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The Gold/Silver Canary In The Coalmine
Zero Hedge ^ | 5-21-2013 | Tyler Durden

Posted on 05/21/2013 10:15:49 AM PDT by blam

The Gold/Silver Canary In The Coalmine

Tyler Durden
05/21/2013 11:27 -0400

In general when equity prices are rising and credit spreads are tightening, the ratio of gold-to-silver prices falls as 'fear' ebbs away and confidence in a real economy returns as exemplified by the rise of risk assets. Twice before we have seen the anti-correlation of stocks and gold/silver flip to a highly correlated regime, and as Bloomberg's Chart of the Day notes, each time it suggested "stocks were due to snap". It seems a concerted push above and a 50x ratio (for gold-to-silver) tends to exhibit notably risk-off behavior. Currently, the S&P 500 and Gold-to-Silver ratio have been highly correlated since this last rally began in stocks and as HSBC's Charles Morris notes, this suggests a 'snap' in risk assets within six months.



TOPICS: News/Current Events
KEYWORDS: gold; investing; silver; stocks

1 posted on 05/21/2013 10:15:49 AM PDT by blam
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To: blam

“as confidence in a real economy returns...” —
???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????? and ?!


2 posted on 05/21/2013 10:26:28 AM PDT by faithhopecharity (()
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To: blam

Gold and silver will rise again when the government’s economic house of cards collapses. Who really believes government meddling can prop up the economy forever? I can’t see the government doing the right things. The economic fundamentals have not changed, but the USA is simply less worse off than the rest of the world, for the moment. The stock market is mainly buoyed as long as there is freshly printed fiat currency. Yet, printing more of that unbacked money will increase inflation and that will hurt the economy again.


3 posted on 05/21/2013 10:43:01 AM PDT by TexasRepublic (Socialism is the gospel of envy and the religion of thieves)
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To: TexasRepublic

I am praying for a near term pecipitous fall in the prices of gold and silver.


4 posted on 05/21/2013 10:51:41 AM PDT by arthurus (Read Hazlitt's Economics In One Lesson ONLINE www.fee.org/library/books/economics-in-one-lesson)
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To: blam

Well, maybe. I’m generally dubious of ratios as technical indicators. But even playing along here, I have to point out that in the first two instances, as near as I can tell, the important point is the first bottoming of gold/silver, let’s call it mid-1999 and end of 2006. I say that the third similar reversal is not the marked one, but the one way back in mid-2011, and the “snap” is so past its six-month due date that it’s expired.


5 posted on 05/21/2013 11:31:14 AM PDT by jiggyboy (Ten percent of poll respondents are either lying or insane)
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To: arthurus

Damn man gold dropped more on April 15 than it had in decades, and silver had to be halted four times as it dropped ten percent in eight minutes Sunday night. I’d say your prayers for the next hundred years have been answered twice already.


6 posted on 05/21/2013 11:35:08 AM PDT by jiggyboy (Ten percent of poll respondents are either lying or insane)
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To: jiggyboy

I’m hoping for >$500 and silver back to $10 or so. Then I think I just might sell out whatever other salable stuff I have.


7 posted on 05/21/2013 11:45:51 AM PDT by arthurus (Read Hazlitt's Economics In One Lesson ONLINE www.fee.org/library/books/economics-in-one-lesson)
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To: faithhopecharity

Bfl


8 posted on 05/21/2013 1:09:45 PM PDT by willgolfforfood
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To: blam

Metals and all the markets are HEAVILY manipulated by our and other governments through money laundering, debt, fait currency printing, etc. The only reason to have metals is because you see the future collapsing in on those markets and currencies. So, with that, who cares what the prices are doing, collect metals as you can.


9 posted on 05/21/2013 1:18:14 PM PDT by CodeToad (Liberals are bloodsucking ticks. We need to light the matchstick to burn them off. -786 +969)
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To: TexasRepublic

Yet, printing more of that unbacked money will increase inflation and that will hurt the economy again.
..............
Man if you’re from Texas like your moniker says — you better take a second thought about the meaning of “unbacked”.

Its not just gold that backs a currency. Its also oil and future economic growth.

So the fed is printing fiat money to the tune of a trillion a year for the last couple years? Guess what the oil industry in Texas just figured out how to get the other 90% of oil in the ground byo fracking. They have just added 50-100 trillion dollars worth of oil/gas reserves to the US economy. Every year for the last three years US oil production has increased by just under 1 million barrels of oil@ day. Same thing will happen this year and next year and the next. Citibank projects the USA will become energy independent by 2017.

This is very big.

There are no energy independent countries with weak currencies.

