2020 Gold forecast, Silver, Gold/Silver Ratio, 10 April

Prediction for Gold at close 10 April


Gold Price Forecast relative to
Long Term Monthly
(LT-M) – Medium Term Weekly (MT-W) – Short Term Daily (ST-D) – and Hourly (not shown) data

(Previous week in brackets)


Gold/USD LT-M MT-W ST-D
1681 (1616)
Trend ↓ (↓) ↑ (↑) ↑ (↑)
% Risk
Weight
82 (80) 65 (48) 90 (78)
Allocation 100% (100%)

Gold/USD live price


Stay will full allocation. The trend is still up even though short term risk weight looks a little toppish and LT Monthly goin g sideways in the higher risk region. Teechnically, the most significant signal comes from the sudden price drop mid March, which we already analysed as a ‘normal’ reaction in a major uptrend. The most likely scenario is to only see an end to a secondary wave advance in a few weeks time, after which this market can build foir a major advance in this primary cycle which started Dec 2015. Having examined the Supercycle trend based on quarterly data last week and concluded this Gold/US$ price could or rather should be driven to a multiple of the current level, there is a strong fundamental economic reality the makes the case for this scenario. A return to a normalised relationship between Total public debt vs GDP and allow for short term to be rolled into Long term debt can only be achieved by a major devaluation of fiat currency against Gold and Silver and possibly even certain crypto assets. There is simply no alternative. The question is how that can be achieved in an acceptable format which includes respect for private ownership. This scenario is possible without creating a gold standard and it will likely involve a ‘give and take’ formula for sovereign nations with larger gold reserves such as Germany, Italy, France, China, Russia, USA and others. We will look at this scenario in coming weeks, unless something unfolds in the meantime.

3 April: No Change. Stay with full Gold allocation in portfolio.
THIS WEEK we include the quarterly long term gold chart with risk weight from 1971 to 31/March 2020.

GOLD-RISKWEIGHT-1971-2020 quarterly chart

LONG TERM QUARTERLY CHART = GOLD PRICE | RISK WEIGHT

The quarterly gold chart, which only registers quarter-end price data, shows a lot of interesting information. Of course one should never trade on this type of chart alone as signals would be much delayed and a position could last a generation or more, but it can give very interesting warning signals if shorter time frames go to extremes in tandem with a Supercycle. This chart tells us that the upside is still huge even though risk weight sits at 87. It is the framework as a whole in which risk weight behaves that shows the true risk and this chart cannot be seen separate from Monthly and even Weekly time frames. What becomes very clear from this Long term quarterly chart is that risk weight often goes to extremes and this can last for for many many years. And if a market has clear direction, price can be relatively flat (1985-2004) or hyperbolic as during the 1975-1980 and 2004-2012 periods. We also know that major price extensions occur right at the end of a cycle when every small investor is drawn into participating.
The psychological impact of a fast moving market is huge as we have witnessed on many occasions in many different asset classes over hundreds of years. Last week we discussed How much gold should be held for ‘mainstreet’ to keep its trust in the monetary system. Financial market panics can happen with or without a gold standard. In 1907 the banking crisis happened whilst the US had a much more healthy level of public debt and owned gold at a 25% ratio to that debt. It is usually a convergence of several events that triggers a panic.
Today, central authorities worldwide, are using tools that have not been fully tested. If we look at gold holdings and public debt, Russia appears the strongest, by far. Europe (10,500 tonnes of gold) stronger than the USA even though 35% of Europe’s larger gold reserves countries (Italy, Germany, Netherlands etc) is still stored in the US. China does not release enough data to guage its true position. China is the Amazon of sovereign monetary management. Much of what is earned is re-invested abroad in order to grow its national industries. This has already led to monopolist status in several major area’s of everyday life including health. A smart reset of the present fractional reserve and shadow banking system will be necessary as fiat money will completely lose any meaning.
The position of Switzerland where much private gold is held can weigh heavily against confiscation in Europe on the assumption that Switzerland will act in the interest of its citizens who ultimately decide for themselves. Hence the chance of gold confiscation remains an outside one, at least in Europe. This by the way a good reason to own gold whereever one lives, as the risk of losing fiat in a bankrupt system is too high. The prediction for the Gold price is that we cannot predict where it will be drawn to or when, only that the Gold price is likely to come more in line with last weeks minimum of 10,000 based on a very conservative acceptation level of real money stored as insurance against the monetary base. The current risk weight timeframes still provide every opportunity whilst there is a ton of cushion. The technical story is no longer just about investment trading opportunity. It is about protection of wealth and health, and for that other ingredients play a role. In other words, if one can protect just 50% of average asset values recorded during then past 10 years, this may prove to be a major achievement.


SILVER FORECAST

(Previous week in brackets)

Silver/USD LT-M MT-W ST-D
15.40 (14.34)
Trend ↓ (↓) ↑ (↑) ↑ (↑)
% Risk
Weight
45 (42) 35 (25) 90 (67)
Allocation 100% (100%)

Silver/USD live price


No Change. Stay with full Silver allocation in portfolio. The price formation since the May 2011 high has been nothing short of spectecular for any generation of participants.The sudden drop below the 2015 and 2018 lows came rather unexpected especially in light of reduced mining activity as a result of Corona lock down and other market parameters. The corresponding increase in the Gold/Silver ratio to that max print of 128 is simply very unrealistic and could only be achieved on very low volume in the physical silver market. This new reality however has not changed the technical outlook which remains very bullish because, based on history, we can now expect bearish divergence in all time frames until this market turns down again, or is permanently reset at a much higher level. The latter could be part of a wider devaluation of fiat currency.

3 April: No Change. Stay with full Silver allocation in portfolio.
THIS WEEK we also include the quarterly long term silver chart with risk weight from 1971 to 31/March 2020.

LONG TERM QUARTERLY CHART = SILVER PRICE | RISK WEIGHT

LONG TERM QUARTERLY CHART = SILVER PRICE | RISK WEIGHT

The bearish and bullish divergences are clearly visible in this chart even though signals don’t come until much after the event. The picture is very similar to gold with the difference that silver may have a much longer way to go. First to get even with gold from where is was the past few years and then making up to reach a ‘normal’ ratio. Price could be well north of 100 dollars in this scenario.


GOLD/SILVER Ratio Price Risk Analysis

(Previous week in brackets)

GOLD/SILVER Ratio LT-M MT-W ST-D
109.00 (111.00)
Trend ↑ (↑) ↓ (↓) ↑ (↓)
% Risk
Weight
72 (69) 65 (72) 15 (37)
Allocation 50/50 AU/AG (50/50 AU/AG)

Gold/Silver Ratio live price


The ratio has traded above 65 for nearly 4 years. It looks virtually impossible for the Long term risk weight to not develop strong bearish divergence. It requires stronger silver price acceleration for that to materialize which should only be a few weeks out at most. This could trigger that long awaited trend towards the equilibrium level nearer 50. No Change!

3 April: No Change. Keep a full 50/50 allocation or even overweight silver. Payback time will happen.
Silver is a commodity and attracts value added tax in most countries if delivery is taken. As long as it remains in bonded warehouse silver should be swapped aginst other asset classes including physical gold if inflation stops playing a role in price discovery, with a possible chance of still missing a huge profit opportunity in a price bubble scenario. I.e Silver drops to a ratio to gold of say 10 or 15. Being able to disengage at 40 or 30 ratio would be a major achievement at this stage and in our risk approach we shouldn’t be greedy with our own money and certainly not with other people’s money.


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