THE GREAT PRECIOUS METALS MARKET DISCONNECT: A Ticking Time Bomb

The Great Precious Metals Market Disconnect that took place four years ago is now a ticking TIME BOMB.  While the Fed and Central Banks have been relatively successful in propping up the broader stock, bond and real estate markets, time is not on their side.  The more the highly inflated markets continue higher, the more breath-taking will be the inevitable collapse.

Now, I am not just pandering hype here, there is plenty of data to support the evidence that the precious metals suffered a serious disconnect from the broader markets in 2012 and continue to be held down like a coiled spring.  One of my readers forwarded me this excellent chart which shows this perfectly:

The chart is a Silver-Gold ratio (RED LINE) compared to the S&P 500 Index (BLACK LINE).  Take note, this is not a Gold-Silver ratio, but the opposite.  As we can see, the Silver-Gold ratio line has paralleled the S&P 500 from 1997 to 2012… very closely.  However, when the Fed announced QE3 at the end of 2012, something quite interesting took place.  The Silver-Gold ratio continued lower towards its bottom level, but the S&P 500 Index surged upward to a new record high.

While many precious metals investors realize that this disconnect took place, this chart shows it with more precision.  Furthermore, if we look on the right side of the chart we can see the percentage level of this disconnect is 65%.  This is off definitely off the charts… literally and figuratively.  Again, I appreciate my reader for forwarding this chart.

After looking at this chart, I did some additional research on the S&P 500 and the silver price.  If we look at the S&P 500 divided by the silver price since 1981, we have the following chart:

The current S&P 500 Index-Silver ratio is 130/1.  Basically, 130 ounces of silver would buy the S&P 500 today.  When silver reached nearly $50 in 2011, the S&P 500-Silver ratio was 28/1.  However, if we go back to 1981 or in 1983, we can see the S&P 500-Silver ratio was 10/1.

If we applied the same 1981 S&P 500-Silver ratio today, the price of silver would be $230.  That being said, the value of the S&P 500 is severally inflated.  So, it is difficult to determine a realistic silver price based on a highly inflated stock index.

Regardless, the YELLOW ARROW in the chart shows that the S&P500-Silver ratio should have continued lower, not higher towards the 130/1 ratio it is currently.  Unfortunately, the precious metals were not allowed to be apart of this GREAT INFLATION because there just isn’t enough physical metal to go around.. if the public started buying hand over fist.

Market Volume Indicating Something Is Really Wrong With The Markets

Not only have the precious metals disconnected from the broader stocks markets (shown in the first chart above), if we look at the volume at the S&P 500 and the silver price, we can spot another troubling sign:

After the S&P 500 hit its low of 666 points in 2009, overall trading volume continued to decline.  While I have mentioned this before in a previous article, I have looked at this trend in a different way.  We must remember, a healthy stock or index rises along with its trading volume.  This is precisely what took place with the S&P 500 from 2000-2009.  However, the opposite has taken place since 2008-9, when the U.S. financial system suffered a severe heart-attack.

Now, if we look at the Silver price chart, we see a much different picture:

As the silver price trended higher since 2000, so did its trading volume.  While its trading volume spiked in 2011 (along with the price) and the fell lower, its overall trend has been higher.  Again, this is nothing new, but what I realized is this important factor:

While the S&P 500 Index has been moving higher on a declining amount of trading volume, this has seriously INFLATED its true value.  On the other hand, as the silver price has been moving lower or sideways as its trading volume has increased, its value has been severally DEFLATED.

Basically, the S&P 500 Index is moving higher on lower and lower volume, thus INFLATING its value.  Now compare that to the Silver price which is being DEFLATED by an increasing amount of paper trading contracts.

Yes, it is true that a Future’s Market was designed to properly hedge producers and buyers of commodities, metals and energy.  However, gold and silver do not behave like most commodities that are consumed.  Gold and silver also perform as monetary assets or stores of value.  By increasing the paper trading volume of gold or silver, it diminishes its role as a monetary or store of value asset.

