Everything Is Going Lower, Including Bonds

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EVERYTHING IS GOING LOWER

Nothing epitomizes cheap money more than the lofty level of bond prices and their corresponding low yields. The old adage of “never chase yield” seems to have been pushed aside in favor of “buy more when the interest rate approaches zero”.

Yield-hungry investors think they are being conservative, though. Some of that reasoning is due to the obvious volatility of the stock market; especially during the first twenty years of this century.

BONDS BIGGER RISK THAN STOCKS

Even before the latest stock market dump, bonds could be considered a bigger risk than stocks. The risk is greater now than it was in 2007-08; and probably more so than at any other time in history.

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Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10

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GOLD-SILVER RATIO TOPS 100 

Recently, the gold-silver ratio topped 100. Nevertheless, it doesn’t seem to matter what the ratio is, or how high it goes. Those who prefer silver always seem to think it’s going to reverse “soon”.

It might; maybe significantly so, too. But it doesn’t mean a thing. There are no fundamental reasons for the ratio to move up or down at any given time.

Actually, there is no reason to track it, either. Except that those who love silver think it is correlated in some way with gold; its not. And that silver is cheap relative to gold (it is), so it must be a better buy (its not).

But what if there was a correlation; or inverse correlation? Shouldn’t we see something on a chart that would indicate such?

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Cash Is King Right Now, Not Gold

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CASH IS KING FOR NOW

Amidst the fallout of stock markets crashing worldwide, gold (silver, too) and oil imploding, and the scare of coronavirus, the dollar itself stands tall. That is not what some were expecting. Nevertheless, unrealistic expectations abound today, so let’s see what we can learn from this.

When investors sell en masse, they generally turn to cash as a resting place for their money. Cash for most people today still means US dollars. This implies an increase in demand for US dollars.  Gold investors and their advisors seem to have been expecting just the opposite.

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Silver Loses Its Mettle – Part 2 (Technicals)

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RE: SILVER LOSES ITS METTLE 

Last week I talked about unrealistic expectations for the price of silver (see Silver Loses Its Mettle). My comments were centered on two specific factors: 1) silver’s primary role as an industrial commodity and 2) the fallacy of the gold-to-silver ratio.

Both of these items have their root in fundamentals, or lack of them.

In addition, I pointed out the fact that the price of silver has declined significantly in every single recession of the past fifty years.

Not surprisingly, the technical side appears to reinforce the lack of fundamental support for higher silver prices.

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Silver Loses Its Mettle

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SILVER LOSES ITS METTLE

Actually, it is silver investors who might be losing their mettle. Coping well in the face of a fourteen percent decline in the vaunted white metal must be very difficult.

The size of that decline happens to be right in line with the major stock market indices, all of which (Dow, S&P, Nasdaq) lost similar percentage amounts this past week. No better, no worse for silver; but it is ironic.

We have been told over and over that silver is a hedge against that type of stock market action.  Also, we’ve been told that silver would be more explosive that its well-respected brother, gold. It was – sort of. The correct word is implosive.  

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Gold And Stocks Headed Lower

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GOLD AND STOCKS HEADED LOWER – NO CORRELATION

Gold and stocks are moving south together; but they are not correlated. Nor, are they inversely correlated, as some gold enthusiasts claim.

Reference to gold as a safe haven has some investors buying gold to hedge against a stock market crash. It is almost as if gold has become a pseudo defensive stock.

It seems investors actually expect gold’s price to go up when the stock market goes down; and vice-versa.

If that were the case, how do you explain the extended periods when both moved together; or the price action of gold relative to stocks in the past four days? Gold currently is lower in price than it was before stocks tumbled nearly 4000 points.

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$1500 Gold Price Is Fair And Accurate

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Is $1500 a reasonable price for gold? Some of the more ardent gold “bulls” might say no. A price of $2000 per ounce should sound better to them. That particular number is likely more popular because gold’s price didn’t quite get there eight years ago, stopping just shy of $1900 per ounce.

Similar behavior occurred after 1980, when gold’s price assent was stopped at $850. At that time, $1000 became the price projection of choice.

In both cases, the expectations for gold were likely born out of desire, rather than fundamentals.

So, how can we know what is a fair and accurate price for gold today – right now?

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Fed-Watching Is Overhyped And Overdone

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FED-WATCHING IS OVERHYPED

If you are one of those who is looking for clues from the Federal Reserve as to the direction of the markets, forget it. You are too late.

Too many people think that the latest Fed minutes will give them some indication of what to expect from the markets. Those same people think that the Fed actually has a strategy and that they are “managing the economy” with the intention of pursuing what is best financially and economically for the country.

Wake up! The Federal Reserve does not exist and operate with the intention of acting in our best interests financially, economically, or in any other way.

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A Lesson About Gold – How Bullish Can It Be?

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A Lesson About Gold

Apparently, there is no limit. This seems especially true right now with all of the “obvious” signs and indicators staring you in the face. It is almost blasphemous to speak cautiously. Better to let your imagination run wild and join in the revelry.

I can’t do that. I don’t choose to be dumped into the same cauldron of boiling fantasy with other analysts and advisors, who tout and promote based on the latest headlines. There has to be more to it. I think there is.

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Gold Explodes, Then Implodes – Again

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GOLD EXPLODES, THEN IMPLODES

It shouldn’t be a surprise to anyone, because it has happened before.

Gold’s quick roundtrip from $1540 to $1610 and back again ($1539 earlier today) had its roots in actions and words between the United States and Iran. Prognosticators say there is more to come. Maybe; maybe not. But there is historical precedent for gold’s action.

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