To continue the discussion in my previous post.
Another thing which makes me reluctant to go long gold or silver is that copper, platinum, and palladium are not joining the party. For example copper:
Now, I write this pre-market on Monday the 18th and gold and silver futures are currently in a big breakout. Platinum, palladium, and copper are not. While these are different markets, they do share the same general trends:
Another reason I’m reluctant to go long is that the dollar is in a clear uptrend and silver and gold generally have an inverse relation to the dollar. Something’s gotta give, and I think it will be silver and gold, primarily because it is the small traders jumping into gold and silver at the moment (or so I believe). Dollar futures are way up this morning.
One more reason I’m reluctant to go long gold and silver is that the SPX is not joining the party either, and because gold and silver have become speculative instruments of late, they have a correlation with the SPX:
Here you can see there was a correlation until about 5 days ago, when the correlation broke. Perhaps gold and the SPX are returning to their traditional inverse relationship, but I don’t think so, primarily because, as I said, gold and silver have become speculative instruments of late. The correlation is more clear with silver:
Now, the broader market appears to have concluded its July bounce and many analysts, myself included, expect a leg down:
At the moment SPX futures are on a good drop.
Finally, Texas tea is not joining the silver/gold rally either:
and silver and oil are highly correlated:
On sum, I see too much divergence to make me comfortable with going long silver and gold. And to reiterate, gold and silver are expensive and not value plays. If they really are going to make another shot up (doubt it, but anything is possible) then the Company would prefer to focus on assets which present more value and less risk (the large amount of divergence=risk in my eyes).
