I feel something is brewing in the background by precious metals. Gold is struggling with the 1200 dollar mark, still after 7-8 Weeks of a sideways trend. Silver recovering from September lows by 13.9 USD. But strange things are happening.

Two enemies

One enemy of gold and silver is the strong dollar, and the “greenback” is on a relatively high level, with the dollar index (DX) by 95,5, approximately. One other enemy of precious metals is the higher interest rate and bond yield, and this week the 10 years US treasury bonds crossed the 3,2 percent line p. a. This wasn’t seen since 2011, more than 7 years ago.

How can gold and silver (and mining companies) fight their strongest enemies? I can imagine a couple of reasons:

• Dollar is strengthening and interests, yields are rising, but these are well known trends, many months ago. Prices can contain all this information already.
• Seasonal effects, especially Christmas, can lift the physical demand.
• Stock markets are nervous, the Nasdaq Composite index fell 1,8 percent yesterday, Thursday, and VIX, the “fear index” (the S&P 500 volatility index) jumped. Stock market corrections or crashes used to lift demand for precious metals, like gold ETF-s, although, not always. It has to be a clear correction trend, I suppose.
• The gold/silver ratio is on a very high level.
• The HUI/Gold ratio is on a very low level.

Nothing to see?

Some analysts, chartists are saying, nothing happened, nothing to see here, these movements are too small to be significant. Like this analyst on Investing.com:

Summing up, the seemingly bullish implications of the analysis of the inverse head-and-shoulders pattern in mining stocks are too weak to change the overall outlook, especially in light of the new confirmation that we saw from the SLV ETF and its volume. The analogy to 2013 remains in place and the outlook remains strongly bearish.

Chart courtesy of StockCharts.com

I know there are many indicators, see gold mines/gold (HUI/Gold) ratio above on the first chart. This is also interesting, it is on the level of the beginning of 2016, so I think it indicates a similar situation as a nice gold and silver rally started.

Is this what really matters?

But I’m really impressed by the indicator “gold/silver ratio”, this one only surged above 80 a couple of times in this century. In 2003, in 2008, at the beginning of 2016, and – now, in September-October. In all the three earlier cases began a strong silver and gold rally, and a rally in gold stocks. In 2011, the indicator reached extremely low levels – then, silver began to fall and felt almost 5 full years. See this chart:

Chart courtesy of StockCharts.com

I think I should buy silver mines now, or silver, with a small leverage (about two, or double.) (But I have no more investable money.) That doesn’t mean you can get rich tomorrow, only buying silver, have patience. Maybe in some months, or 1-2 years. Or never, nothing is sure on the markets. (Better, have patience and a broader portfolio.)

Looking much older historical charts, in the 90’s, this indicator didn’t seem to work. The ratio was on very high levels during a period of about 2-3 years, also above 90, and I suppose it wasn’t a good idea to invest in precious metals. May be in the second half of the decade – after the oil crisis, with inflation jumping –, I should investigate it further.

Source: Stooq.com

Update:

Lol, ever heard of BANG stocks? (Barrick, Agnico Eagle, Newmont and Goldcorp).

the BANG stocks were very likely to outperform the FANG stocks
(The Felder Report)

Motto:

Bottoms in the investment world don’t end with four-year lows; they end with 10- or 15-year lows. Jim Rogers in Investopedia

Other posts in this series:

• Black Sugar, Baby, And Hot Money – Sugar and Coffee
• And The Very Best Stock Market In The World Was…
• Tales From The Crypt – Greek Blood On The Streets
• Deadly Coffee, With Cocoa Flavour
• 8 Reasons Why Gold Mines Can Rally Again
• Buying At Prices Of 2009? – Turkey
• The Curse Of The Disaster – Uranium mining

Disclaimer:

I am not a financial advisor and this content in this article is not a financial or investment advice. It is for informative purposes only, or simply to make you think, entertain, increase testosterone and adrenaline level. Consult your advisers before making any decision.

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(Cover photo: Pixabay.com)