Gold-Silver Ratio and the Metals’ Fundamentals

Keith Weiner calculates strong fundamentals for both gold and silver (with gold’s being better).  His fundamental price of gold stands at around $1400/oz. and silver at $18.70.  He also calculates a Gold-Silver Ratio (GSR) at over 74. The fundamental calculations conflict with my guarded stance on the metals.

His method is more focused directly on the gold and silver markets, while mine are focused on the ‘Gold vs.’ ratios to other asset markets.  Mine are bigger picture and they are in process, not activated.  But when this guy talks fundamentals, you need to listen.

Curious Gold-Silver Ratio That Did Not Fall

For context, Weiner’s calculation would project the GSR to its highs of Q4 2016.  This is right in line with my current analysis (in short, gold is better than silver) about not only the relationship between gold and silver, but more importantly, the macro backdrop.

The GSR has been technically bearish, but the Commitments of Traders (CoT) data and now Weiner’s fundamental view argue for risk in silver relative to gold.  If such risk were to manifest in a rising GSR that would equal risk in the broad macro since this Horseman rides in the dark of night, impaling happy idiots (casino patrons) in their sleep.

gold-silver ratio

So the bullish fundamental view of gold and silver contradicts, to a degree, my current stance on the metals, which is mostly due to silver’s scary CoT alignment near the configuration that coincided with last summer’s onset of a harsh correction.  But a rising GSR might not.  It depends of course on whether said rise occurs with the metals rising or falling nominally.

I could be wrong to be cautious because as we noted in NFTRH 436 and in updates last week, the gold bug “community” is fairly negative right now (though silver’s public optimism is elevated) and have been muted for the last couple of weeks, especially for mining stock players.  When the gold bug thumps his chest, have caution.  When he’s apprehensive or better yet, fearful or terrified?  Not so much.  Indeed, a terrified gold bug “community” is a beautiful thing for would-be buyers.  Simply wonderful.

So I am watching the situation closely.  I am more interested in the precious metals as a macro indicator right now than I am in obsessing over my favorite ‘gonna make me rich!’ explorer or this producer or that.  The stock market is in my opinion in a very late stage suck-in.  If my opinion proves out, it’s gonna get woogly out there.

While the fundamental backdrop (and I trust Weiner about 1000 times more than the usual suspects perma-promoting precious metals’ funnymentals) may be improving, as I’ve often written in NFTRH my preferred scenario for buying the sector hard would be when golden babies get thrown out with the bath water (or draining swamp).  In other words, as in Q4 2008, when they are being puked up as their fundamentals improve by leaps and bounds.  It’s a rare thing, but it can make your decade if you catch it right.

People, I don’t know how to say this any more clearly; this market is very interesting right now in a hundred different aspects.  There is a lot to digest and process, but I think a pivotal time is upcoming and it’s gonna be plenty interesting.  Put on your thinking caps and keep the tin hats in the closet.

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