investors and short-term traders.  These ratings are used by bullion dealers, jewelers and investors across the globe.  For definition of time frames, please click here.

Full Disclosure: As appropriate, subscribers to The Arora Report are provided precise buy zones and sell zones as appropriate.  Further, subscribers to The Arora Report may undertake short-term trading positions in addition to the very long-term generational opportunities.

By Nigam Arora
Chief Investment Officer
Courtesy of www.TheAroraReport.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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