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A look at the Gold and Silver Charts (13.06.2024)

Chart-Purchasing-Power-US-Dollar-Inflation- 1913 to 2013

Dollar trajectory since 1913. The removal of gold from the financial system to ensure the use of the paper dollar in transactions does not have the desired effect of maintaining the purchasing power of the fiat paper. (Unless the desired effect was and is to devalue it to zero).

This article explains why Panama does not produce its own currency.

Although it has the Balboa the constitution of 1904 provides that it may produce its own coins but will utilize the US Dollar for its circulating currency.

Is this a good or bad situation?

ADVANTAGES of being dollarized. (Utilizing the Dollar as a local currency).

  1. Stability in Inflation and Interest Rates:
    • Reduced Inflation: Adopting a stable and strong (ish dollar relative to commodities, silver, gold, and particularly other currencies), currency like the U.S. dollar can help a country control hyperinflation. The country effectively imports the low inflation rate of the dollar-issuing country (the U.S.). Having watched the actions of the past two governments, I am of the opinion that the usage of the Dollar has been a blessing to the country. An independent reserve bank in Panama would have been a disaster (in my opinion).
    • Lower Interest Rates: With lower inflation expectations, interest rates tend to be lower, which can boost investment and economic growth.
  2. Elimination of Currency Risk:
    • Exchange Rate Stability: By adopting the dollar, a country eliminates the risk of exchange rate fluctuations, which can reduce uncertainty for businesses and investors engaged in international trade.
    • Attracting Foreign Investment: The reduction in currency risk can make the country more attractive to foreign investors, leading to increased foreign direct investment.
  3. Enhanced Economic Integration:
    • Trade and Investment: Dollarization can facilitate trade and investment with the United States and other countries that use or peg to the dollar, as currency conversion costs and risks are eliminated.
    • Financial Integration: It can promote deeper financial integration with global markets, improving access to international capital.
  4. Monetary Discipline:
    • Fiscal Discipline: Without the ability to print money, governments are often forced to pursue more prudent fiscal policies, as they cannot finance deficits through money creation. (But sadly they can borrow).

DISADVANTAGES

  1. Loss of Monetary Policy Independence:
    • Inability to Adjust Interest Rates: The country loses control over its monetary policy, including the ability to set interest rates to respond to domestic economic conditions. (Thank goodness).
    • No Lender of Last Resort: In times of financial crisis, the country cannot rely on its central bank to act as a lender of last resort to support its banking system. (Which SHOULD lead to more responsible governance).
  2. Loss of Seigniorage:
    • Revenue Loss: Seigniorage is the profit made by issuing currency. By using a foreign currency, the country loses this revenue, which can be significant. (What is the cost of producing a $100.00 bill relative to the value it creates in the system?).
  3. Exchange Rate Rigidity:
    • Inability to Devalue: The country cannot devalue its currency to boost export competitiveness or adjust to external shocks, which can lead to prolonged economic downturns. (In the case of Panama this is a real win. The government changes every five years. There is no incentive to plan for the long term. Rather grab what they can while the going is good).
  4. Dependence on U.S. Monetary Policy:
    • Imported Economic Conditions: The country becomes subject to the monetary policy decisions of the U.S. Federal Reserve, which may not align with its own economic needs. (The Panamanian government has bypassed this restriction to its own detriment and that of the country by borrowing against state owned assets, leaving the next administration to worry about paying back the loans).
    • Exposure to U.S. Economic Conditions: Economic problems in the United States, such as inflation or financial crises, can directly impact the dollarized country. I believe that this is a huge risk in the Panamanian economy. (We have advised officials in prominent positions to encourage the population to purchase silver and gold as a hedge against the US dollar, sadly to no avail).
  5. Subject to US policy: Political decisions made in the US can easily be imposed on the country utilizing the US Dollar by threatening removal of the right to use the dollar or other monetary sanction.

Independent borrowing: The ability of the government to borrow has had a detrimental effect on the stability of the local economy. Use of state owned assets as collateral for loans has enabled the government to borrow far more funding than it should and therefore not make the correct politically difficult decisions that it should.

BITCOIN AND GOLD

BTC:GLD below shows bitcoin  outperforming Gold. The indicators are weakening showing BTC beginning to lose strength against Gold.

$BTCUSD:$GOLD Bitcoin to US dollar/Gld CRYPT 13 June 2024

ETHUSD Has given us a sell and looks as if it has a way still to depreciate.

