Gold
The mainstream media will tell you it’s the government shutdown (we know it as the Schumer shutdown). Or global uncertainty. Or central banks buying. Or US economic uncertainty (Huh? +3.8% second quarter GDP). Or whatever they can make up. Or Goldman Sachs and other brokerages saying gold will go to $4,900 an ounce by the end of next year. Interestingly, was it only a few months ago that they forecast gold to reach $3,000 an ounce? Ray Dalio, billionaire founder of Bridgewater Associates, the world’s largest hedge fund, says the current economy reminds him of the early 1970s. Back then there was a lot of debt. He suggests investors have 15% of their portfolios in gold.
The price charts, though, have been telling this story for weeks if not months. Everything is in the price. The 50-day and 200-day moving averages have been upsloping for a very long time. The 200-day moving average is the one the big players like Ray Dalio’s Bridgewater Associates look at. Plus, going back to 1971, the seasonal gold chart shows September as the month with the second largest monthly percentage increase in the gold price. Then there is a historical pause in October before the price increases resume in November and December and carry through into January. Price is continuing its September rally.
Silver
Fundamentally, it can mostly be summed up in three words. The Trump Effect. He has commitments from many companies to onshore their manufacturing. Solar panels, chips, cars… They all need silver in some form or another. Add in other factors such as fast-food restaurant automation (thank you Gavin Newsom for pushing that along when you raised the fast-food worker minimum wage!) and the +3.8% second quarter GDP along with a +4% GDP forecast for the third quarter increases silver demand too.
Then there is backwardation (not Michael Jackson’s Moonwalk). This occurs when the spot price becomes greater than the futures price. The reason now is what is mentioned in the above paragraph.
Technically, from the charts, we have the upsloping 50-day-and 200-day moving averages which the big players look at. This increases the upside momentum in price and FOMO (fear of missing out). Plus, the gold-silver ratio has been above 80 for weeks if not months and has stayed above 85 and 90 for a good part of that time. Historically, any ratio above 80 usually means a price increase in silver.
Until next time…