Gold and silver had a nice rally today, and ran up into hard resistance as one can see from the charts.
I published a note on the Net Asset Value Premiums today that shows that for the first time in my memory the premiums on gold versus silver had turned decisively in favor of gold.
This has occurred before, when a fund was expanding its size using a shelf offering for example. They sell units and raise cash to buy metals, and the size of their cash reserves go up and then down. This affects the NAV premium quite a bit.
Sprott's PSLV has recently completed a large expansion which showed up in the premiums in the end of July and August. These expansions have caused PSLV to underperform SLV for the year to date.
And in early August we saw the premiums at par in the Central Funds as well. That might be a drag on effect as investor enthusiasm for silver become subdued.
But now gold is clearly edging out silver. I'm not sure why, but I suspect that if this trend continues and deepens then the market is pricing in some event as yet unforeseen, at least by us.
A change in monetary policy, war, a new trade regime? All these exogenous events are possible, in addition to endogenous factors such as a big official buyer or two in gold.
Let's see what happens.