Of course, this is being done on purpose.  While the Fed and Central Banks continue to prop up the broader stock, bond and real estate markets with money printing, debt and derivatives, the ENERGY that they are relying upon to continue BUSINESS AS USUAL, is in serious trouble.

If you have not read my article, THE BLOOD BATH CONTINUES IN THE U.S. MAJOR OIL INDUSTRY, it provides clear evidence that the big U.S. oil companies, ExxonMobil, Chevron and ConocoPhillips are going into serious debt to pay for capital expenditures or pay shareholder dividends.  This is not a business model that is sustainable in the long run.  Something is going to give… and in a BIG WAY.

The Great Precious Metals Market disconnect is a ticking TIME BOMB.  Even though it is impossible to forecast when the bomb will go off, logic suggests the S&P 500 will head LOWER, while the price of silver (and gold) will head HIGHER.

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50 Comments on "THE GREAT PRECIOUS METALS MARKET DISCONNECT: A Ticking Time Bomb"

  1. Love sound logic.

  2. I’ve always felt that at some point, there will be a serious price disconnect from ‘Ponzi Paper Gold’ price and physical, as I believe the last paper-to-physical ratio was something like 340 ‘paper ounces’ held – per ONE OUNCE of physical.

    Shit hits the fan, who do you think will be first in line to trade paper for physical?

  3. The first chart of silver over gold is indeed puzzling since 2012. A declining ag/au ratio and a rising stock market makes no sense. Silver is also an industrial commodity it should move up with a rising market. Also, I’ve found that a rising silver to gold ratio is often associated with a bull market for both silver and gold. Three explanations in my mind.

    1. Due to massive money printing rich investors prefer gold to silver when hedging. Silver is scarcer per dollar hedged. The little guy likes silver and buys the mint’s coins.
    2. The s&p is weighted towards the information tech stocks and not real industrials. Since information is the product, they don’t use much silver. I.e. Google, apple, Amazon, Facebook, Netflix, etc.
    3. Outright manipulation of the Silver and gold markets by banks and governments. Also, central bank stock buying. Boosting stocks in an artifical way.

    How long can this continue? A long time. I’m of the opinion that we will see a break in the bond markets prior to a crash in the stock markets. The trouble will start in China or Europe.

    Thanks Steve for so many thought provoking articles.

    • Although I agree with you thoughts, I differ in opinion of thought 2. Were there no electronic devices to receive the electronic data purveyed by these tech companies they would remain in great shape. But as we all know silver is primarily in use by the hardware that runs the software.

    • I agree Eddy and when the bond market starts to break as yields creep up, there will likely be a gradual switch out of bonds into stocks and commodities. And as the bond markets are much bigger than either of those, sheer weight of capital will continue to inflate their values.
      With regard to lower volumes, that is partly explained by the high level of share buybacks. As big companies find it harder to deploy capital, they either pay dividends or buy back shares. Also many companies have supported their EPS by buying back shares with cheap debt. Both these factors explain why share volume is dropping. There may be less share buying, but that does not stop the value of shares increasing provided that selling does not overbalance the buying. At present that does not seem to be the case

      • DisappearingCulture | February 11, 2017 at 7:51 am | Reply

        And there is an unknown volume of buying by the Working Group on Financial Markets AKA plunge protection team. Also by strategic buying to prop up the indices [rather than sound investing] one can beat back fundamentals of free market mechanisms.

