Gold Market Commentary – Tue 14 Feb, 2017

Gold:Silver ratio – Further confirmation of the end of the bear market

This short post is from Bob Locus at the Financial Tap outlines how the gold to silver ratio is yet another sign that the bear market for metals is over. It is a simple concept but one that has proven fairly true over time. We all accept that silver is more volatile than gold and in bull markets outperforms gold to the upside and in bear markets outperforms to the downside. We have seen a notable shift in this ratio which could start to pick up steam in the coming months and years.

Click here to visit the original posting page over at the Financial Tap.

Gold Silver Ratio

One aspect of the precious metals market today that I like is the Gold Silver Ratio.  It appears to have topped, right along with the 2016 gold bottom, and for all gold bull followers out there this is certainly a welcomed development.  Precious metals bear markets always hit silver hard, while bull markets always see Silver outperform gold.  As a result, the Gold Silver Ratio rises during bear markets and then falls during bull markets.

On the chart below, the long rising channel represents the precious metals bear market when gold/silver were both sold aggressively.  Each peak in the ratio, as seen with the red arrows, correspond with major Cycle price lows.  Meaning that as gold sold and collapsed into each yearly low, Silver as a ratio was hammered further.

But that trend has reversed, and silver has for the first time in five years outperformed gold.  The chart shows the Gold Silver Ratio has turned lower, meaning that with the last big gold selloff, Silver actually outperformed gold, on a relative basis.  It’s not proof of a bear market low, but we do know that every precious metals bull market saw silver dramatically outperform gold.  In every case, the Gold Silver ratio turn lower as the entire metals complex went higher.  From my perspective, it would appear that the ratio has broken lower and that a new downtrend has been established.

Gold Silver Ratio - The Finanical Tap

 

 

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Comments:
  1. On February 14, 2017 at 7:20 am,
    OOTB Jerry says:

    Fighting like heck to keep silver below $18

    • On February 14, 2017 at 7:48 am,
      OOTB Jerry says:

      just more crimex………

      • On February 14, 2017 at 7:54 am,
        OOTB Jerry says:

        Has Yellen opened here trap yet………..even her NAME is Fake……….

        • On February 14, 2017 at 10:14 am,
          OOTB Jerry says:

          Credit Swisscheese laying off 6500……………zh

  2. On February 14, 2017 at 7:34 am,
    Matthew says:

    The GSR is going much lower this year — probably about 20% lower.

    GLD:SLV daily:

    http://stockcharts.com/h-sc/ui?s=GLD%3ASLV&p=D&yr=1&mn=1&dy=13&id=p01327104559&a=506582704

    • On February 14, 2017 at 10:45 am,
      Steele says:

      Looks like short sellers lining their own pockets.

      • On February 14, 2017 at 3:05 pm,
        Excelsior says:

        It’s Kerrisdale Capital Managment – the same organization that shorted and smeared First Majestic last year at the peak of the market. Yes, they are lining their pockets.

  3. On February 14, 2017 at 7:55 am,
    BDC says:

    Just received this. Bill on this morning’s “St. Valentine’s Gold Massacre”: http://www.stocktipster.net/index.php/2017/02/14/st-valentines-gold-massacre/.
    He now sees it ‘retracing’ to 1180 and 16.80.

  4. On February 14, 2017 at 7:59 am,
    OOTB Jerry says:

    Fake name Yellen……needs to go to pasture………..

  5. On February 14, 2017 at 8:12 am,
    Matthew says:

    This is very good news:

    Scorpio Gold Announces Settlement of Court Proceedings Relating to a Subsidiary

    http://www.scorpiogold.com/s/news.asp?ReportID=778314

    • On February 14, 2017 at 9:40 am,
      Dan, calgary says:

      Thanks Matthew, I did not see that yet. Good on them for saving time and money through mediation instead of feeding lawyers that don’t get dirty like miners and don’t deserve the exploration money.

      The bad news they released before does not exclude the Drinkwater or Mary area from future mining.

      • On February 14, 2017 at 10:04 am,
        Matthew says:

        Yes, and in this new bull market environment, we don’t need litigation hanging over us as it always takes a toll on confidence/sentiment.

        That’s a good reminder about Drinkwater and Mary LC and Custer can be mined in the meantime.

        Don’t forget that detailed mapping and modeling is underway to define drill targets within the mineralized corridor at the Jumbo-Keystone project.

    • On February 14, 2017 at 3:11 pm,
      Excelsior says:

      Agreed Matthew. This has been dragging out for a long time and I think management made the right call to just pay the $1 million and settle it. Far better to just put it behind them, rather than spending much more than that in legal fees fighting to show their side of the disagreement.

      It could have been 2 -3 times worse if it had gone to the extreme, and even if they won their position in court, they would have spent well over this $1 million. The best decision was to put it to rest, and get back to mining, so I’m thrilled to see it will be in the rear-view mirror moving forward.

