The Gold-to-Silver Ratio: A Truly Generational Opportunity

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Back then, during 4:15 each Friday night, there would be a choice of brokers and analysts (even a janitor) subsequent to a aged teletype appurtenance (I am devising some-more than a few lifted eyebrows among a kids out there as they fast Google hunt “teletype machine” on their Smartphones while sipping a $10 crater of fancy-ass coffee) in expectancy of a all-important “Money Supply” numbers that everybody ostensible was going to give them a spirit as to when seductiveness rates would start to decrease from 16%-plus nosebleed levels of a early 1980s.

Today, it’s radically a same solely a teletype appurtenance has been transposed by Janet Yellen and a badge of paper giving us a income supply total is now Janet Yellen’s tongue giving us a all-omnipotent clues to a “hawkish-dovish” leanings of a U.S. executive bank. However, one thing hasn’t changed: a comprehensive LUNACY of these obsessions and how a algo-bots seize on a word clouds and pierce markets in trillions with each singular tongue out of Janet’s mouth.

So bullion and china immediately bolted aloft along with bonds on Tuesday afternoon after that each bullion guru on a universe was emailing me about how we had best not “fight a Fed” during risk of anal slash and that given new, large and intelligent income shopping paper and earthy bullion would force a bullion banks to govern a managed retreat, my near-term counsel was misplaced, foolish and suicidal. So along comes Yellen and tells a universe that fundamentally she could caring reduction about acceleration (you know – a Fed’s vital 100-year charge is to guard inflation) and what should have been a $100 blast in bullion prices to $1,350/oz indeed becomes a insignificant $20/oz pierce to around $1,242/oz and ends adult behind subsequent $1,230/oz a unequivocally subsequent day, a estimable $57 off a tip given progressing in March.

Today a US Dollar Index is down again and while a weaker U.S dollar hasn’t always been a clarion call for a bullion bears, it positively has supposing a tailwind of sorts for a bullion bulls. The problem for me is that a GDX (shown above) is not accurately lighting adult a runway as a messenger for aloft bullion prices and with bullion adult $5.50 during mid-day, Newmont, Barrick, Goldcorp, and a HUI are all down. Was it not usually dual days ago that a Fed’s Madame Yellen gave us all a “green light” for gold? Then since isn’t it by $1,300?

Gold Spot Price

The reason that bullion and china are not screaming aloft opposite a many bullish of elemental backdrops is clear: a bullion bank traders are underneath orders to shave another $50/oz for their Q1 PLs, and as we tighten out Q1/16, notwithstanding bullion carrying a best quarterly allege in over 25 years, it is still $50 off a highs. we hang to my guns; bullion MUST have a pullback that shakes out all of a latecomers to a celebration and gives us all a healthier entrance point. All those cynics who were doubtful behind in Dec when we was pulsation a list and doing a table-dance on a city gymnasium stairs have left from bearish to bullish in a brief 3 months given they usually got in AFTER a HUI skated adult a ice over a 170 blueline and are now prosaic with movement rolling over. They wish a puck low though we contend it gets dumped behind into a neutral section initial while they conduct for a dais sucking breeze and hollering for a Gatorade.

Now, carrying gotten that off my chest, we was doing some work yesterday on a opinion for china and before we go on, there are some extremely splendid people out that know a china marketplace fundamentals a whale of a lot improved than we do. Ted Butler, David Morgan and Eric Sprott are 3 such people and notwithstanding a fact that they are deliberate china gurus, a work they all do is downright and it has a roots utterly in a data. A good many orators out there that have good skills in communicating a china story are, with good honour to Marshall McLuhan, masters of a medium, possibly it is by a coop or by podcasts or by station in front of crowds during investment conferences, though a form of investigate we have sought out over a past 40 years is a kind that has experimental information behind it—you know—footnotes and references and brackets that tell me where a ruin a author got his information.

I recently review an essay by Jeff Neilson entitled “Silver Fundamentals: The Numbers Don’t Lie”in that a long-term box for china is done and as constrained as is my possess scatter-brained “ad hoc” intrinsic clarity of china being a generational shopping opportunity, this essay throws all of my “gut feel” form of nonconformist “analysis” off a 34th-storey patio and as it sails gleefully by a air, sheets of pencil-scratched paper being ripped to shreds, carrying a arise to see a numbers is unequivocally utterly a revelation. You see, McLuhan unspoken that given a form of a middle (oration, penmanship, blog, podcast, You-tube video) embeds itself in a summary (“Silver is good/Silver is bad”), there is combined a symbiosis of sorts by that a middle influences how a summary is perceived. So when we review an essay that is grounded in tender information and contains information from as distant behind as 1344, it is a form of educational enema where a virginity of a summary is unaltered by a colorization of a medium.

In other words, fact replaces jive – and we get review a full essay here: It’s unequivocally good. . .

The Real Price of Silver

Needless to say, notwithstanding my ongoing faith that we are now in a visual proviso for a changed metals, we consider that owning china contra owning bullion is a high-probability trade that could be a 2016 Trade of a Year. we am going to put on a trade this week that effectively favors china over bullion and is a high-risk process of shorting a Gold-to-Silver Ratio (GTSR) whose draft we posted a few weeks back:

Gold-Silver Ratio Chart

If we am right about this tentative improvement in a metals, bullion will get taken down harder than china all formed on a GTSR, so we wish to give myself adequate time to cover a brief in bullion and double adult on a china prolonged so we will use a Jul options. we will buy 100 SLV Jul $15 calls for $.68 (U.S.$6,800) and also 20 GLD Jul $115 puts for $2.92 (U.S.$5,840) for a net withdraw of U.S.$12,640. we will need to see possibly $108.68 on a GLD or $16.26 on a SLV as breakeven points on this trade by a third Friday in July. By enchanting these prolonged positions, we am effectively shorting a GTSR though will need to see this slight seesaw, back-and-forth trade operation of a past 4 weeks waste and do so quickly, lest a time premiums erode divided to zero. The risk in this trade is that we see a continued operation for bullion and china above $1,160–1,170 for bullion and underneath $16.00–16.25 for china right by July, during that indicate both choice are value 0 and we am seen chasing my dog around a residence with a bottle of JD in one palm and a span of clamp grips for a medicine chest in a other with a headphones personification Zeppelin’s “Kasmir” during max volume.

Let us urge for otherwise. . .