LAWRIE WILLIAMS: Gold touches $1550 before being brought down sharply yet again

On Thursday morning trading in Europe, the gold price rose sharply to $1,550 before being brought back down to well below the $1,540 level – whether this was profit taking, or a suppression move by the usual suspects will be the subject of argument.  We think it may be a bit of both.  However it does suggest that gold could have the potential momentum to move higher and breach the $1,550 level permanently – but perhaps not until next week as we somehow doubt it will be allowed to end the current week above that level.  Much will depend on U.S. markets later today as to gold’s short term progress.

Silver, which has been catching fire recently, also moved up sharply to the $18.70 level, before also being brought back down to a little below $18.50 – still an enormous improvement for silver investors given the metal was languishing below $16 only around 6 weeks ago.

Interestingly the Gold:Silver ratio (GSR) as I write has come back to around 83.3 – again a substantial change from the 93 it had hit in June.  We had suggested in previous articles that the GSR would come back to 80, meaning silver would be rising in percentage terms rather faster than gold, but this seems as if it maybe be happening sooner than expected.  If 80 is breached on the downside the next target for silver investors would be 75 – and if gold continues its upwards run and reaches say $1,600, a GSR of 75 would pit silver at over $21 – a substantial gain for the silver bulls.  As we have noted in another recent article (See:  Enormous silver ETF inflows. Is it about to take off?) there have been enormous silver inflows into the silver ETFs – notably SLV – suggesting that the big money was seeing great potential for a substantial silver price gain, and this seems to be being borne out currently in the markets.

So what next?  We see the upwards momentum for both metals continuing, although there could be short term corrections.  And also the U.S. Labor Day holiday, which tends to be taken as the end of the Summer holiday season, is only a few days away.  This sometimes seems to mark an inflection point in the precious metals markets with a change in direction so we could see some fireworks thereafter, but whether these would be positive, or negative, for precious metals remains to be seen.  With the 90th Anniversary of the start of the Great Recession coming up in October, and markets showing signs of parallels with 1929 we’d be nervous about U.S. equities, and if this nervousness is replicated by the U.S. investment sector there could be a further flight into safe haven investments like gold.  But also, as we have stated, a severe stock market meltdown could bring gold and silver down with it as good assets need to be sold off to keep investors afloat.  These ‘good assets’ would likely recover way ahead of the rest of the market but could cause some short term grief even for the precious metals investor!

29 Aug 2019

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com