  6. On February 14, 2017 at 2:11 pm,
    confused says:

    Ouch! Have you read this Matt, EX or any other gold bulls here?

    https://goldtadise.com/

    • On February 14, 2017 at 3:36 pm,
      Excelsior says:

      I’ve read comments from that contributor Plunger before, and overall, he has a well thought out and reasoned outlook for another leg lower with the A B C leg. (with A being the down leg from 2011 to Dec 2015, and then the upleg B being the move off those lows to the 2016 summer highs, and then now being the leg C further down.

      I would not completely rule out his scenario, as it is well reasoned, but I don’t agree with the thesis or those projections for a few reasons:

      ____________________________________________________________________

      For a sector to mark a bottom requires terrible sentiment, in late 2015 you could tell it a number of ways. Frank Homes (Mr. Commodities) started an airline ETF waiting on the sector to recover, there were less resource sponsors and traffic on most of the main mining websites (including here at the KER), and mining conference attendances were down in the toilets. Very few except a few of the rogue contrarians here on the KER were even discussing buying mining stocks back in December 2015 tax loss selling season. If you remember, we were joking on this blog about “holding our noses and buying more Silver miners.” It was fairly grim.

      Technically speaking, for it to be a bottoming pattern then the rally off of those lows needs to take out the recent prior peaks, and Gold and the miners absolutely delivered last year. Gold took out 3 higher peaks as well as the 2013 spike low, on massive volumes, and it paired up precisely with the lows and then move to record highs on the Gold Miners Bullish Percentage Index. (more on that in the next post)

      _________________________________________________________________________

      First let’s review the double bottom move down to $1445.40 that gold put in during mid to late December 2015. I had remained more reserved, because I had said since the rally in the first quarter of 2015 that I wanted to see the prior peak at $1346.80 (~$1347) taken out definitively on a closing basis. If you recall, the rally in early 2015 had fizzled out at $1307.80 and not made it past $1347. It was a bummer back in early 2015, and as a result, moving forward $1308 became first resistance, that had to be taken out to eclipse the rally from 2015. $1308 was referred to as “The Matterhorn”, (he mentioned $1309 in the article – same basic level). However, $1208-$1309 was significant, but to me it was only the first of several challenges Gold must overcome.

      It was Dragonite that reminded us all of the major spike down trough to $1321.50 from the spring of 2013, which had started the several years of sideways to down consolidation. Upon going back and looking at that again, it became very clear that this $1321.50 was a severe downturn in 2013 and defining moment in the Gold Bear. There was even a show here on the KER where the speakers had postulated that $1321 was “The Bottom” way back then. The point was that for the Bull market to be back on then Gold absolutely needed to put in a close above $1321.50.
      Well, look at the chart below of the past and what has happened this year and you’ll note that Gold took out $1307.80 (the Jan 2015 peak), $1321.50 (the 2013 spike down low trough, that did serious chart & sentiment damage), and Gold also took out $1346.80 (the next higher peak from the summer of 2014). When those levels ($1308/$1321/$1347) were taken out, then I was finally comfortable with the fact that it was not just a counter-trend rally, but in fact the beginning of the new bull in gold.

      Lastly, when Gold spiked up to $1377.50 this summer, it also took out a lessor peak of $1361.80 (from the autumn of 2013). Typically the summer is more bearish for the metals, so for Gold to have taken out so many prior peaks was uncharacteristically bullish. We mentioned in discussions on here a few times (and Glenfidish nailed it) that Gold had borrowed from the normal Fall rally by going so high into the summer, and that we’d have a dip down into November. (great call Glenfidish).

      That’s exactly what we’ve seen play out thus far, and so far coming out of late Dec 2016 to early 2017 the metals have rallied a bit and technically made a “Higher Low”. Honestly, unless Gold goes all the way down and breaks below that $1045.40 Dec 2015 low, then in my opinion we are still in the new Gold bull market.

      • On February 14, 2017 at 3:39 pm,
        Excelsior says:

        Here is the Chart that goes with all those Gold peaks & troughs. It’s easier just to see it:

        http://stockcharts.com/h-sc/ui?s=%24GOLD&p=W&yr=5&mn=0&dy=0&id=p21742695491

        • On February 14, 2017 at 3:44 pm,
          Excelsior says:

          Based on the Gold chart it sure looks to me like the Dec 2015 low of $1045.40 and the Dec 2016 low of $1124.30 form a “W-shaped Double bottom”. Also that $1045.40 formed a tinier double bottow back in Dec 2015 to kick off that $1045.40 level as the lower low.

