A quick update comparing gold vs silver vs gold stocks

March 5, 2020

Just a quick interview today with Craig Hemke. We address the volatility in the precious metals and the continued out performance of gold compared to silver and gold stocks.

Click here to visit Craig’s site for more metals commentary.

    Mar 05, 2020 05:25 PM

    A new ~100m, +3g/t gold intersection highlights the potential scale of De Grey’s Hemi discovery

    Mar 05, 2020 05:28 PM

    Gold at $1672. Providing it doesn’t fall out of bed on Friday, this should be yet another very encouraging weekly close and weekly candle for the yellow metal.

      Mar 05, 2020 05:18 PM

      Here’s a good article that goes with the Dr. Fekete article that I linked to recently. The author is right about the importance of spreads and I’ll never forget the transformation silver went through beginning with the crash of 2008. Before the crash, the bid-ask spread for silver was routinely 10 cents or more, never less and more was common. During the crash, I remember being surprised when it shrunk to 6 cents, then 4, then 3. Silver was becoming more liquid in a crisis while platinum (for example) saw its spread jump from $10 all day every day, to $100. (When adjusted for the price collapse from $2,200+ to about $750, that widening was more like 30x than the nominal 10x.) Of course gold also enjoyed a narrowing of its own bid-ask spread as we would expect.

      So silver IS obviously money but the really interesting thing is that its spread continued to narrow well after the crisis had passed and despite all the new liquidity being pumped into the system. What I thought was a very narrow spread during the crisis is now considered a very wide one deserving close attention if not alarm. A half-cent spread is now the norm and has been for years (which deserves these !!!).
      As an aside, after 2008, I never again came across anymore pre-’65 90% junk silver still in circulation or even the less valuable and slightly newer 40% junk. Silver had gone mainstream.

      Back to the present, I remember the spread widening before last week’s plunge and thought it was strange but didn’t dwell on it. That was a mistake that reminds me of not taking negative technical divergences seriously enough at times. It seems to me that the spread widened because big/smart money pulled their bids in anticipation of soon obtaining a much better deal.

        Mar 05, 2020 05:24 PM

        That is an interesting signal to look for — the widening or narrowing of the spread to indicate a sea change in the trend and liquidity event.

        I agree that Silver is money, despite the constant dwelling of late by pundits on it’s industrial component. It will still have it’s pricing set by investors in it as “money” or an “uncurrency” in the futures markets.

          Mar 05, 2020 05:42 PM

          I am tempted to yell in the back of Jamie Dimon’s backswing!

            Mar 05, 2020 05:10 PM

            Ha! I’m inclined to yell at Jamie Dimon at any time. πŸ™‚

      Mar 05, 2020 05:52 PM

      Yep agreed Ex. If gold was to remain unchanged into Fridays close, it would roughly be 2% higher than Fridays close 2 weeks ago. In light of the bloodbath last week, that is very constructive. More than what I was expecting after last weeks chaotic end to be honest. Silver, again though is proving to be disappointing. Its less than 1% higher over the last 24 hours whilst gold is 2.5% higher. Unfortunately its beaten to a bloody pulp and is attracting little safe haven attention. Yes, ultimately silver is money like gold but until sentiment towards it changes and the broader PM sector improves fundamentally, moves to the upside may well remain muted.

        Mar 05, 2020 05:13 PM

        Ozibatla – Agreed on both points made about gold and silver.

        Gold could post it’s highest weekly close in 7 years, while Silver has languished in comparison, and just isn’t being seen in the same light that Gold is recently, as it relates to safe haven appeal.

          Mar 05, 2020 05:21 PM

          I don’t doubt that at one point Silver will wake up and play catch up to the moves Gold has made to the upside (and then some); however, I am concerned how sluggish it has been for some time now.

          If we took a time machine back to early 2016, when it rallied to $21.23 in tandem with Gold’s surge to $1377.50, and asked folks where they though Silver would be when Gold chugged roughly $300 higher up to $1672, then I doubt most people would have guessed — “Oh, Silver will be lower in that case, around $17.35”.

          The fact that gold added over 21% while Silver fell over 18% from their respective 2016 highs, when Silver is supposed to outperform on a percentage basis, is frustrating to say the least.

            Mar 05, 2020 05:55 PM

            Absolutely agree 100%. Normally for such a situation I would imply the theory that the longer you coil/restrict/hold back something then the more severe it will over compensate in the opposite direction when let go. However, silver just stinks and I think patience is a virtue here.

            Your comparison of gold and silver from 2016 to today just further verifies how out of favour silved has become. If one was to take the time frame further back towards the initial onset of the PMs bearmarket then silvers performance is worse still. During that time, gold initially stabilsed around the $1150-$1180 price range whilst silvers range was $18.50-$19.00. Today silvers over $1 lower yet gold is over $500 higher. Silver is just so undervalued but whos to say it wont become moreso in the foreseeable future? The gold to silver ratio chart perfectly encapsulates silvers underperformance.

      Mar 06, 2020 06:24 AM

      Gold at $1687 in pre-market trading. So far looking good for a stellar weekly close.

        Mar 06, 2020 06:25 AM

        To the points made above, Gold is still up versus Silver on a factor of 3:1.

        When will Silver get moving?

        Mar 06, 2020 06:11 AM

        Was looking real good until some fat finger just dumped $700 million in futures. Successfully smashed gold down over $40 in a matter of minutes. And the circus rolls on!

    Mar 05, 2020 05:14 PM

    Gold in CDN is 2,240. Andy Schectman The President of Miles Franklin Precious Metals Investment is interviewed by Maurice Jackson of Proven And Probable. Really interesting to hear what he say’s about the price of silver now. He calls it the most undervalued commodity on the planet.

    Mar 05, 2020 05:43 PM

    Wish I worked for Craig Hemke.

