donderdag 20 december 2018
woensdag 12 december 2018
vrijdag 7 december 2018
Copper/Zinc/Lead/Nickel Production Vs. Silver Price
Silver is mostly produced as a byproduct from copper, lead and zinc. If production of these metals goes up, then the silver price is likely to fall.
The following two charts show this negative correlation.
The following two charts show this negative correlation.
dinsdag 4 december 2018
Yield Curve Vs. VIX
The 10 year - 2 year bond spread is a leading indicator for the VIX with a 2 year delay. For more info, go here.
(and the VIX is also called the fear index and is correlated to gold)
(and the VIX is also called the fear index and is correlated to gold)
Credit Spreads Are Widening
In case you are wondering why the 10 year yield has dropped below 3%. Here is the answer.
The economy is slowing down and you can see this in the people fleeing corporate bonds and going into treasuries. Credit spreads are widening and it's a bad thing.
The economy is slowing down and you can see this in the people fleeing corporate bonds and going into treasuries. Credit spreads are widening and it's a bad thing.
maandag 3 december 2018
3-2 Treasury Yield Vs. 2-1 Treasury Yield
The 3 year - 2 year treasury yield is a leading indicator for the 2 year - 1 year treasury yield and provides a good indication on how the yield curve will evolve. The delay is 4 months. For more info, go here.
zaterdag 1 december 2018
Yield Curve Vs. Net Interest Margin
The yield curve shows the difference between the interest rate of high maturity bonds (10 year treasury) and low maturity bonds (e.g. 3 month bond). When this yield curve spread is high, the banks have high income streams from their loans at high yields, while their costs, paid as deposit interest to depositors, are low. That results in a higher net interest margin.
Silver premiums approach historic high
Just a heads up for the silver stackers. The premiums are approaching the historic highs of 30%, so we should find a bottom soon.
vrijdag 30 november 2018
Initial Jobless Claims Vs. Unemployment Rate
Initial Jobless Claims are a leading indicator for the Civilian Unemployment Rate.
Initial jobless claims report the number of individuals who have filed for unemployment insurance benefits in the previous week (mostly involuntary layoff). This gives us near real-time data on the state of the labor market. The blue chart leads the red chart with a 3 month delay.
Initial jobless claims report the number of individuals who have filed for unemployment insurance benefits in the previous week (mostly involuntary layoff). This gives us near real-time data on the state of the labor market. The blue chart leads the red chart with a 3 month delay.
woensdag 21 november 2018
LIBOR Vs. Jumbo CD
Typically, the certificate of deposit rates or CD rates follow the LIBOR rate.
But since 2015, something weird happened. The LIBOR rate moved higher along with the Fed Funds rate, but the CD rate stayed at around 0%.
This means that banks don't want to pay out depositors, possibly to maximize their own profits. Also, another reason is that banks have too many deposits.
But since 2015, something weird happened. The LIBOR rate moved higher along with the Fed Funds rate, but the CD rate stayed at around 0%.
This means that banks don't want to pay out depositors, possibly to maximize their own profits. Also, another reason is that banks have too many deposits.
donderdag 15 november 2018
woensdag 14 november 2018
dinsdag 13 november 2018
PPI Vs. CPI
The producer price index (PPI) measures the prices of output from producers. The PPI is a leading indicator for the consumer price index (CPI). As producers see their output costs go up, they will pass these costs on to the consumer. As producers can't pass on all of their costs to the consumer, there is a delay of a few months between the PPI and the CPI.
There are two measures for inflation CPI and PCED. The PCE Price Index is preferred by the Federal Reserve because it is composed of a broad range of expenditures. Another difference between the PCE Price Index and CPI is that the PCE Price Index is also weighted by data acquired through business surveys, which tend to be more reliable than the consumer surveys used by the CPI.
The 10 year break-even inflation rate = 10 year bond - 10 year tips. It represents a measure of expected inflation and is a leading indicator for the CPI.
The CPI and PCE are both important indicators of U.S. inflation. While CPI is more important from the perspective of an individual, PCE is more important from the perspective of monetary policy.
