COMMODITY CORNER
Gold & Silver
The most recent Gold & Silver craze is well underway over the past year or two, with skyrocketing inflation, the sinking value of the U.S. dollar, and the threat of digital assets potentially replacing cash. The Gold Bugs have been out in full force, as history says that investors flee to gold during unfavorable economic times, and a shrinking currency.
As discussed in our publication When to Buy and When to Sell: Combining Easy Indicators, Charts, and Financial Astrology (available on Amazon), gold, though it is volatile, and interest rate sensitive, is generally considered a safe-haven “store of value,” that preserves wealth during market and financial uncertainty. Essentially, gold (and to some extent silver), has always been expected to move in the opposite direction of the equity markets.
In a risk-off environment, such as rising interest rates, higher bond rates, a slowing economy, decreasing earnings, and a falling dollar, investors often turn to gold for safety.
As risk-on conditions usually coincide with high consumer confidence, positive expanding corporate earnings, declining interest rates, falling bond rates, and a stronger dollar, investors generally do not buy gold.
As noted in our publication (refer to Chapter 1), gold spot prices can be manipulated, and the metal has recently been heavily purchased/accumulated by foreign countries. There are several potential uses for gold, and many ways which it can be purchased. Many retail investors have also diversified a portion of their portfolios by allocating into gold and silver.
But the questions remain - What is the actual value of an ounce of gold? Can I buy anything with gold? Can I trade my gold back in for a currency of my choice? Will gold be confiscated like it was in the past? Why are governments around the world buying up so much gold? Most of these questions remain unanswered, or changeable, although foreign governments are believed (by some) to be hoarding gold to potentially create their own gold-backed currency.
Silver is also considered a very valuable asset, as it has many industrial uses in addition to hedging the dollar. Silver can be a little tricky, however, as the significant use in the industrial arena can cause a reduction in price during a recession, which may not affect the price of gold at all. Silver usually trails gold in price action, and can be gauged with an indicator known as the Gold to Silver Ratio.
This ratio measures the amount of silver it would require to purchase an ounce of gold, and provides an indication of when to invest in one or the other. As the reading rises, it suggests that silver is more favorable, comparatively speaking, than gold, and vice-versa. A reading of 80 is generally considered “neutral. The further the reading rises above 80, the better silver is considered to be valued versus gold, and the further it declines below 80 is more favorable for gold compared to silver. Remember that this gauge is only measured for gold vs silver at any point in time, not an actual indicator to buy or sell either. There is also a Gold to Dow Jones ratio that works the same way.
In Astrology, the Sun “rules” gold, and the Moon “rules” silver. Certain planetary transits and aspects can signify strong and weak periods for gold and silver, as well as other precious metals in the markets. Combining the historical performance of these conditions, gauges, and aspects, can assist in your decision making on the best time to purchase, sell, or trade, these assets.
On this website, and in future blogs, we will monitor and discuss these possibilities.