      • But as we have seen, the CBs of the world, helped by all the TBTFs (that use the bonds as collateral in the derivatives casino) can and probably will continue to buy of all the debt. Rates cannot rise to “normal” historic levels, or there is a sudden collapse. This ain’t gonna happen anytime soon… Remember what B.S. Bernanke said on the topic. They can prop up bonds and stocks, all that is paper. ALL paper. That’s why they loath the PMs… Volker’s “Gold is my arch-enemy” rings in my ears… And the paper-PM scam they have going on the CONeX/LBMA is getting old… The Eastern fizz exchanges signify there is limited time for them to maintain the status quo. When it all fails, it will happen very quickly, so that the masses trapped in stocks and bonds will have no time to re-allocate their paper funds. But trying to time this singularity is, IMHO, not possible for outsiders. Either you read the signs on the walls and add 1+1, or you don’t… May we all be on the right side of the trade when the hammer falls. GLTA and a great thanks to Steve for sharing all his work and insights.

  4. The proof is in the pudding. Fact/fiction ratio is going up exponentially.

  5. The problems will start in europe.The german target salden go to the roof.Once the Club med recognize that they can express Mister Schäuble(financial minister) with the declaration to leave the euro the problems will start.

    Three important elections.Holland,France,germany.When nothing chances and Le pen is president she wants a “Volkabstimmung” to leave the euro.

    So germany is jammed between two things.

    Making a transfer union and pay the south of euro.The target salden will go rapidly up.This will lead to make the germans elect the AFD(similar to a right party) or the sothern europeans will leave the euro which is similiar to broke of those counties.Our debts and target salden wil be blown in the wind and germany is broken too.

    • The Target-2 debt, all debt within the € system, must be paid in €. As soon as one country leaves, the debt, of course, will be paid back in devalued Lira’s, Francs, Drachmas, whatever. The whole euro system blows up when a country leaves. So, Germany throws in the towel, resulting in two euro’s, or simply what it was before 2001. They WILL grab plan b, c, or d from the shelves. They are ready to act, as is the US when the time comes.

      They don’t mind, because the current system was doomed to fail from the beginning. And they don’t care, because the system hates savers, and adores debtors. You voted for it, as i did. That’s what they will tell us.

      Keep stacking.

      • But in a devalued currency the club med cannot pay back.Germany is in responce for 28% of the european debts.Draghi said they must pay back.But it’s not possible.
        Draghi is a lyer.
        We don’t voted for this system.There was france who said to the german cancler when we don’t agree to the euro we cannot make the union between east and west.
        France had a weak currency and hated the strong deutsche Mark.Today it’s exactly the opossite.

  6. euro is europe

  7. Diogenes Shrugged | February 10, 2017 at 12:53 pm | Reply

    Claims over the last many years that precious metals prices should be higher are without much merit. As I recall, gold bounced around $270 twelve years ago, and the price has since roughly quadrupled with inflation. That is the price increase you all should have taken advantage of, not any price increase you expect to see in the future.

    Over the last several decades, the quantity of money in circulation has only increased (inflation), and the velocity of that money has only recently begun to drop off (as evidenced in part by the falling price of oil). Since money only comes into existence as debt, it stands to reason that the only way that prices can generally continue to rise is if more debt continues to be assumed, but more importantly, only if the velocity of money in the economy starts rising again. (Every single one of us could have a trillion dollars buried in our basements, but unless that money comes into circulation — i.e. assumes some velocity –, the economy would remain exactly as it is now).

    Since nearly all the money in the world came into existence as debt, and since those debts are only becoming harder and harder to service (much less repay), it stands to reason that the future will be plagued with increasing insolvencies, defaults and bankruptcies. Debtors’ liabilities are banks’ “assets,” so when debts that can’t be repaid or serviced are defaulted on, those bank “assets” vanish into thin air. This means that the total money supply accordingly decreases. Less money chasing goods means falling prices.

    What I’m describing is deflation. Deflation is not about prices. Deflation is about the total money supply and its rate of circulation (velocity). As the money supply drops, most prices drop with it because the remaining money in circulation becomes more scarce, and therefore more valuable. Attendant money hoarding only makes matters worse by dropping velocity.

    Harry Dent has predicted a future gold price of $500, if I recall correctly. I didn’t omit a zero. Here it is again: $500. Personally, I think he’s right about that. But here is the important thing to remember: in a deflationary environment, every instrument available for preserving wealth will likely perform worse than cash and precious metals. So, don’t sell your precious metals when their prices fall. Their purchasing power will remain intact while the purchasing power of everything else turns to mud.

