Fort Kobbe Vaults Newsletter - Gold and Silver Charts

A look at Gold and Silver Charts (2022-12-08)

As you are probably aware, I strongly favor silver and silver stocks for numerous reasons.

When looking all the way back to 2000, you can see that silver prices increased by about 125% and from 2003 to 2011 it increased by a whopping 950%.

Between 2020 and 2021 the price increased by 160%. This gives an idea of how quickly and how far silver prices can run in a relatively short time period.

$SILVER Silver - Continuous Contract (EOD) CME 20 Year Monthly Chart

Some of the contributing factors to the potential for a good run in the silver price are:

Increasing uses for silver through Industrial demand

  • Silverware
  • Photography
  • Jewelry
  • Hedging
  • Photovoltaic cells
  • Water purification
  • Nanoparticles
  • Investment
  • Medical applications
  • Clothing
  • Electric vehicles

Limited silver supply

Because of the suppression of silver prices and the average all-in sustaining costs of silver mines in 2021 being between $34.00 and  $35.00 per ounce, while the current spot price is around $22.00, the incentive to develop and produce is limited.

The Silver Institute anticipates an increase in production of around 2.5%. They also expect prices to fall on resolution of the Ukraine / Russia conflict, with  which conclusion I disagree vehemently.

Their logic is that prices have been artificially increased as a result of this recent conflict. (Where in reality Gold and silver prices hardly moved as a result of the conflict.)

My perception is that Russia has been forced to sell its gold and silver in order to finance the conflict, so in my opinion prices will increase once the matter is settled and this is in addition to shortages under normal economic conditions that cause price increases.

Download the World Silver Survey 2022 by The Silver Institute by clicking this link and pay attention to pages 35 and 74 (All-in Sustainable Costs)

Limited production capacity

According to The Silver Institute all categories of silver demand in 2022 forecast  amounts to 1.101 billion ounces while silver supply forecast amounts to 1.030 billion ounces, with one analyst anticipating demand to go to 1.210 billion ounces the  year of 2022.

Click here to see the Silver Supply & Demand details on The Silver Institutes website.

Wealth Wave - Change in Silver Supply and Demand - 2014 to 2022

Diminishing recovery grades

Grades of silver being recovered are diminishing continually with suppressed prices discouraging further exploration as well as recovery of unsustainable grades at these prices.

CPM Group published a table showing average grades recovered over the past number of years.

Average Silver Price 2005 to 2020

The US Dollar

In my personal opinion the US dollar has limited value left in it, I do not see a collapse, but certainly a continuous diminution in value for the following reasons:

1. Because of its use as a political tool. Countries subject to sanction and confiscation of their dollar assets or having their use of the SWIFT transfer system curtailed are banding together in order to bypass the system. 

2. The self destructive overprinting of trillions of dollars automatically destroys the value of the currency.

3. As countries perceive the value of the reserve currency decreasing they sell or allow their treasury bonds to expire, sending more dollars back into the US system. The depreciation of the dollar then should automatically lead to assets priced in dollars receiving a higher dollar price. (Manipulation excepted).

4. The onerous requirements placed on countries by FATCA legislation, impeding international business to the advantage of the US encourages not doing business with US citizens.

5. The massive debt burden which is unpayable and denominated in US dollars, $31,418,843,000,000 (www.usdebtclock.org) and this is only part of the story. The alternatives to resolving this are to inflate away the debt or default. Neither good for the retention of value in the currency.

6. China is a major holder of US Treasury bonds. (second only to Japan at $1.24 Trillion). If China decides to dump their bonds the dollar takes a huge hit. China was holding over three TRILLION in bonds, which they have now reduced to only $967.8 Billion. (Read more about the Dollar Decline vs. Dollar Collapse by clicking this link)

7. Most importantly, in any currency collapse, faith in that particular currency is lost. When belief that the ‘paper’ no longer is a store of value the currency suffers, first slowly then all of a sudden.

8. No currency as of this moment is backed by physical assets, although Russia and China are on the way there. Russia is denominating rubles in gold and making them convertible. RUB 5,000.00 per gram of gold, (approximately $62.00/gram)

9. Interest rates, totally unrelated to market conditions, result in misallocation of funds, which when realistic rates are once again in place, cause over invested or malinvested companies and individuals to fail. Not a bad thing in terms of clearing the system, but painful while it happens.

10. Legislation protecting big business and making small and medium business impossible or difficult to run. Just look at who has prospered and who has suffered during the COVID period.

11. The education system has been manipulated to produce peons not entrepreneurs, unless one goes to a school / university designed to educate. This holds back the entire society. Smart people come from all walks of life.

US Dollar Currency Index 1968 to 2022

Live U.S. DOLLAR CURRENCY INDEX on Trading View. (If you look at this live chart make sure that you change the default view from 1Y to ALL)

Have a good look at the lower highs and lower lows on the above chart. The run up we see towards the right of the chart is the usual fear trade, where funds flow to the dollar when there is fear in the market.

Our in-house system has given us a sell on the dollar, so I would be circumspect about going long  on the dollar at present.

$USD US Dollar - Cash Settle (EOD) ICE

It is well known that generally gold and silver prices have a negative correlation to the dollar, so expect their prices to rise as the dollar falls.

Silver Global X Silver Miners ETF appears to be moving now, with a 16% move up since our buy signal during October.

SIL Global X Silver Miners ETF NYSE
TodayLast Week
Gold Price$1,789.00$1,784.00
Silver Price$23.14$22.20
Gold:Silver Ratio77.19:180.27:1
Gold Miners Bullish Percent Index51.7251.72
Dollar Index105.05105.47
Dow:Gold Ratio
(BahaUS30 33707.00/Gold price ,1789.00)
18.8419.36
Current USA inflation rate (Dept. of Statistics)7.7%8.2%

Referring to the article above, don’t forget the Silver:Gold ratio at 77.19:1 when silver is being mined at 8:1 should result in a price of $223.62, this is a far cry from $23.14

Gold’s low of the week was $1,765.00 and the high was $1,810.00, now trading at around $1,789.00. 

The monthly chart for Gold is a buy. The weekly chart is a buy. The daily chart is a buy.

$GOLD Gold - Continuous Contract (EOD) CME

The low for Silver this week was $22.03 and the high $23.54, trading around $22.98 at present.

Silver on the monthly chart is a buy. On the weekly chart we have a buy which is holding and is slightly overbought. On the daily chart, we have a buy signal.

$SILVER - Continuous Contract (EOD) CME

On the Stockcharts.com charts, the blue vertical lines are our proprietary system buy signals and the red vertical lines are system sell signals – for information purposes only

Please contact us to arrange the purchase and storage of your gold and silver requirements in a safe, insured, location outside of your jurisdiction.

This is my interpretation of the market and is not to be taken as financial advice. Before making any buy or sell decisions I recommend that you consult with your professional financial advisor.

Larry Simon
Larry Simon

Larry Simon was educated at the University of Witwatersrand, Johannesburg, South Africa and is an experienced businessman specialised in management, investment and finance.

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