Stocks and Precious Metals Charts - Silver Takes the 19 Handle - Markets On Edge Before Payrolls and Powell

The Gathering Tweetstorm

"U.S. factory activity unexpectedly contracted in August for the first time in three years as shrinking orders, production and hiring pushed a widely followed measure of manufacturing to its lowest level since January 2016. The Institute for Supply Management’s purchasing managers index fell to 49.1 in August, weaker than all forecasts in a Bloomberg survey of economists, data released Tuesday showed.

Figures below 50 signal the manufacturing economy is generally contracting. The group’s gauge of new orders dropped to a more than seven-year low, while the production index shrank to the weakest level since the end of 2015. Faltering manufacturing could complicate President Donald Trump’s re-election campaign as recent data undermines one of his signature promises for a strong economy.

Stocks extended declines and the yield on 10-year Treasuries fell sharply Tuesday after the data was released. The dollar weakened."

Bloomberg, U.S. Manufacturing Contracts for First Time in Three Years


“Because silver and gold have their value from the matter itself, they have first this privilege, that the value of them cannot be altered by the power of one, nor of a few commonwealths, as being a common measure of the commodities of all places. But base money may easily be enhanced or abased.”

Thomas Hobbes

Gold and silver are the antithesis of the primacy of the power of the state to arbitrarily and sustainably mandate value and create wealth as it wishes at will.

Anyone who has personally witnessed the collapse of artificially managed maintained exchange rates into black markets knows this.

Tariffs and a marathon tweetstorm had US equities reeling a bit over the weekend.

Even an effort to turn it around during the quiet futures overnight trading hours couldn't help, and so stocks finished lower after the three day weekend.

The Manufacturing ISM missed this morning, and at 49.1 actually showed a slight contraction.

Risk off was the big story, with the Dollar and Gold higher.

But the real mover and shaker was once again silver, which took out the $19 handle in the morning with some authority, and then held it during the afternoon and into the close.

Wow.

Jay Powell will be speaking in Zurich near the end of the week.

There will be a Non-Farm Payrolls report on Friday, which may play backup to Fed Chair Powell's remarks.

It is fairly obvious that a market crash and a recession would have seriously negative effect on Trumpolini's 2020 election ambitions.

Let's see how the bulls respond to this. And who may decide to give them a helping hand.

And oh by the way, Insiders Are Selling Stock Like It's 2007

Have a pleasant evening.

Silver: Short Term, Longer Term, In Relation to Equities and Gold

“If you shut up truth and bury it under the ground, it will but grow, and gather to itself such explosive power that the day it bursts through it will blow up everything in its way.”

Émile Zola

Never buy something just because it has declined from a high.

If a principle is fundamentally sound and remains so, then there will be an inevitable reversion from any extreme high or low, back to a primary trend. 

Silver may present an outstanding opportunity. 

In the short term silver is coiling, and is deeply oversold relative to stocks.   It is even out of balance with gold.

But longer term it still remains in a bear market.

Timing and patience are everything.

Gold Silver Ratio and Some Thoughts On Markets

Fear Us!

As you may recall, silver is more volatile than gold.

That means if the two metals are moving in the same general directional trend, as they are often wont to do, then silver will be moving faster and further in that direction than gold.   Silver has a higher beta.

So when one considers the gold/silver ratio, one is perceiving the 'spread' between the two.  In general, at the extremes, the spread between gold and silver will widen and narrow markedly as compared to itself over time.

We are at such an extreme now. Sometimes these merely signal short term tops and bottoms. And sometimes they signal trend changes.

In addition to the volatility differences, there are a few others.

Silver has a greater industrial usage than gold. So it corresponds more to the general trend in base metals.    Further, gold is perceived as more of a 'safe haven' than silver.  Gold is more purely 'money' than silver.  Silver is also more often a byproduct of base metal extraction.

All other things being equal, gold will be a more reliable store of value in times of crisis, but silver, once the crisis is past, will begin to overtake gold and recover more quickly.   Holding silver with leverage, given its already volatile nature, can be a real sleigh ride.  I don't use it for investment purposes, merely for a quick flip, lightly and only on occasion.

So there are a number of variables to consider in this ratio. In the past I used to engage in fairly elaborate multivariate regression analysis of these things.  I am doing less of this technical price analysis now that the markets have become as they are.  Analysis without including Asian supply and demand fundamentals has become somewhat effete.

As I have remarked colloquially the other day, there is some 'weird shit' going on in the silver market.  I will probably have more to say about this in the days to come.  I am sifting through rumours and data.  I may pass a few along, just because they are so delightful, in the manner of a novel. 

And I cannot say enough what a poor measure of the demand and value of metals is to be found on the Comex. If you really consider now what it is doing and how it is doing it in the quest for 'price discovery,' it is about as relevant to the value of the precious metals as a private game of Liar's Poker is to the value of the US dollar.  

But while people believe, it does have power.  It is an unfortunate country whose prices are set in a poorly regulated casino. 

I firmly believe that the US markets have given way to a shockingly pervasive control fraud once again, which can be called The Big Skim.  And there will be consequences over time.

These schemes always seem to fail.  In their late stages their is more use of fear than fraud, until they become almost all stick and no carrot, and then they fail.   And their failure has few fathers, but an abundance of orphans.