To cap it off. Oil is causing the US industry to grow this year at about 2-2.5%. This filling state & federal government coffers...fast. real fast. federal & state borrowing is falling off a cliff.

Man you really need to take a trip to west texas or south texas. The energy and excitement of those areas is just like you read in books about texas oil in the early days.

Texas is the biggest and best of the oil regions in the USA but the not the only oil/gas region. There are oil and gas zones all over the USA. They’re all ramping up production in a big way using the new technology.


10 posted on 05/21/2013 1:40:58 PM PDT by ckilmer
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To: ckilmer

You don’t have to lecture to me about the oil boom in Texas, I have my finger in that pie. No doubt, the US economy is optimistically riding on the coattails of our oil-based prosperity. Nothing but government meddling could stifle it. However, the paper coming off the mint’s presses is not directly backed by gold, oil or anything else tangible. The only thing that gives value to fiat money is the public’s confidence in the government. How much do you trust them? That confidence can be extremely ephemeral. Ours would not be the first government that printed itself into hyperinflation. Ever hear of the Weimar Republic, or Zimbabwe?


11 posted on 05/22/2013 11:42:15 AM PDT by TexasRepublic (Socialism is the gospel of envy and the religion of thieves)
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To: TexasRepublic

The only thing that gives value to fiat money is the public’s confidence in the government.
................
You’re right that the current administration is a bunch of third world communist crooks. But the example we have of that is Brazil. Their government is a bunch of communist crooks. But they’re energy independent. They have a strong currency. And a strong economy.

(Now they have screwed themselves for the time being by demanding so much in taxes from offshore drillers there that the oil industry has abandoned efforts to tap an enormous offshore oilfield there.)

The public’s confidence in the government is mostly a function of the public’s confidence in their own future. You are mostly confident in your own future. Its the rest of the country that worries you. Just read your last paragraph backwards starting with the last sentence and work your ways forward.


12 posted on 05/22/2013 12:19:55 PM PDT by ckilmer
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To: TexasRepublic

Considering Brazil, or any one of a dozen oil rich but incompetently run third world countries — there’s a simpler way to say this.

Deep oil pockets cover a lot of economic sins.


13 posted on 05/22/2013 12:32:54 PM PDT by ckilmer
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To: TexasRepublic

Ever hear of the Weimar Republic
........
On the Weimar Republic my own personal hobbyhorse is that reason that both Germany and Britain were very successful in the 19th century was that they produced their own energy in the form of coal.

When the economies of Europe switched over to oil in the second and third decades of the 20th century—both Germany and Britain went straight south—because neither country had homegrown oil.


14 posted on 05/22/2013 12:51:25 PM PDT by ckilmer
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To: ckilmer

Man if you’re from Texas like your moniker says — you better take a second thought about the meaning of “unbacked”.

Its not just gold that backs a currency. Its also oil and future economic growth.

So the fed is printing fiat money to the tune of a trillion a year for the last couple years? Guess what the oil industry in Texas just figured out how to get the other 90% of oil in the ground byo fracking. They have just added 50-100 trillion dollars worth of oil/gas reserves to the US economy. Every year for the last three years US oil production has increased by just under 1 million barrels of oil@ day. Same thing will happen this year and next year and the next. Citibank projects the USA will become energy independent by 2017.

This is very big.

There are no energy independent countries with weak currencies.

To cap it off. Oil is causing the US industry to grow this year at about 2-2.5%. This filling state & federal government coffers...fast. real fast. federal & state borrowing is falling off a cliff.

Man you really need to take a trip to west texas or south texas. The energy and excitement of those areas is just like you read in books about texas oil in the early days.

ok. I agree with the above and in fact have heard many other economists and money managers say that.
however, answer this one question for me.
I firmly believe the following:
barack Obama, having spent his formative years in Indonesia, hates the usa and does not want to see it prosper as above.
barney frank, and the like, see another great American Christian middle glass as a danger.
and people like john Kerry are empty vessels that will go along with the two above for self gain.
granting me that, aren’t they going to do everything they can to make fracking and the like difficult/expensive/illegal?


15 posted on 05/27/2013 7:07:59 PM PDT by willywill
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To: willywill

granting me that, aren’t they going to do everything they can to make fracking and the like difficult/expensive/illegal?
,,,,,,,,,,,,
All the good stuff that’s happening in the oil patch is happening DESPITE the dems. The feds could help things along in the oil patch but they’re not doing that. They’re not helping. But the feds are also not actively killing the gas/oil. So far the bans on fracking are coming at the state level. Blue states like New York have banned fracking gas. California is moving toward banning fracking oil.

The carbon based energy they are actively killing is coal.


16 posted on 05/27/2013 8:25:29 PM PDT by ckilmer
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