Gold and Silver Checklist

To be able to time the precious metals market you need to take into account a lot of things. Here is a checklist.

1) Gold Forecaster Index

The gold forecaster index is a leading index for the gold price.

Always make sure that the gold forecaster index is in positive territory when buying gold/silver.

(go HERE for silver forecaster index)

2) Taylor Rule Rate
Inflation starts to appear when the Taylor Rule Rate is above the Fed Funds rate. Only buy gold when the chart is in positive territory.

3) Misery Index
Another correlation is that between the misery index and gold. The more misery, the higher the gold price. High unemployment and high inflation are good for gold.

4) Real Output
Productivity is negatively correlated to inflation. Whenever productivity slows down, efficiency drops and goods become more expensive to make, resulting in higher inflation, which is good for gold.

5) Supply and Demand

Always check that gold and silver demand is higher than the supply of gold and silver. When mine supply goes down, precious metals typically move higher.

However, be aware that gold has a high stock to flow ratio, which means mine production doesn't impact the gold price that much as it does with other commodities. Same with silver.

The USGS gives annual numbers on silver production and silver reserves.

As silver is a byproduct of base metal mining, it is important to watch copper production in Chile and Peru.

6) Gold Demand

Gold demand can be witnessed from many places. Watch the global ETF flows.

Watch the GLD stock level. If the stock level goes higher, the price goes higher.

Watch the COMEX gold numbers. They need to go up.

Watch the COMEX deliveries. They need to go up.

Watch LBMA gold/silver levels.

China gold demand can be found from the SGE deliveries. Make sure this number goes higher each month. India gold imports can be found here.

7) Silver Demand

Silver demand can be witnessed from the SLV stock level. If the stock level goes higher, the price goes higher.

SLV is correlated to the total physical silver holdings.

Watch the Chinese SHFE warehouse numbers, which show Chinese silver demand.

Watch Shanghai silver withdrawals.

Watch the COMEX silver numbers. You want these to actually go down because that would mean there is a shortage.

It means that money is moving from COMEX to PSLV.

8) Central bank gold demand

Make sure to check if central banks are buying gold.

Central banks owned 1150 million ounces in reserves.

List of countries: https://tradingeconomics.com/country-list/gold-reserves or https://www.gold.org/goldhub/data/gold-reserves-by-country

China central bank: http://www.pbc.gov.cn/diaochatongjisi/116219/116319/3959050/3959052/index.html

9) U.S. Mint Sales

U.S. Mint sales are a proxy for demand. You want this to go up.

10) Gold and Silver Premiums

When the premiums to spot price are high, this typically tells us that precious metals will go higher. You can watch the APMEX silver premiums.

Junk silver bags are primarily bought for their silver content and follow spot silver prices very closely. If you see a spike in premiums here, that means there is real demand for silver.

Shanghai gold premiums can be found here.

Shanghai silver premiums are rising.

APMEX gold premiums. Alternatively you can find gold premiums here.

PSLV premiums.

11) COT Report

The COT report gives info on open interest, swaps and managed money. You want to see a lot of managed money shorts, which will result in a short squeeze. Open interest is correlated to the gold price.

Follow the Smart Money (large speculators) which are trend leading.

12) Swiss Franc Vs. Gold

Watch the Swiss Franc for short term movements. A strong Swiss Franc is good for gold.

13) TIPS

Gold and TIPS are correlated.

14) Real Yields

Gold outperforms when real yields go down.

 

 

 

15) Seasonality

Gold/Silver is more likely to rise during the months of January, April, July, September and November.

16) Technicals

Besides all these fundamental reasons above, you need to check the technical picture as well. Buy gold when there is a breakout. (Jesse Livermore: "Follow the path of least resistance")

17) Cycles

Charles Nenner cycle for gold says that gold bottoms out in May 2021.

18) Sentiment 

The gold miner bullish percent index (BPGDM) is correlated to gold. Buy gold when the sentiment is bearish and turning bullish.

19) Currency in circulation 

Look at the big picture.

20) 30 year/10 year bond yield ratio

This ratio shows the market's expectation of inflation.

 

 

21) Google Trends

Check google trends for: "How to buy gold" and "Stagflation".

22) Debt to GDP

If Debt to GDP rises, gold rises.

 

23) Near Term Forward Spread

A low Near Term Forward Spread typically indicates a bottom in gold.

24) Rate Hikes

When rate hikes stop, gold rises and stocks fall.

Check the proxy for Fed funds rate.

Check the future path of Fed funds rate.

 

25) OCC Report

Check the OCC Report for any anomalies.

26) FRBNY Foreign Gold Deposits

When foreign gold deposits rise, central banks are buying gold.

27) Bank Term Funding Program
If the regional banks fail, the bank term funding program rises. Deposits will flow out of the banks into gold.

 

 

 Keep an eye on the secret second central bank of the U.S.: the FHLB. If this spikes, trouble appears in the banking system.

 

28) Analyst Estimate
Analyst estimate of gold price based on Newmont Mining revenue.

29) Gold Lease Rates

Lease Rate = LIBOR - GOFO

Look for high gold lease rates.

30) Gold/Silver Futures Curve

Make sure the gold futures curve is pointing up.

31) VIX

When the VIX index minus 1 year treasury bill rate rises, gold will outperform the stock market.

 

32) Fundamental Value

Use the MonetaryMetals fundamental value chart to evaluate gold.