The CPI and PCE do not cover identical categories of personal spending. The PCE has a broader scope than the CPI, as it captures the expenditures by both rural and urban consumers. Unlike the CPI, the PCE includes expenditures from non-profit institutions that serve households.
The Fed has given preference to PCE due to its broader scope and “chained base” for calculations.
Segments contributing to inflation can be found at the Truflation website.
zondag 11 november 2018
Platinum is a buy
When we look at the platinum supply and demand, things are getting worse for platinum. The automotive demand has been going down sharply and we are in platinum surplus now.
But the price of platinum is now at $800/ounce, which means that a lot of producers are having losses. Lonmin and Impala are going to go bankrupt in a year from now. That means that we will see around 2 million ounces less production, which will put the supply and demand balance back into deficit. Platinum price will need to go up.
Moreover, there is one interesting development. Fuel cell cars are going to hit the market in the coming years and they need platinum. So I see platinum demand to go back up due to fuel cell cars in the coming decade. But this depends on market penetration, if the industry decides fuel cell cars are not the future, then the outlook for platinum will be dire.
Conclusion, it is a good time to get into the physical platinum market. Go buy a platinum ETF.
But the price of platinum is now at $800/ounce, which means that a lot of producers are having losses. Lonmin and Impala are going to go bankrupt in a year from now. That means that we will see around 2 million ounces less production, which will put the supply and demand balance back into deficit. Platinum price will need to go up.
Moreover, there is one interesting development. Fuel cell cars are going to hit the market in the coming years and they need platinum. So I see platinum demand to go back up due to fuel cell cars in the coming decade. But this depends on market penetration, if the industry decides fuel cell cars are not the future, then the outlook for platinum will be dire.
Conclusion, it is a good time to get into the physical platinum market. Go buy a platinum ETF.
zaterdag 3 november 2018
Gold Forecaster Index
The "Gold Forecaster" index was created by Albert Sung, who theorized that the gold price could be predicted by a formula using leading economic indicators.
The red line comprises all metrics that are bullish gold and looks at their change in sentiment. The blue line is the gold price. Whenever the red line is above zero, the gold price will go up with a delay of 6 months.
This is a real game changer in the world of precious metals. I call this the "Holy Grail". Go HERE for "Silver Forecaster" index.
Be sure to read the gold and silver checklist as well.
The red line comprises all metrics that are bullish gold and looks at their change in sentiment. The blue line is the gold price. Whenever the red line is above zero, the gold price will go up with a delay of 6 months.
This is a real game changer in the world of precious metals. I call this the "Holy Grail". Go HERE for "Silver Forecaster" index.
The following chart is the same index, but the trade balance is replaced by import and export air freight numbers because this gives us a faster data point.
Be sure to read the gold and silver checklist as well.
vrijdag 19 oktober 2018
woensdag 3 oktober 2018
Lumber Price Vs. Home Price
This is a graph between lumber prices and home prices. Lumber prices are a leading indicator.
Typically a 2 month delay.
zaterdag 22 september 2018
Excess Reserves and the Yield Curve
Excess reserves at the Fed have been going down as the Fed started to unwind its balance sheet (blue line). But oddly, deposits minus loans at commercial banks were steady flat (red line). Why is this?
Moreover, this means that there are a lot of deposits but not enough loans. Taking into account that the yield curve is approaching zero (green line), banks need to pay the same interest to depositors (short term maturity) as they receive in loan interest (higher maturity), but this needs to be done on more depositors than loans.
Which means bank profits will be going down while the Fed reduces its balance sheet and its excess reserves. Less excess reserves also means less money being paid by the Fed to the banks via IOER.
When the blue line approaches zero and the red line doesn't, something magical will happen.
Moreover, this means that there are a lot of deposits but not enough loans. Taking into account that the yield curve is approaching zero (green line), banks need to pay the same interest to depositors (short term maturity) as they receive in loan interest (higher maturity), but this needs to be done on more depositors than loans.
Which means bank profits will be going down while the Fed reduces its balance sheet and its excess reserves. Less excess reserves also means less money being paid by the Fed to the banks via IOER.
