Gold Market Wire
News, analysis and commentary for gold traders and investors
Gold Market Update
Gold Takes over The Precious Metals Driver's Seat
July 8, 2021 - (Gold Market Wire) - For several months now, the Precious Metals market has seen Silver in the commanding position. This has now changed with Gold taking over the 'pole' position. The effect, of course, has been to see the Gold/Silver ratio climb over downtrending resistance.
So, we have a noticeable switch to Gold from Silver underway in the precious metals market. That is plain. Gold is now up seven sessions in a row. Recently, Silver has been our preferred instrument to capture alpha, but that has shifted, as all markets do. Silver, meanwhile has been struggling, although a positive Gold market should lend it strength. As Gold reclaims the crown from its little brother, and, one assumes, there are some large players behind Gold's surge. Central banks have no real role for Silver, but for Gold they do. That alone makes us think that institutional buying is stepping in or someone on their behalf, is quietly accumulating. What a better time to do it when Asia is in the market and the West and the UK are somewhat sidelined by season?
Interestingly, against this backdrop, and no matter how much the Goldbugs bray, the US Dollar seems to be in rock solid position, and ready to head higher... especially against the Euro. Consider the situation. A country, like the USA, now so heavily divided it is starting to see real secessionist elements emerge. A Capitol building still surrounded by troops. The major states of the Union, New York and California, being deserted by the wealthy; a looming confrontation over State rights vs. Federal authority; and stillthe currency is rising against the Euro. How bad must things be in Europe, then? Well, 'badder' is the answer.
A secondary consideration is also in effect. The airwaves, the punditry and now even the mainstream politicians are all awash with rhetoric over a potential invasion/take-over/sugbjegation of Taiwan by the PRC. In such an environment, the truly pregnant question is where will Yen based reserves flow to in a shift, when they start to get worried about regional war? Probably to the only currency with a major military and combined economy – the US Dollar... the Reminbi being out of the question, for rather obvious political reasons. Something is 'up', regarding Taiwan, and it does;t look like the usual posturing. If the United States heads into the next round of Congressional/House campaigning in chaos, as seems likely, why would Bejing wait any longer to push the Taiwan issue. They have 'successfully' taken Hong Kong out of the international equation. It has disappeared from the news cycle. Can the same thing be achieved with Taiwan? It would certainly help to have a acrimonious situation in the USA. That looks like it will be provided.
In this environment we can't see the US Dollar falling vs. the Euro. But the tension level should be foreshadowing a rise in precious metals. We are left with a stand-off, which we have believed for some time, that will see the Precious Metals and the US Dollar rise together – despite what the Goldbugs think about the Dollar. In fact, we are living through such a moment right now. Gold is a safe have, without a doubt... but in functional terms – it is NOT a currency, no matter what the Goldbugs say. Yes, in some circles it is money. But that still doesn't make it a currency. It also doesn't mean that the US Dollar must collapse for Gold to rise. The question of course is 'collapse' against what, exactly? The Yen? The Euro? We don;t like the odds of that. Our idea that Gold and the US Dollar can rise together is slowly being proved. We think it has room to run - despite what those who adore Gold think.