    If you think you can wait until then to buy your precious metals, think again. You might have wealth (stocks, bonds, real estate) to buy them now, but your wealth could be wiped out before gold gets to $500.

    You are unlikely to get rich by owning precious metals, but you might get by when everybody else starves.

    (Hat tip to Nicole Foss at theautomaticearth.com)
    https://www.theautomaticearth.com/product/a-world-of-change-download/

    • Diogenes.This is not possible.Every asset class can not fall.Once it get worse the money will jump from one class to another.

      • Diogenes Shrugged | February 10, 2017 at 4:45 pm | Reply

        Nope, the money will literally disappear. It will vanish completely. It’s called “write-offs.”

        Failing banks don’t lend more money in that sort of environment, either. They fail.

        Losing reserve currency status only means you’d expect to pay more for imported goods, but dollars will get stronger and stronger for years to come because there will be fewer dollars to go around. The net effect is that you’ll pay the same price for imports as in the past (unless Trump gets hefty tariffs, in which case you’ll be paying the import tax, too).

        • What if the Fed instead decides to implement helicopter money and then the Fed and the debt are nationalized and repudiated? Yes, that is a massive deflation as the debt that the “money” is based on disappears, thus disappearing said “money”, but helicopter money to pay off old debts with cheaper new money would send physical metals prices through the roof. Or at least if the paper manipulation ended during.

        • Well, if/when they issue new dollars, 1 new dollar for every 100 old dollars in a major devaluation, then 500$ may be a reasonable target…

    • i’ve read some of the analyses of harry dent, and while thought provoking, his assay doesn’t factor in the widespread belief that a fiat currency crisis is expected to happen with the next crash. at that, comparisons to previous boom bust cycles of the economy and valuations therein are perilous, because i would say we may well see something that we haven’t seen before …

      • Diogenes Shrugged | February 10, 2017 at 5:06 pm | Reply

        Frankly, in reference to the American dollar, I don’t understand how so many pundits can be so self-satisfied with such inarticulate terms as “currency crisis” and “hyperinflation.” It’s just nonsense. The dollar will be the last currency standing.

        True, China and others might be contemplating backing new currencies with gold, but they don’t have even a hundredth of the gold tonnage they’d need to do that. And a gold backed currency will never be accepted by the cabal that runs the world. Like Lincoln’s Greenback, all those attempts at a new currency will fail.

        If the U.S. ever issues a new currency to replace the dollar, do whatever you can to refrain from trading your precious metals for that new currency. That new currency will indeed hyper-inflate, and within five years you’ll be ruined. I may be out on a limb here, but all I see in every directions is lemmings. The only difference between lemmings is which cliff they’re running toward.

        • well it is anybody’s guess how things will unfold going forward. the feeling in the article is that the divergence of the precious metals will lead the metal price to come up to have the lines meet again. however you could also propose that the s and p bubble will collapse and the line that has gone ‘up’ and away from the metals line will just come down and parallel it again but at a new lower value. it’s a guess that because the lower line has split off that it mysteriously will rise and meet the alternate line again.

          also, myself i see the dollar collapsing under the weight of debt, and the chinese yuan won’t replace it. the only thing that gives us dollars weight right now is its reserve currency status, the likes of which it is expected to lose in coming months or years. the currency that 9 out of 10 globalists prefer seems to be the world bank’s sdr’s. i’m not a globalist by any measure, but a new currency that emerges without the debt lines of any of the warty fiats out there right now would be most likely.

          my two cents (pun intended).

          • In as much as the SDR’s and their value are based on a basket of all fiat currencies (consists of the U.S. dollar, euro, the Chinese renminbi, Japanese yen, and pound sterling) there is no chance that it will save or substitute for anything.