          In addition, note how Gold blasted up through the 144 week EMA, 233 week EMA, and the 377 week EMA. In particular, Gold had sunk down through that 144 week EMA in 2013 and hadn’t broken back up through it until last year’s rally. That is pretty significant in my view.

          • On February 14, 2017 at 3:47 pm,
            Excelsior says:

            Another point weighing in favor of the bottom being in is that the mIners really outperformed the metals and often led the metals higher. This is a very bullish sign.

            *One of the better indicators I keep in the arsenal of technical data weapons is the breadth indicator (BPGDM) – The Gold Miners Bullish Percentage Index.

            You’ll notice on the chart below that the (BPGDM) made trough lows to oversold conditions in Nov-Dec 2014, right before the early 2015 rally, and then made lows in Jan of 2016, right before that epic rally last year, and then it hit 100 in July/Aug which is as overbought as possible. So that was a clue to take some chips off the table. Then you’ll see that in Nov & Dec of 2016 that things had gone down and double-bottomed as too oversold, so that was a good time to buy….. etc…..

            http://stockcharts.com/h-sc/ui?s=%24BPGDM&p=D&yr=5&mn=0&dy=0&id=p20600169876

          • On February 14, 2017 at 4:04 pm,
            Excelsior says:

            It look like the miners could top out again soon (which makes sense because usually the miners rally from early January to early March, on all the news releases that come out prior to the PDAC, and the after the PDAC they have a habit of selling off in mid-late March ….. The “PDAC Curse”. Last year was the first exception in a long time (another point about the strength of last year’s rally).

            I’ve said all along that I like buying from after Thanksgiving to late December during tax loss selling season, and then selling those positions right after PDAC as a seasonality trade. It looks like it’s going to link up well based on the BPGDM chart above.

            I’m planning for another week or two to squeeze a few more gains out of the miners, and we should also see a flurry of press releases hit over the next 2 weeks so companies can cover the news with investors at PDAC. This should add fuel to fire and put a little life back into the sector (right before the market pulls the rug back out — ha!)

  7. On February 14, 2017 at 2:46 pm,
    Ozibatla says:

    Im not yet convinced that the bear market in pms has ended. For those who care, Rambus latest chart analysis paints a clear picture that indicates we are still in a bear market for gold and silver. Although with chart analysis it is upto ones interpretation as people can draw lines, shade areas and use any timeframe to further their bias. Worth a look nonetheless.

  8. On February 14, 2017 at 2:53 pm,
    RICHARD/DOC says:

    NAK is emblematic of why investors have to be discerning in the PM sector. It’s being taken to the woodshed and the selling is probably not over. Some of the moves of some of the stocks don’t make sense and that’s why it’s important to spread your risk amongst a number of stocks. Be very careful. I also would add that there is not a lot of strength to the recent move in the PMs. We’re still in a trading range for them and will remain in one for weeks and months yet. Be careful out there.

    • On February 14, 2017 at 3:49 pm,
      Excelsior says:

      It was a typical Casey/Katusa “Pump” followed by the Kerrisdale Capital “Dump”.

      • On February 14, 2017 at 6:36 pm,
        Excelsior says:

        Thoughts from Eric Coffin today about NAK / NDM – Northern Dynasty:

        @HRA-Coffin – “Apparently I missed all the fun today. Good to see a bunch of you had nice trades (apparently) on $NDM. I don’t have any respect for Kerrisdale but, that said, I don’t have a lot more for those pumping Northern Dynasty to the moon either.

        Its a very marginal project, size notwithstanding, and I personally think it has zero chance of getting permitted. You can go on about Trump and the EPA all you want but there are plenty of levers the State of Alaska can use – the US IS a federal system after all – and a fairly large majority of Alaskans don’t want Pebble to happen. Until that changes, and copper goes to five bucks and stays there, I wouldn’t hold my breath waiting for Pebble to go forward.

        And one point I do agree with the short buys on is that it’s more than a bit odd that a project that has seen $750 million in spending doesn’t have a nice shiny feasibility study for all of us to see. I’d want to see a good economic study if I was chasing the stock at these levels. “

  9. On February 14, 2017 at 7:39 pm,
    Ozibatla says:

    So Matthew, going off your last sentence, are you cautious about PMs in the interim?

    • On February 14, 2017 at 8:04 pm,
      Matthew says:

      Yes. I think there’s a decent chance that we’ll see a little more upside in the very short term (days) but then we should see a break that could last a few weeks to well over a month. I don’t know if the miners will pull back significantly or not during that time but they should at least go nowhere to down. I’ll be waiting for clues…

  10. On February 15, 2017 at 6:15 am,
    Marty says:

    He who controls the yen, controls the metals

  11. On February 15, 2017 at 6:25 am,
    Marty says:

    Nothing like holding the real thing; equities can disappear in the twinkling of the eye, thanks to CEDE & Co.Caveat emptor!

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