Money, which just did its best month in 40 years… started the current month with its best the week in 40 years.
I had already planned to show you some charts today, but I will show you the price chart first as the market action has gotten so extreme.
Gold, never so daring, has just had its best month in eight years and is on course to end its best week in 12 – since the financial crisis. Gold is already flying at record altitudes, while silver has been on the decline so far.
It’s the kind of angle and trajectory on a chart that you’re probably used to seeing tech stocks display, where James Allen’s renewables play out. Exponential energy fortunes.
What it is not is something you would expect from a liquid market for an inert metal. A relatively abundant inert metal when compared to its big brother, gold.
I remember Charlie Morris, our resident fund manager, described the silver market as ‘loose’ meaning you can throw in a lot of buying or selling, and usually the price won’t move much. . (This contrasts with a “tight” market, where small amounts of buying and selling can cause the price to vary significantly – think of micro-cap stocks.)
For money to move so much, so fast, it means someone has to really love money all of a sudden. Maybe a lot of people – there are definitely a lot of young people joining the crowd, sure – more on that in a moment.
One chart that I think is even crazier than the one above, albeit slightly more nuanced, is the incredible increase in cash holdings by exchange traded funds (ETFs).
This is a measure that avoids the price entirely and simply examines the demand for the metal from investors who do not want (or cannot own) the physical bullion directly.
While investors who wish to gain exposure to silver of course have a lot to do with its price, the silver holdings of these funds exemplify the rate at which these funds actually buy the physical metal.
And as you can see in the table below, they bought a parcel…
ETFs buy a lot of money because investors buy a lot of stocks in them.
Following on from yesterday’s letter in which we looked at ‘children’s’ interest in gold ETFs, it’s worth taking a look at the interest in silver in gold. young people.
We predicted July 23 (No hooded savior – click to read again) that the major gold and silver ETFs, the $ GLD and the $ SLV respectively, would become the most popular stocks on the millennial investment platform Robinhood as the bull market for previous metals intensifies.
As we noted yesterday, $ GLD has jumped over 50 spots in the rankings since then. The $ SLV has taken an even more aggressive step towards celebrity status, however. It was the 327th most popular stock on the platform when we wrote this – but now it’s 101 positions ahead of 226th. It’s still a long way to go, but I have faith.
The price of these “money-backed” stocks is displayed in purple (left scale), while the number of Robinhood users owning the stock is displayed in green (right scale):
The number of users holding the share since then has grown by more than 100%, with 18,000 more children getting on the silver train.
When the price hit £ 20 earlier in the week, Charlie Morris pricked up his ears:
Wow, the money is back to where I shorted it in 2013. It was a great moment. I don’t feel the need to go back today. This time the wind is behind. That said, [it’s] fairly done….
Charlie referred to the amount of silver that moved above its 200-day moving average during this sudden increase (in fact, by how much the price exceeded its long-term trend). Usually, when an asset crosses this threshold, it is a sign that the market is moving ahead.
As I said yesterday, the speed with which the prices of precious metals are moving makes me think that there is going to be a definite pullback at some point, an upheaval that is going to shake up newcomers to space. It will only be a bump in the road to higher prices in the future – but it will make new converts to question their beliefs.
At the moment, however, as the weekend approaches, the money looks really, really bright.
£ 22 per troy ounce, with no VAT or dealer fees included. Damn hot.
I wish you a good weekend,
Editor, Capital and conflict
PS On the subject of precious metals, you might be interested in what Kit Winder wrote in the Exponential investor. The explosion in Beirut, a tragedy that struck an already ravaged economy, may finally be what prompts the government to start selling its vast gold reserves – click here to read his analysis.
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