            If they went back to an SDR that was gold backed like it was originally (SDR was initially defined as equivalent to 0.888671 grams of fine gold, equivalent to one 1969 U.S. dollar) and had a mechanism for adequate distribution then maybe that might inspire enough confidence to prevent total collapse. It would be one hell of a trick but central banks are certainly motivated as they will all probably be killed if the currencies collapse.

        • I’ve thought over many of the points you bring up. Many of them are good points. I would add a few things.

          While it is true that in a massive economic crisis in which confidence is eventually lost and debt cannot be repaid a very large portion of that debt will indeed be written off and thus vanish (since most currency is digital). This will ultimately be deflationary. However, after this massive deflationary effect, I do think hyperinflation could be possible under two examples:

          1. Much or most of the debt is defaulted on and deflation ensues, but government tries to stop the default by replacing the defaulted currency with printed currency, which would greatly devalue the currency in conjunction with the confidence already lost, thus causing massive or hyperinflation.

          2. Because confidence is lost in the system, if a new currency is introduced it will be introduced at a revised level of confidence and it will be price adjusted according to competing currencies, thus despite introducing a new currency, it could at the very start already be half or less the value of the USD today, thus resulting in high inflation.

          So either way, I see heavy deflation happening and then at a later time hyper or massive inflation of the new or current currency.

          I also agree that precious metals usually are a tore of value. However, in history there always comes that once or twice in a century time when there is a currency crisis and in that event, precious metals not only act as a store of value, but can actually make one very wealthy if that person holds through the currency storm. This is due to the collapse in asset prices or valuations. Bubble pops and asset prices collapse to a more natural level. Even in hyperinflation asset prices will revert back to the natural market price when priced in real assets such as gold.

          So what will most likely happen is rea estate and land and other asset prices will collapse in gold prices. The massive increase in buying power will allow people who hold precious metals to buy such assets up at much cheaper prices. In currency the prices may collapse too, or be hyperinflated, but in gold and silver the prices will be far more affordable or at fire sell prices.

          That once in a century time is coming and will I believe happen in our lifetime, within the next 5-10 years.

        • Yes in history some currencies have failed over and over. The new replacement currency fails. Then the second replacement currency fails. Not an easy adjustment. I think the US$ will remain just at a different rate. At some point gold may have a set price or become the global currency measuring stick replacing the dollar as the measuring stick. Even the cabal probably doesn’t know what it is going to push through so how could the public know. At the moment the trend is up against most currencies for gold so watch for any trend change. As you all know, water food etc are more important first. . . .

    • “Debtors’ liabilities are banks’ “assets,” so when debts that can’t be repaid or serviced are defaulted on, those bank “assets” vanish into thin air. This means that the total money supply accordingly decreases. Less money chasing goods means falling prices.”

      A potential flaw in your thesis could occur if instead of those debts “vanishing into thin air” banks’ failing assets are swapped with perpetual reverse swaps with the IMF-supported Fed to maintain liquidity. As printing presses approach meltdown, pumping USDs into the economy, prices are not only prevented from falling but reverse in epic inflation.

      I’m no financial wiz or soothsayer… just saying. Too many potential “what ifs” in the extremely dynamic global monetary system to predict with certainty. But I agree, PMs (real money) will represent a tremendous advantage, regardless the direction. And as they say… what goes up, must come down. It’s all cyclical. Gold and silver will both hedge against inflation and represent real wealth in deflationary periods.

    • DisappearingCulture | February 11, 2017 at 8:00 am | Reply

      The price of gold will not drop to $500, as that is well below the cost of mining and refining it.

