Gold price Pay attention to gold-silver ratio as markets surge higher – DeCarley Trading
My first question is actually from my leader, Daniella kam Boni on Twitter. She asked what’s more exciting gold, above eighteen, forty or silver above twenty one dollars. What do you think my perspective? I see I pay close attention to the gold, the silver ratio, which is basically how many ounces of silver it requires to purchase one ounce of gold. In March. In April, we saw that ratio jump up to 130 somewhere, really honestly off the charts, something we had. Never seen before and it’s come back down quite a bit. I think the last I checked it’s around 90, but I still think there’s room for that to move lower, more comfortable ratio would be somewhere around 70. So with that in mind, I think the fact that silver starting to outpace gold. I think this is maybe just the beginning of that, so I think Silver’s got to catch up to gold, or even you know, even if the market doesn’t necessarily the metals markets, don’t necessarily continue. Higher silver should outperform. So, in other words, the ratio can go both ways if the metals move, higher silver will probably outpace cool.
If they move lower gold will probably at least not fall as hard as gold is I’m. Sorry, silver would not fall as hard as gold, so that’s kind of how we’re looking at it. I do think in the short run, though there is some room on the upside and both of them.
Well, I was gon na say so. You know, like I mean that’s the but bottom line is in the ratio: silver kind of outperforms gold like it’s it’s, the silver that catches up to gold, not gold, falling down to Silver’s level, correct that’s that’s, how we’re leaning in the in the short run there’s Still some seasonal support for metals. The dollar, I still believe, is going to continue lower, so there’s a lot of reasons that the metals would go higher. Also, I mean let’s face it. Gold and silver are momentum plays once the train starts, pulling out of the station. It’S hard to stop it eventually, I mean we’ve seen this happen in gold over and over and over. It eventually ends up like that. Does probably isn’t gon na happen right away. I think we’ve got a little room to move on the upside before we start have to having to think about that. What levels do you are important? I mean you know we have a lot of people talking about all time highs, you know, or at least pushing to 1900 by the end of the year. How far do you think gold gets before I like that before it gets ugly right so for gold? I don’t I’m thinking the upside and gold is probably limited to about a hundred 150 dollars from here, at least before we get a good correction and then we’ll have to kind of reassess things Silver’s in a completely different ballgame.
Here, silver is nowhere near the 2011 high and honestly, I don’t think we’ll see that 2011 high in my lifetime silver got up to 50 for those young kids that weren’t around during that time. I doubt we’re gon na see 50, but I wouldn’t be surprised if silver breaks resistance around 20 12 22. If it can break and hold, I think we’re, probably gon na see 26, maybe even 30 before it’s said and done. Oh wow. So last time we talked, I mean you know we were talking about silver. You know right now you say momentum is driving this, this trade. What about industrial side? I mean? Obviously you know things aren’t really going smoothly in the US when it comes to kovin 19. We don’t really know how that’s going to impact economic performance for the rest of the year, so I’m sort of wondering I mean you know, does does how does that industrial side of silver impact, this momentum trade? So I think a lot of that is probably mostly built in. If you look at copper, copper also is a industrial, metal and it’s performed very well. In fact, it’s probably performed better than it. It probably should considering what we’re seeing going on in the economy and that sort of thing, but we have to also keep in mind that this, the kovetz shutdown situation and the lingering effects are a little bit different in that consumers generally at least now.
This can change, but at the moment they still have my to spend their still spending that we saw that with the retail sales number last month, so things are still moving just because people are sitting at home, there’s doesn’t mean they’re, not consuming, and so so so Far, that hasn’t been a game changer, but again things can change quickly, so we’ll just have to kind of have the the boards and see how it goes. So I guess like is: do you think this has a lot to do with in the stimulus measures? I mean everybody’s sort of talking about this, this income cliff that the u.s. is facing. You know the the 600 of you know related to unemployment for kovat. If that doesn’t get resolved, does just silver come crashing down, you know like you’re like what. How does that impact her sentiment? Sure so I mean that that would definitely be a big blow. I think that our the federal government has taken pretty dramatic action thus far, and so my guess is they’re not going to just step away from the table and let things collapse, so I think that they will kind of hopefully, hopefully anyway, I think they will kind Of taper down some of the the money that they’re that they’re throwing out there that’s said because silver is so far behind compared to gold. I don’t believe that we’re gon na get a complete collapse and silver, even if gold starts to struggle silver, will probably still maintain relative reasonable pricing.