$ETHUSD Ethereum to US Dollar 13 June 2024

BTCUSD is a sell. It appears to be making a reverse head and shoulders pattern which if it completes portends higher prices. Right now the indicators look negative and I would be out awaiting a break of $72,500.00

$BTCUSD Bitcoin to US dollar CRYPT 13 June 2024

GOLD AND SILVER STOCKS

Yesterday physical gold gave a signal that it will now outperform the stocks.

$GOLD:$HUI Gold- Continuous Contract (EOD) Gold Bugs Index - NYSE - 13 June 2024

Physical silver continues to outperform silver stocks. Demand for physical silver is growing continually and is being reflected in the physical to stocks comparison. The spike high on 10 June is cause for concern regarding a reversal.

$SILVER Silver - Continuous Contract (EOD) CME 13 June 2024

GOLD AND SILVER

I have been banging on about silver for a long time as being a manipulated market which is totally undervalued and that I cannot think of another good, service or product which is about half the price today that it was fifty years ago.

The silver:gold ratio is trading around 79:1. We are constantly reminded that the ratio coming out of the ground is around 8:1 which tells me there is something amiss.

Constant shortages in the silver market, made up by recovery of scrap silver, does not bode well for the ongoing suppression of the prices.

Ever more uses and therefore demand for silver, particularly in solar and voltaic cells and now particularly demand in India tells me that something has to break.

This chart by ‘graddhy.com’, similar to ones I have previously produced, beautifully illustrates the current situation.

I have continually predicted a price of around $200.00 for silver on the basis of the silver to gold ratio coming more into line with the reality on the ground. This price would give us a ratio around 11:1 which I think is fair.

silver yearly-45 years review

In terms of gold it would appear that physical gold is being drawn from the ETF’s and prices are reacting to the supply shortage. 

As stock of gold becomes available while China reduces its purchases, prices could stabilize and ETF’s could gain back some gold volume. (Gold price WHITE, Gold volume at ETF (ORANGE).

Gold Price vs GOLD ETF holdings

But the clincher is the rate at which physical metal is draining from western vaults. According to Doug Casey’s Substack latest post, huge premiums in Shanghai are draining western vaults, with LBMA’s vaulted silver stocks falling 60% this year so far, and Comex’s falling by 46%. Gold’s drain has been less dramatic perhaps, but recent days have seen record stand-for-deliveries. In the last eight trading sessions, nearly 90 tonnes of gold have been stood for delivery taking the total so far to 253 tonnes, a rate which easily exceeds this year’s US gold mine annual output estimated by Metal Focus at 166 tonnes…

$GOLD:$SILVER Gold Continuous Contract - (EOD) Silver - continuous 13 June 2024

GOLD TO USD

Gold v USD  The chart below shows that the inverse correlation that usually exists between the dollar and gold has broken and since April correlation between them generally exists. (Gold = red/black candlesticks. Green = Dollar).

$GOLD DXY Gold - Continuous Contract (EOD) CME 13 June 2024

A LOOK AT THE GOLD AND SILVER CHARTS

TodayLast Week
Gold Price$2,309.00$2,358.00
Silver price$29.07$30.17
Gold:Silver ratio79.58:178.09:1
Gold Miners bullish percent index82.1485.71
Dollar Index105.08104.22
Dow:Gold Ratio (BahaUS 38461.00 Gold price, $2,309.00)16.6616.44
Current USA inflation rate (Dept. of Statistics)3.4%3.5%

Gold’s low of the week was $2,288.00 and the high was $2,341.00, now trading at around $2,312.00.

  • The monthly chart for Gold is a hold. We bought it at $1,800.00 and have held it to date. It looks overbought but the indicators are mainly positive.
  • The weekly chart remains out.
  • The daily chart, we are out but the price is consolidating. Making a head and shoulders pattern. Let’s see which way it resolves.

$GOLD Gold - Continuous Contract (EOD) CME 13 June 2024

The low for Silver this week was $28.84 and the high $30.25, trading around $29.08 at present.

  • Silver on the monthly chart indicates a hold. The signals look strong for now. 
  • The silver weekly chart is a hold. It looks overbought and seems to be running out of steam. 
  • The silver daily chart indicates a sell even though the OBV is increasing. This is most unusual so bears be careful.
$SILVER Silver - Continuous Contract (EOD) CME 13 June 2024


Our partner has stock of both Gold, Silver and Goldbacks in our vaults available in Panama. Please contact us for more information.

Goldback FortKobbeVaults Panama

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.

If you are interested in an overview of Fort Kobbe, you may want to have a look at this video: Mike Brown, Director, Fort Kobbe, International Vaults, A DotCom Magazine Exclusive Interview

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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