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A look at Gold and Silver Charts (26.01.2023)

World Economic Forum, Hedgeye cartoon
© Hedgeye Risk Management, LLC with permission granted by Hedgeye, reproduction and republication is expressly prohibited.

It seems that many of the invitees to the WEF (World Economic Forum) meeting in Davos preferred not to appear in Davos this year. The tide is turning, and the usual array of guests seem concerned that their presence may be misconstrued and that consequences may follow.

I have been looking for confirmation of a change in the tide of more and more restrictive practices by governments. I anticipate that this may just be a twinkle of positivity in the distance.

Back to gold and silver

How have the mining stocks represented by ASA (a closed-end precious metals and mining fund) fared compared to being in physical metals over the past twenty years?

As we can see below from 2004 to 2011 the stocks generally outperformed the metal, subsequent to that, holding the physical metal has been a far better proposition. If we look at the reaction of the miners during 2020 to a relatively small increase in the gold price, we can see the potential for a hike in the miners this next run. 

It would be great to see the gold price exceeding $2,000.00 at which point I would expect a short pull back and then a real run.

In my opinion the tables are turning for the miners, they have been so undervalued and represent such good values at these levels, that it is certainly worthwhile looking at holding some miners in one’s portfolio. Of course the risks are higher, but in my opinion the rewards should be as well. 

There is no security as good as physical metal under one’s direct control either held in person or in a privately owned independent non bank vault, nonetheless a portion of one’s portfolio in mining and related stocks could prove to be a  good choice for the next run.

2023-01-26-ASA-Chart

Why should one hold gold?

  • Gold has maintained its value throughout the ages.
  • Gold is a way to pass on and preserve wealth from one generation to the next.
  • Gold doesn’t corrode and is easy to work with and stamp as coins. 
  • Although the dollar is one of the world’s most important reserve currencies, its value has continually fallen against gold. 
  • Gold has historically been an excellent hedge against inflation.
  • Deflation is defined as a period when prices decrease, business activity slows, and the economy is burdened by excessive debt. This has not been seen globally since the Great Depression. During the Depression, the relative purchasing power of gold soared while other prices dropped sharply. 
  • Gold retains its value not only in times of financial uncertainty but also in times of geopolitical uncertainty. It is often called the “crisis commodity” because people flee to its relative safety when world tensions rise. 
  • Much of the supply of gold in the market since the 1990s has come from sales of gold bullion from the vaults of global central banks, production of new gold from mines has been declining since 2000, it can take five to 10 years to bring a new mine into production. As a general rule, reduction in the supply of gold increases gold prices.
  • Increased wealth of emerging market economies boosted demand for gold. In China, gold bars are a traditional form of saving, and demand for gold has remained steadfast. India is the second-largest gold-consuming nation in the world. Many are beginning to see commodities, particularly gold, as an investment class into which funds should be allocated.
  • Gold has historically had a negative correlation to stocks.The late 1970s were great for gold but terrible for stocks. The 1980s and 1990s were excellent for stocks but horrible for gold. In 2008, stocks dropped substantially as consumers migrated to gold.

Gold should be an important part of a diversified investment portfolio as its price increases in response to events that cause the value of paper investments, such as stocks and bonds, to decline.

Although the price of gold can be volatile in the short term, it has maintained its value over the long term. Through the years, gold has served as a hedge against inflation and the erosion of major currencies, and thus is an investment well worth considering.

I have experienced this personally, holding gold while the Rand collapsed in South Africa.

You can read the original article by Michael Bromberg, on 8 Good Reasons to Own Gold by clicking here

TodayLast Week
Gold Price$1,935.00$1,910.00
Silver Price$23.77$23.40
Gold : Silver Ratio81.37:181.56:1
Gold Miners Bullish Percent Index55.1755.17
Dollar Index101.78102.22
Dow:Gold Ratio
(BahaUS 33787.00/Gold price,1935.00)
17.4617.28
Current USA inflation rate (Dept. of Statistics)6.5%7.1%

Gold’s low of the week was $1,913.00 and the high was $1,950.00, now trading at around $1,936.00. An extremely tight range.

The monthly chart for Gold is a buy and looking strong. The weekly chart is neutral looking overbought. The daily chart is neutral looking overbought.

$GOLD Gold Continuous Contract (EOD) CME 25 January 2023

The low for Silver this week was $22.79 and the high $24.17, trading around $23.84 at present.

Silver on the monthly chart is a buy but faltering in momentum. The weekly chart is holding but weakening. The daily chart gave a sell on Tuesday and appeared to be reversing again yesterday, let’s give it time to settle.

$SILVER Silver - Continuous Contract (EOD) CME 25 January 2023

Our partner has stock of both gold and silver in our vaults available in Panama, please contact us for more information.

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

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