Gold And Silver Set Up Just Like 2009, Prior To Exloding Higher
Gold And Silver Set Up Just Like 2009, Prior To Exloding Higher from King World News
One of the greats just said the gold and silver set up is just like 2009, prior to exploding higher.
March 24 (King World News) – Ole Hansen, Head of Commodity Strategy at Saxo Bank: The global spreading of the coronavirus will have a negative impact on global growth over the coming quarters. In response to this development we have seen pro-cyclical commodities led by crude oil suffer a major blow while industrial metals have dropped to levels last seen in 2016. The biggest casualty however has been silver which derives half its demand from investors and half from the use in industrial applications.
Being categorised as semi-precious, silver tend to follow gold closer than any other metal. During the past few weeks, however it collapsed by almost 40% while the gold-silver ratio spiked to 127 ounces of silver to one ounce of gold. Some 70% above the average ratio of 77 seen during the previous five years.
Silver Rebounding Strongly Off The Lows
Silver tends to perform like a high beta gold, meaning that it rallies faster but also drops faster. The combination of recession worries and the recent dash-for-cash phenomenon helped tip silver over the edge. Once the near twenty-year uptrend from 2002 was broken the floodgates opened and silver was left exposed to another problem that can occur when markets get out control. Namely its lack of liquidity which also helps to explain why the recent sell-off in both platinum and palladium ended up being so aggressive.
What we are left with is a metal, which like the Norwegian Kroner, has come symbol of the extreme risk adversity currently sweeping through the markets. The chart below shows a remarkable similar behavior between these two unrelated markets against their peers: gold and the euro.