    • Diogenes Shrugged, everything you said appears to be correct, and also appears to be in agreement with the substantially more correct Austrian economic perspective, but I think there is maybe an added dimension we need to consider this time. As “the banks assets vanish into thin air” causing deflation, the banks become insolvent. Then the lender of last resort, the Federal Reserve, comes in to save the show (like last time in 2008). But last time they were “too big to fail”. This time they are “too big to save”. If enough big banks become Insolvent and will fail without sufficient bailout, and if the Federal Reserve is incapable of providing sufficient bailout, then the Federal Reserve needs bailed out. This is where it gets interesting. When the Federal Reserve fails, the same thing will happen to their standardized paper/electronic banknote as has happened to every other bank note of a failed bank throughout history, It will fail to remain negotiable; it’s value will approach 0. velocity of the remaining SUBSTANTIALLY reduced/deflated money supply will spike approaching infinity as everyone tries to unload the remaining banknotes of the failed bank. There are people arguing deflation as in your comment, and people arguing inflation. BOTH are right. It starts out highly deflationary and gold could indeed hit 600 or even substantially lower. But eventually, if this next crisis is the big one, gold could hit 60,000 or substantially more. The problem is the yardstick (value of the dollar) is changing throughout the process. The value at first increases (yardstick gets longer=dollar buys more) during the deflationary period and then decreases (yardstick gets shorter) during the very high and likely very short hyperinflationary period, as the issuing bank of the standardized bank note fails. The two big unknowns are: 1. when the eventual crisis will be triggered, and 2. how quickly it will all play out. If it plays out very quickly, then the hyper-deflationary pressure that will occur first will be barely even noticed as the hyper-inflationary environment that will occur second plays out. Either way, securely stored and physically protected real assets, diversified in location, are your friend.

  8. I like Harry Dent & I think he’s very intelligent . . . but I have to go with the general consensus of opinion on this from the likes of Peter Schiff, Mike Maloney , Avi Gilburt. & of course Steve ! And if they say its going up its going up . . . I dont want to end up being the only one in the poor house . . . with Harry . . .

    R.M

    • Diogenes Shrugged | February 10, 2017 at 5:08 pm | Reply

      We will all be in the poor house soon. But if you have cash and precious metals, you have a greater chance to survive. That assumes, of course, that you have food, heat, and the means to defend them.

    • I think if 99% of everybody is completely broke (and defaults on their debs), you could do pretty damn fine with 500$ gold. Unlikely, but still in the realm of possibilities.

  9. The silver cots at the moment are terrible. The cots were easing but they just piled on massive shorts. I was expecting to make money short last night (Australian time) but to my surprise had and easy night long with my feet up with a smooth trend to the upside. Money for jam.
    The problem I have is when to turn the bullshit money I make into real money as I never buy above the cost of production. I think I will wait with such large shorts but who knows.
    One day the cots will be wrong which could cause a massive short squeeze and if it gets above 21 bucks look out. If it breaks 21 dollars I will be making my first purchase above the cost of production ever. if it breaks 26 it could go to the mid 90s or beyond.
    But the cots have not been broken so it may be business as usual. Which I am hoping for because I much prefer buy silver below the price of production.

  10. PS
    Another chart of interest to gold and silver aficionados is the gold to monetary base chart.
    http://kingworldnews.com/wp-content/uploads/2015/01/KWN-I-1282015.jpg
    Which implies that gold is the cheapest it has been in history.

    • Diogenes Shrugged | February 10, 2017 at 5:28 pm | Reply

      The money from the QE’s is counted in the monetary base, but that money has not found its way into circulation, so it’s a lot like a trillion dollars buried under the concrete floor of your basement.

      The price of gold, albeit manipulated to roughly match cost of production, reflects how many dollars IN CIRCULATION that you can buy with with an ounce. After subtracting QE debt money from your chart, I would expect the ratio would still hover between 0.5 and 1.0.

      • The qe currency, has gone into circulation in much the same way that any currency, is used to buy fixed assets. So your analogy of dollars buried etc is incorrect.

  11. They’re good charts Steve and they say a lot, if one takes the time to absorb the information. I will have a closer look later.

    You might have the makings of a “Technical Analyst”, YET! 🙂

  12. Dio / Douche

    How can you breathe with your head up your ass ??

