It’s been awhile since I wrote about Precious Metals, as I lost ALL interest in them years ago. I very publicly sold my silver in the summer of 2017 – as I was leaving the bullion industry and starting CGC – at $16-$17, to buy more BTC when SegWit locked in (at which point, I deemed the end of silver’s monetary era). Afterwards, my gold in early 2018 at $1,300 – which I still see SOME legacy monetary value in, but not much.
In a nutshell, I believe crypto has permanently usurped Precious Metals’ use case – never to yield it back. Moreover, the gold and silver markets have been so hopelessly overridden by derivatives – by at least 100x - they are no longer scarce. As for actual PHYSICAL metal, it is at this point, acquired ONLY by a handful of backward-thinking Central banks – who would NEVER consider silver, just gold.
Retail Precious Metal sales plunged years ago, and nearly all PM buying today is in the paper market. Frankly, the average person has no clue gold is even acquirable in physical form – let alone, has the inclination to do so. Based on my experience in the industry – as Marketing Director of a major bullion dealer – I’d guess the average Precious Metal holder is around 75 years old. And given the exploding emergence of the Digital Age, I expect that as these holders pass holdings on to kin, it will be aggressively sold for decades (for among other things, crypto assets) – creating a permanent supply imbalance that will continue to suppress prices and physical premiums.
That said, the legacy financial markets still view gold as an “inflation hedge” – albeit, a weak one – to be purchased entirely in the paper markets. They are not yet sold on, or legally able to, buy Bitcoin and cryptocurrency – other than the smallest, most legally nimble institutions (for now). So, when “inflation fears” rise enough to spook them, good old “paper gold” still exists for a short-term trade.
It’s been a long-time since the Fed, which has destroyed global fiat purchasing power at an accelerating pace since the 2008 crisis, has been deemed to be “losing control” of its ability to manage financial markets. That point is not here yet, but clearly the weakening global economy has spooked them – enough so, to finally start hinting a new easing cycle is night.
Last night, the perma-bulls at Goldman Sachs finally capitulated, catalyzing gold to FINALLY break through the $1,350 resistance level that has been in place since 2013. The fact anyone still listens to these criminally stupid, politically and financially compromised buffoons is beyond me – but still, some work remains before the world fully sheds the Wall Street plague that has wrought so much damage, for so many decades.
The last time gold got this high was the night Trump was elected – when the Cartel came in hours later, to slam prices back down. Tonight it’s holding at $1,380 – and if it wants to make SERIOUS headwinds, MUST break above the even bigger $1,400 resistance level.
IF this occurs, it will be interesting to see what happens – but more so in BITCOIN, which has “coincidentally,” simultaneously, surged to nearly $10,000. Not that I think Bitcoin cares much about Central banks – but certainly, if they want to accelerate the pace of fiat destruction (which I assure you, ALL Central banks will follow…INCLUDING THE CRYPTO-LOVING CHINESSE), it will provide an additional, powerful crypto tailwind.
As for silver, EGADS it looks ugly. As noted above, I sold silver at $16-$17 when gold was around $1,300. And now, at $1,380 gold, silver is just $15. In other words, not only is silver barely off its lows, but the gold/silver ratio is at an essentially ALL-TIME HIGH Of 90!
In other words, even amidst the most powerful gold rally in years (if you can consider $1,200-$1,250 to $1,380 powerful), silver has performed miserably. Sure, it still has a high directional correlation with gold, but it is rapidly falling behind in relative performance – as is platinum, which is all but dead, DESPITE a massive palladium rally.
So, what does it “mean” that gold has rallied to $1,380…whilst Bitcoin has returned to the cusp of $10,000? To me, that fiat currencies are about to be decimated further – particularly the world’s 200+ NON-reserve currencies against the dollar; prompting some legacy “inflation hedging” by institutions, whilst retail buying will likely remain stagnant.
It also means that crypto has another major tailwind behind it, just as an historic rally – signifying commencement of the DIGITAL AGE – has begun!