So I don’t see any big collapse coming right away. I don’t think that’s played out, but I guess we’ll just have to wait and see. One of the big reasons for the the rise in gold and silver is a u.s. dollar fall into one month. Lows are sorry, are their their lowest levels since March? Are we do you think the u.s. dollars is now in a downtrend? I do, I think, we’re still in the mid 90s in the US dollar, if you’re looking over the last couple years, that seems cheap. But if you look over the last couple of decades, that’s actually pretty expensive, so I still think there’s plenty of room for the dollar to move lower, especially given what our federal government is doing and what the central banks are doing. The u.s. no longer really has an interest rate differential it’s, not a material one, and until that changes dollars, probably gon na struggle and that should support metals prices. So how far do you think gold can go, I mean or how far do you think the US dollar can can go on? Are you looking at 80s 70s so for now we see trendline support coming in around 93, which isn’t too far from where we are. If it breaks below that, I think we’re looking at mid to low 80s. So I don’t know if it seems crazy to talk about, because we haven’t seen that in quite a while, but it’s it’s doable.
But a few weeks ago it was crazy to talk about you know twenty one dollar goal at twenty one dollars silver and at eighteen, eighteen, fifty gold, so yeah it’s, just it feels like we’re in this new paradigm shift. Sure yeah I mean one thing: 2020 has taught us, we really have. We just never know what anything can happen, anything’s game. So I guess what else are you looking at? I mean you know. Obviously like interest rates, I mean you know a lot. A big part of this has to do with with monetary policy a lot of people speculating in September. The Fed will introduce some sort of yield curve control. What are your expectations, and is this? Is this going to? Is this sort of the next step to drive gold? You know like to your target, you know hundred dollars higher so sure, so we do pay close attention to the Treasury market. It has been a complete snoozer. Lately I mean we, its Treasuries haven’t done anything in months we had like a really exciting March and then it just kind of flatlined and so we’re waiting for the next move. To be honest, Treasuries generally go up this time of year, because there’s nobody’s willing to step in front of the bus. I think they’ll probably continue to creep creep up just a little, but we normally see a seasonal top in like the middle of August. So any trader that’s, looking for some sort of change in interest rate, might start to think about that in a couple of weeks that the market does tend to be seasonally vulnerable and in addition, if you think about it, the US yields are they’re pathetic.
The 10 year yield is around 0.6 0.6 tenths of a percent. So I mean honestly, you really are losing money, putting your money in Treasuries because of inflation and other things, and for ten years that’s just a bit. It just doesn’t make sense for most people and in this environment, with stocks being relatively stable, again it’s hard to justify such a small yield, particularly when you keep them. Yet when you keep in mind that there’s really probably no upside potential like in previous years, people have been making money and Treasuries, not necessarily because of the yield, although it’s helped, but because of the capital gains it’s hard to imagine really any capital gains from here. In fact, we could see the exact opposite, so I know that people have kind of said this for years and it hasn’t really worked out that way, but eventually we’re going to get to a point where investors are gon na realize they’re, not making anything in Treasuries. It’S all risk and very little reward they might as well be parked in cash, as opposed to the tenure noted a five year note. Well, I mean and gold I mean I think, that’s also what’s, making gold really attractive and we’ve seen gold and equity sort of rally together, which I you know, is really unusual and I think that’s, because you know as they’re taking on equity risk. They need that that hedge and you just like you say you can’t, get it with with Treasuries, so it you know to you: does it make sense to to look at gold as that safe haven? I think that’s exactly what people are doing I’m, not sure.
Eventually, that is gon na stop working and it you know, they’re, not weren’t. The markets are gon na, send a memo and let people know in advance that it’s time to rethink things so it’ll probably be a pretty abrupt repricing when it does happen, but for now I don’t, I don’t think that’s simply it like. I said I think we’ve got a little more time on the up side and gold before things really start to turn the corner, but yeah you’re right there’s a lot of money out there. That government has ejected a lot of cash. It needs to find a home, and gold and silver have been a place for that money. Carly. Thank you very much for joining us it’s, always a pleasure to talk with you. Thank you very much for your time. Thank you. Absolutely. It was great to be here. You’Re fun.