Real Gains No Gimmicks: Now Is The Time For Gold & Silver To Shine

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from Silver Doctors:

SD Outlook: There’s a few reasons why gold and silver may indeed shine this week. Here’s the details…

Time to see if gold & silver can shine.

It’s hard to get a better set-up than we have right now.

The events calendar is light this week, and it actually favors gold & silver.

Why?

Inflation data.

Or better said, stagflation data.

We get the Producer Price Index on Wednesday and the Consumer Price Index on Thursday.

The PPI measures what producers pay for the items they use to produce their goods. It will be interesting to see how the trade wars are now affecting producer costs.

For example, just how much has the cost of steel and aluminum gone up in price?

Furthermore, what will the producers do in the face of rising costs?

Let’s talk about a soda pop for a second.

If the cans are more expensive (either manufactured by the soda pop company or sourced already fabricated in a can) because of the aluminum price increases, will the company just take the loss in profit (if there is a profit) or will the company pass on the higher costs to the consumer?

These are very real decisions that companies will make, and since businesses operate in a “just in time” inventory system, meaning the soda pop company doesn’t have tons and tons of aluminum stockpiled somewhere, but rather, it is constantly ordering aluminum with the fluctuations in demand for the soda.

And just like the producers begin making decisions about whether to charge more to their customers, or whether to eat those costs and make less profit, we’ll know soon enough in the CPI, because that is a measure of prices the customer pays.

So where the producer of soda pop is concerned about the cost of aluminum, sugar, water, etc, the consumer just wants to know how much a can of soda costs.

What does this have to do with gold & silver?

Two words: Inflation hedge.

You see, dollars sitting in a bank account or a savings account lose purchasing power with each passing month.

In some countries, like Argentina and Venezuela, fiat currency in the bank or even cash in the wallet can lose purchasing power with each passing day.

That is where gold & silver come in as a hedges against inflation.

By converting dollars into gold, or silver, that purchasing power is maintained because the metals rise in price, and they can be sold later at a higher price.

Yeah, “But Half Dollar, gold and silver only go down in price”.

Not over long periods.

Sure, during the last seven years its been brutal, but what about the last twenty?

Not bad.

Not bad at all.

Besides, since the cartel price suppression has been very brutal, especially this year, not only do gold and silver step up into their roles as inflation hedges, but they also can see capital gains in a rise in price above the rate of inflation as a way of catching back up to their fair values.

So it’s hard to go wrong with gold and silver, especially right now.

Which is why I think it’s time for gold and silver to shine.

So let’s dive in and see where things stand for the week.

We all know what happens when the 50-day moving average crosses the 200-day moving average.

It can be good news or bad news depending on which way you want an asset moving.

Or in the case of the gold to silver ratio, which one you want to outperform.

That said, the 50-day moving average on the GSR is about to cross the 200-day:

This means that silver is about to start outperforming gold at an even faster rate.

Which is something we want to see.

And if we are going to rally this week, then silver will finally be outperforming gold for the right reasons.

We can see that since the markets opened last night, it’s been strength overnight and into the morning:

So gold and silver are off to a good start of the week.

Gold does look like it has turned the corner here:

Going back one year, notice on the gold chart how the rally was strong and ultimately ran up to test the $1350s.

But also notice something about that run – we started it from $1200.

If we are going to rally this week, which I think we are, well, we’re starting from above $1250 (actually above $1260).

And where would $150 from here put us?

Yup.

$1400.

So we’ll see.

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