  13. You seem to be proving that the market is manipulated and you’ve denied that the silver/gold prices can be anything other than rear the cost of production and other associated costs. From my brief view of the above, you seem to contradicting your prior statements.

  14. Deflation of the present paper bubble will not impact precious metals as Harry Dent projects.
    Present status quo of Central Bank debt fueled markets is coming to a close, as Grant Williams and Hugo Salinas Price have illustrated via the recently falling foreign exchange reserves. Everyone whom has been making hay on the back of this Central Bank printing momo orgy is not going to simply get ‘liquidated’; they are going to begin hedging, and if not personally trapped, will begin rotating some of their personal portfolio out of paper, as the deflationary liquidations proceed. They will be looking for something that is undervalued, but highly liquid, and catching a momentum bid. PMs will be that vehicle in spades. Even if they ignorantly park the vast majority of their hedges in paper PMs, it only takes a fraction of percentage points to get the momo rolling and create a shortage in the physical markets. Lastly, I doubt the present ‘hoarders’ of PMs are going to flip their ounces for a few bucks… most see, and will await a full reset.

  15. In my personal opinion (and practice) I believe the smartest play in PMs is to buy them on the way up (within reason) and on the way down. Production costs are not as important as available supply. That supply is limited and if you sit on the sidelines waiting for the best prices, when YOUR price point comes who’s to say there will be anything to buy?

    Certainly buy on price dips but don’t wait until that “perfect” price comes along. Supply is limited and if ANY ONE of the big money guys/groups comes along and realizes that PMs are a great investment, what makes anyone think there will be ANY supply for them to buy?

    When PMs were at their lowest and highest prices in the past few years, I could not find ANY dealer willing to sell when the prices were at their lowest or buy when the PMs were at their highest – without adding substantial premiums when the prices of PMs were low or only willing to buy PMs at a substantial discount when PM prices were at their highest. I know this for fact and I dealt with some of the most reputable dealers in the business.

    If you wait until PMs hit your personal price point for buying, good luck in finding those PMs for sale at YOUR price point. I still firmly believe that the smartest play in PMs is to buy them on the way up (within reason) and on the way down. Just my opinion and experience. YMMV.

    JR

  16. Great Analysis. Please stop using the word “basically”.

  17. If you are responding to my comment, I did not use the word “basically” even once; If the response was not directed to my comment, please excuse me.

    JR

  18. Thanks Steve, and to your reader who sent you that great graph on S & P and Silver/Gold ratio, apprecaited both.

    regards

  19. @GrahamB,

    I am that humble author James Randolph (as you posted) and again, I did not use the word “basically” even once in my post(s). I am left confused by both remarks, however, I post on these forums hopefully to make positive contributions or to share viewpoints, but I don’t care to be accused of posting something I have not.

    Please show me where I have used or overused the word “basically” (except in this post) and I will apologize and move on. I’m certain that you understand that no one likes to be misquoted.

    @RoyRudy,

    If you would be so kind as to point out what post(s) of mine prompted you to post “Great Analysis. Please stop using the word “basically”, it would be greatly appreciated. I think you might have my post confused with someone else’s. If not, I will gladly do as you have requested.Thank you in advance for your courtesy.

    JR
    James Randolph

  20. I like that first graph of Silver/Gold Ratio as compared to SP. I would not have considered making such a graph. You can clearly see that machinations and manipulations have resulted in the price of gold and silver being severely underpriced today, when compared to the price of the SP. You can also clearly see 2 periods of time when the PM’s were OVER priced. 1. The Y2K scare right before the year 2000, and 2. in about 2011. But why?? Why does a simple ratio of the silver price as compared to the gold price appear to produce a valuable chart for predicting when the metals are overpriced as compared to the market (as defined by the SP) or underpriced? Why cant you use any 2 other commodities, even monetary commodities, like Copper and Nickel? This only seems to work with good correlation for gold and silver and no other commodities and I do not understand why.

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