Why Does Silver Look So Good With The Gold/Silver Ratio At 26-Year Highs?
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Silver futures continue to disappoint me more than any other commodity on the board. But I am still longtime believer that silver will relive the glory days of $50 and beyond; I’m waiting for a setup like what we are experiencing now to plan my attack.
Under normal circumstances gold and silver tend to catch a bid on safe-haven buying, rising inflation and low interest rates. Right now, tensions are rising with Iran after a drone attack knocked out a key oil pipeline and calls for a surgical strike by the U.S. on Iran were put on the table. The next thing to watch is inflation expectations and we should continue to see inflation edge higher as tariffs on Chinese imports will deliver a small boost. Also, keep an eye on interest rates and how they react with no trade agreement in place. The global economy is stalling and talks for an interest rate cut is not entirely out of the question.
Like a rubber band that gets stretched too far, eventually we tend to see it snap back. Currently the Gold/Silver ratio is just over 88 and could be a major top and setting up for a massive correction. There are many different types of fundamental and technical chart patterns market technicians focus on and multiple ways to interpret them. This is why technical analysis is an art form. One guide you can keep handy is the Top 5 Technical Indicators and it’s a free download here Top 5 Technical Indicators
So what is going to make silver snap back and get this ratio lower?
Industrial demand accounts for more than 50% of silvers total demand and earlier in the week we saw plans for additional tariffs on laptops, smart phones, solar panels and automobiles. This has crippled silver demand for the time being but once we see a resolution to the trade agreement it could be lift off. At that point the Fed should continue to hold interest rates steady, demand should pick up and tariffs should be reduced. This combination with rising geopolitical concerns could be what reignites the bull market. Feel free to contact me to further discuss long term strategies in the silver market.
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