by Gary Christianson, Miles Franklin:
Breaking News: Paper silver prices rebounded since early June, but fell back on Friday, July 5, to $15.00.
These articles describe empirical valuation models for silver and gold prices based on three macroeconomic variables. They conclude that silver prices are substantially undervalued (almost 40%), and gold prices are somewhat undervalued as of July 5, 2019.
But valuation models are not timing models. They show when macroeconomic fundamentals suggest that metals prices are too low or too high in the “big picture.” However, metal prices can remain under or overvalued for years. Long-term investors buy silver and gold when they want insurance against loss of purchasing power, central bank predations, governmental intervention in markets and economic crashes.
A Timing Indicator.
If you day-trade, you compete with non-human algos that act in microseconds on information unavailable to most people. This trading is dangerous for most individuals.
If you occasionally trade a portion of your silver stack, many timing tools are available that help buying low and selling high.
One is the “Summation Indicator” as described below. You buy and sell silver when the indicator reaches extreme readings.
The Summation Indicator is a weighted average of the silver to gold ratio, the RSI (14-week relative strength) of the silver to gold ratio, and the RSI of the silver price.
- Like all markets, the silver market is “managed” by large commercial interests, JPMorgan, governments and central banks. Beware of their influence.
- The Summation Indicator is one of many timing tools. No tool is always accurate.
- Hold a stack of silver knowing that currency devaluations are inevitable, and they will revalue silver prices much higher. Buy or sell a portion of your remaining stack when the indicator reaches extremes.
- When the indicator exceeds 70, sell some of your stack.
- When the indicator falls below 30, purchase more silver. In bull markets, buy when the indicator hits a multi-month low and reverses higher, even if it doesn’t reach 30.
- False signals will happen. Use other indicators to confirm buy and sell timing signals.
Examine the graphs of silver prices and the “Summation Indicator” from 2002 to 2019. The indicator shows buys (green ovals) and sells (red ovals).
Central banks and governments can influence markets for long periods of time, but not forever. The media, Wall Street, central banks, and governments encourage many dangerous ideas. REMAIN SKEPTICAL when you hear that:
- We create wealth for the bottom 90% of the populace by printing (digital and paper) more currency units.
- The national debt (more than $22 trillion) can increase forever without huge and negative consequences.
- MMT—Modern Monetary Theory or Magic Money Tree economics—will enable government to spend much more with minimal consequences.
- Student loan debt ($1.6 trillion) can increase (rises $90 billion per year) without destructive consequences.
- Over $13 trillion in “negative yield” (insanity) global sovereign debt is a sign of financial health and not caused by central bank desperation.
- There will be no recession for another decade.
- Depend upon mainstream financial media for news…
As Charles Hugh Smith (good article!) says,
“If vested interests are in charge, failure is guaranteed… The only possible output of this arrangement is collapse.”
In charge vested interests include Wall Street, Big Government, the Deep State, Big Pharma, Military-Industrial-Security Complex, Big Ag, and a legion of think-tanks and lobbyists. Because these powerful interests are in charge, expect ever-increasing debt, huge deficits, managed markets, devalued currencies, propaganda and higher silver prices.
- The empirical model shows that silver is undervalued in 2019 by almost 40%. Expect much higher silver prices unless U.S. national debt reverses lower. Estimated probability of decreasing national debt = 0.000001%.