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LAWRIE WILLIAMS: Some respite from gold and silver attacks

Despite seemingly making a small recovery Thursday and in early European trading on Friday, those seeking to keep gold and silver prices depressed returned with a vengeance Friday morning and forced at least a temporary end to the seeming precious metals recovery.  European equities were marked down too so there was no good news for the coronavirus-hit investment community, apart from a small percentage rise in Japan’s Nikkei stock index overnight and a somewhat similar small uptick in U.S. equities after they had mostly opened in the red.

The seeming assault on gold and silver continued in early trade on Monday but there was something of a turnaround late Monday and today (Tuesday), with the dollar declining after a recent period of strength, gold and silver prices picking up respectively to the $1,990s and to just over $24.  The Gold:Silver Ratio (GSR) came back to 78 after running as high as above 82, signifying that silver might again be outperforming gold as prices rose, while U.S. equities started the day nervously lower.  Gold’s next target is to retake the $1,900 level (it was nearly there at the time of writing) and silver $25, suggesting a GSR of 75. 

Should all that be achieved it could suggest that those with a vested interest in seeing gold and silver lower (the big shorts) may be slowing down the battle with a possible further positive impact on precious metals prices and a weakening of the dollar, into Q4.  Whether that will provide sufficient momentum to take gold back to $2,000 and silver to above $28 remains uncertain though, but will become apparent soon enough.  If this happens expect to see equities – particularly the tech stocks which are in bubble territory – trend lower.

Canadian economic consultancy, Murenbeeld and Co., whose analyses I rate highly, had pointed to an extremely close correlation between the gold price and the inverse of the U.S. Treasury’s Inflation Protected Securities (TIPS) yield.  Over the past 2-3 weeks this correlation has drifted apart suggesting that gold’s decline has been overdone.  To regain the correlation should see gold advance to around the $1,950 level - and if the uncertainty over the U.S. Presidential election comes more to the fore as election day approaches the TIPS yield could decline further and gold move back to near $2,000 again. 

The election result may hinge on the relative performance of Joe Biden vs Donald Trump in the Presidential debates.  Trump, as the accomplished TV performer, and one who does not necessarily always tend to play by the rules, is expected to have the edge in these but if he doesn’t succeed in crushing Biden on live TV he could well see this perceived advantage evaporate.  The first such debate is this evening in Cleveland and the subsequent analysis by the media will be illuminating. 

There will be two more such Presidential debates and a Vice President’s debate before election day – anything could happen.  Biden is apparently currently ahead in the polls, but not by so far as for me to be able to draw any real conclusion as to the final outcome.  However the final result may well come down to which side is most committed to turn out and vote, and how many anti-Trump Republicans may abstain or even vote Democrat.  Certainly some big names have threatened to do the latter!

Overall I’m still positive about gold’s future path – perhaps less so about silver as investors may have found the recent fall too steep for comfort - and remain negative about the future for equities.  Go gold!

29 Sep 2020 | Categories: Gold, Silver

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