Fort Kobbe Vaults Newsletter - Gold and Silver Charts

A look at Gold and Silver Charts (2022-12-15)

Hedgeye Risk Management, LLC - Are we in Hell? No, this is the new normal
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Last week we  spoke about silver and looked at the reasons that the dollar is getting pushback worldwide. This week I would like to add to that, but focusing on gold.

The majority of reasons discussed regarding silver apply equally to gold. (If you would like, you may look back on our website for last week’s news letter)

All Major Currencies Have Depreciated Relative to Gold
Stansberry Research

In our view, we are in a recession (two consecutive quarters of negative growth), despite the rewording of the definition of recession by the powers that be. If we look at the FRED data we see that every recession is preceded by an inversion of the yield curve.

Looking at the chart below, we see a negative yield curve of 0.71 up from negative 0.87 the largest differential since 1981. Does that foretell the greatest recession, or dare I use the word depression?

$YC2YR Yield Curve - 2 Year Bonds (EOD) INDX 13 December 2022

Gold normally reacts by increasing in price as a result of the reaction by the FED to the quickly slowing economy by quickly reducing interest rates.

My worry is that interest rates may only reach 5% to 5.5% before they cannot raise them much more. At this level it would not give room to cut rates sufficiently to ease any recession.

As it stands I do not see much more room to increase interest rates without crashing the markets. In 2007 the federal funds rate was 5.25% and that was enough to cause the global financial crisis of 2008, in my opinion the market is much more fragile and much more in debt now than in 2007. Rates then, plummeted to 0 and sent gold from $850.00 to over $2,000.00.

As I see it, there is a hidden  risk of systemic failure, in which case interest rates become of little interest. (excuse the pun). Once interest rates have peaked, gold and silver prices can naturally rise.

Gold and the dollar are usually negatively correlated, so up until now the strong dollar has had a suppressive effect on the gold price and this appears to be turning.

As the dollar weakens we can expect a strengthening of the gold price. I have, however, seen both move in tandem, usually in an upward direction.

$USD US Dollar - Cash Settle (EOD) ICE - 13 December 2022

The gold and silver prices have in no way compensated for the massive ‘money’ printing that has taken place, nor the unrealistic inflation numbers that have been produced which way under estimate real inflation as represented by the ShadowStats chart below.

When perceived risk is high, gold prices rise in dollar terms and vice versa. This works perfectly well when prices are not being manipulated. You can see proof of manipulation provided in numerous previous articles.

I still love crypto’s as a means of transacting. I love the fluidity and speed of transacting as well as the simplicity and non interference in the transaction, but I don’t like the volatility of the medium. As things stand at present, the argument that cryptos can and will replace gold seems tenuous at best.

I do believe that in time, these issues can and will be resolved, but not by a government based ‘crypto’ system or CBDC (Central Bank Digital Currency), where we basically have a system similar to what we have now, but much much worse.

This would be an Orwellian system where every cent is tracked and controlled, where saving or spending can be allowed or terminated or directed at will.  What the world needs is a freely traded independent system free of government interference.

Currently governments are buying gold in massive quantities. The World Gold Council estimates that countries purchased about 400 tons of gold in the quarter ending September 2022 and that demand is up 18% year to date and 28% compared to third quarter 2021.

Are they worried about the value and longevity of the dollar and other fiat currencies? Why is the price not reflecting this huge demand? 

Physical gold and the miners, explorers and royalty companies look like a great buy at these prices. Beware of further manipulation of prices for political purposes.

An ounce of silver or gold is an ounce irrespective of where they put the price in fiat. Just think back to when oil reached minus -$47.00!

TodayLast Week
Gold Price$1,776.00$1,789.00
Silver Price$23.08$23.14
Gold:Silver Ratio76.86:177.19:1
Gold Miners Bullish Percent Index51.7251.72
Dollar Index104.29105.05
Dow:Gold Ratio
(BahaUS30 33705.00/Gold Price ,1776.00)
18.9718.84
Current USA inflation rate (Dept. of Statistics)7.1%7.7%

Gold’s low of the week was $1,773.00 and the high was $1,825.00, now trading at around $1,778.00. 

The monthly chart for Gold is a buy. The weekly chart is a buy. The daily chart is a buy. Both weekly and daily charts look overbought so expect a slight correction.

$GOLD Gold - Continuous Contract (EOD) CME - 14 December 2022

The low for Silver this week was $22.97 and the high $24.13, trading around $23.20 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, also overbought.

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

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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