When the blue line approaches zero and the red line doesn't, something magical will happen.
vrijdag 21 september 2018
The U.S. dollar is slowly losing status
Just a small update on COFER to see if the U.S. dollar is losing status: the long term trend is down, but it is still the most important currency.
And in more detail: 2017-2018: you can see the U.S. dollar is slightly dropping in status.
zaterdag 15 september 2018
Silver Depletion in 20 Years
I have been wondering what the status is on the silver depletion.
The USGS reports global silver reserves each year and this report can be found here.
I have charted this here.
- Poland, Russia, Peru and Australia have seen increases in silver resources.
- Chile, Canada have seen decreases in silver resources.
- Peru is the largest producer with the largest reserves, followed by Mexico.
When we look at the total reserves, we get this: We have 533000 tonnes of silver resources in the world.
Now, the annual silver production can be found here: We have 25000 tonnes silver production per year.
Which means silver will be depleted in approximately 20 years (if no extra silver resource is found). See you in 20 years when silver skyrockets!
The USGS reports global silver reserves each year and this report can be found here.
I have charted this here.
- Poland, Russia, Peru and Australia have seen increases in silver resources.
- Chile, Canada have seen decreases in silver resources.
- Peru is the largest producer with the largest reserves, followed by Mexico.
When we look at the total reserves, we get this: We have 533000 tonnes of silver resources in the world.
Now, the annual silver production can be found here: We have 25000 tonnes silver production per year.
Which means silver will be depleted in approximately 20 years (if no extra silver resource is found). See you in 20 years when silver skyrockets!
vrijdag 14 september 2018
Gold / Silver Premiums Up
After several months we finally see premiums go up, just at the moment that the U.S. mint stopped selling silver. The reason the U.S. mint stopped selling silver is not because there is no supply, it is because there is no demand. U.S. mint sales have dropped to record lows (see chart below). So it can't get worse than this, only better.
On the other hand, as precious metals prices are dropping, the premiums have gone up at the miners, dealers and China.
So that is looking good for precious metals investors.
The managed money shorts graph is looking good too, especially for silver.
COMEX registered gold is again at all time lows, which shows me that China has been buying all the London vaulted gold as GLD is hitting lows. The low amount of registered gold means that there is no chance that GLD vaulted stock can go lower.
Leverage (registered to eligible) is almost at a new high, which means the gold price is now at the bottom.
So there is no better time to buy gold and silver right now.
On the other hand, as precious metals prices are dropping, the premiums have gone up at the miners, dealers and China.
So that is looking good for precious metals investors.
The managed money shorts graph is looking good too, especially for silver.
Leverage (registered to eligible) is almost at a new high, which means the gold price is now at the bottom.
No slowdown in growth from China
When I look at China power consumption numbers, I don't see any slowdown in growth. July power consumption hit a new high.
vrijdag 7 september 2018
Gold/silver price Vs. Oil price
When we chart the Silver/Gold price minus Oil price, we can have a good idea on the margins of the precious metal miners although oil costs are just a small part of the overall costs (only 10% of AISC). As you can see here, the trend has been higher since 2014.
=> Producer Price Index by Industry: Gold Ore and Silver Ore Mining - Crude Oil Prices: West Texas Intermediate (WTI) - Cushing, Oklahoma
=> Producer Price Index by Industry: Gold Ore and Silver Ore Mining - Crude Oil Prices: West Texas Intermediate (WTI) - Cushing, Oklahoma
The HUI index though (miners), has not been following the correlation since 2014. This is because the gold and silver price has been breaking down lately and sentiment is not positive. Other costs like development costs due to lower grade ore could also have a negative impact. Nevertheless, the chart above is a good indicator for the health of mining companies (comparing the gold/silver price against the oil price).
Energy costs are just 10% of the total AISC costs of a miner. So it doesn't have a significant effect on the overall costs in mining. Miners with a high strip ratio and open pit mines have more exposure to energy costs.
When we look at the revolution in Electric Vehicles (EV), we notice that gasoline consumption will drop (gasoline demand/price goes down) and EV demand will go up (silver demand/price will go up).