    Mar 05, 2020 05:13 PM

    A further observation on silver: In the last 3 hours it has sold off 21 cents (over 1%). Gold meanwhile has sold off $6 (less than .40%). The sell-off in silvers perfectly matches other sell-offs seen in oil, platinum, palladium and copper during the same time frame. Whether or not silvers “precious” aspect supercedes its “industrial” aspect (for what its worth I believe it does), doesnt really matter currently because it appears overiding sentiment regarding silver has it firmly pidgeon holed within the industrial sector. Until this changes I just cant see it catching upto gold in terms of percentage gains.

      Mar 05, 2020 05:26 PM

      Here’s silver vs copper with gold vs copper overlaid. It looks like typical silver action to me: underperforming gold when stocks fall hard and fear is high. Notice that silver is still up 37% versus copper since stocks topped versus gold 18 months ago. That’s because copper, like the stock market, is tied to the fate of the economy.

        Mar 06, 2020 06:20 AM

        Great point and great chart showing how the Precious Metals are still closely correlated when compared to the Base Metals, despite Silver’s under-performance relative to Gold.

        As a result of the under-performance of Silver to Gold, most pundits have over-hyped the “industrial” component of Silver as the cause. Ultimately pricing is set on the futures market by traders that view Silver as money, and a #PreciousMetal, like gold – not a Base Metal.

        For most of history, Silver has tracked Gold as money, and currency of last resort, so I don’t buy the Silver will be sold off due to #BaseMetals lagging narrative, and it will eventually catch up to Gold and surprise those turning their nose up at it presently.

        Silver is far more speculative PM asset though, and tends to the track the PM miners, far more than it does Copper, Nickel, Aluminum, etc…

          Mar 06, 2020 06:21 AM

          Ex, that chart actually does not show correlation between PMs and industrial metals but it does show that gold and silver are highly correlated. I would have to put copper on the chart by itself to assess correlation with gold and silver. In the chart above, gold and silver are both priced in copper.

            Mar 06, 2020 06:55 PM

            Understood, and I worded that poorly – it shows how similar Gold and silver are correlated as they relate to copper and to a larger extent the base metals. Both silver and gold have outperformed copper in a similar pattern, and despite Silver’s underperformance relative to Gold, it is still acting like a precious metal, and not a base metal.

            Mar 06, 2020 06:03 PM

            I actually liked the chart on much I re-posted it earlier over at CEO. CA. There was a discussion going on that silver was just an industrial metal, and I disagreed and was discussing how gold and silver have outperformed the other commodities, precisely because the are not as tied to the strength of the economy, but rather are real money.

            Mar 06, 2020 06:05 PM

            I actually liked the chart so much I re-posted it earlier over at CEO. CA. There was a discussion going on that silver was just an industrial metal, and I disagreed and was discussing how gold and silver have outperformed the other commodities, precisely because the are not as tied to the strength of the economy, but rather are real money.

            Mar 06, 2020 06:19 PM

            The guys claiming silver is just an industrial metal can safely be ignored as they have not done their homework.
            I wonder if it would surprise them if you pointed out that silver currently sells for 99x as much as copper even though the above ground supply is equal to decades of production while copper’s above ground supply often equals just months, weeks, days or is even in deficit.

            The above, along with its correlation to gold proves that it’s the monetary side of silver that sets the price. In other words, investment demand, not industrial demand.

            This is nearly 8 years old but still gets the point across:

      Mar 05, 2020 05:37 PM

      Here’s silver vs gold. What I see is the end of a 6 month cycle. We saw a move-ending spike in September and it appears we’ve got the same thing now except it’s inverted.
      If I were looking to buy more metal here, I’d buy silver and only silver. The Fed’s actions will be reflected in the silver price once stocks stop falling hard every day. This is a big transition period for both sectors.

        Mar 05, 2020 05:16 PM

        I hope your right Matthew. I agree, silvers incredibly undervalued at present and I would be buying more at current prices. Platinum also looks good at current prices.

    Mar 05, 2020 05:57 PM

    Brent Cook asks “So, What’s Really Going On?” in a Panel Discussion at Metals Investor Forum

    #MIF – February 28 – March 1, 2020 in Toronto #VIDEO

      Mar 05, 2020 05:02 PM

      Eric Coffin, HRA Advisories “Shit, Meet Fan” at Metals Investor Forum

      #MIF – February 28 – March 1, 2020 in Toronto #VIDEO

        Mar 05, 2020 05:03 PM

        Gwen Preston of Resource Maven “Gold: Covid-19 Chaos Within A Stellar Setup”

        Metals Investor Forum #MIF – February 28 – March 1, 2020 in Toronto #VIDEO

        Mar 06, 2020 06:52 AM

        GREAT COMMENTS>>>>>>>>BY ERIC COFFIN>>>>>>>>>>>>JMO……..

          Mar 06, 2020 06:56 AM

          I think he is spot on…………concerning the metals……….
          Got Phyz………

          Mar 06, 2020 06:05 AM

          There were lots of good interviews from the Metals Investor Forum in late Feb, which took place right before PDAC. I enjoy all the key note speakers and am still digesting all their talks as these just posted but I’ve listened to a few of them now and also really liked that panel discussion with Brent Cook as moderator.

          Good stuff!

    Mar 05, 2020 05:11 PM

    Joe Mazumdar Editor of Exploration Insights “Little decisions – Trials and Tribulations of investing in the junior mining sector”.

    Metals Investor Forum #MIF – February 28 – March 1, 2020 in Toronto #VIDEO

    Mar 05, 2020 05:35 PM

    Peter Spina – Gold in 2020, Precious Metal Stocks On the Verge of Historic Gains

    Cambridge House International – #VRIC #VIDEO