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On this very rough day for equity bears, there’s just one “First Buddy” for me, which is GDX, my gold miners short. Over the course of the past half year, gold has generally done great, but it seems to have reached a peak in April (around the time that equities were wrapping up their final freak-out) and has been engaged in a series of lower highs since then.
Even though gold is barely budging right now, its younger brother silver is having a grand old time, blasting 4% higher and enjoying the power of a very long base that it has been building up.
Gold is having a fantastic day, up over $80 as of this composition, but to my eyes, silver is the real breakout, because it’s been lagging gold so dreadfully. Today, it blew past its minor price gap and looks like it could resume an honest-to-God rally and catch up with its fancier big brother.
The Silver/Gold ratio is oversold, but silver is not “undervalued” relative to gold based merely on price
A common hue and cry from Team Silver Bug is that silver is extremely undervalued relative to its big brother in metallic monetary arms. It has to be, because its price is so cheap as measured in gold!
Not true. Silver’s price relative to gold is what the market and history – save for a few distinct upside explosions in silver and the Silver/Gold ratio – say it is. These dramatic upside events have largely been driven by macro considerations, not silver seeking out its true value before being pounded back down by some elaborate conspiracy.
(more…)Now that the trade wars are behind us, assets which were serving as safe havens have been turned on their head. Silver and gold are both down again this morning, with gold losing about $250 per ounce over the course of just the past week.
