Transcription
Hello everyone. Welcome to the Vancouver Resource Investment Conference. How you all doing today?
There was recent news, uh, with the, uh, CME, uh, launching weekend, like 24/7 futures trading on gold, silver, oil. And I know that there was a lot of, you know, speculation and concern about the manipulation, uh, the paper price manipulation of the metals and such. Uh, do you think that could be problematic for the, um, the movements in gold and silver, or do you think it's a minor noise element on the side?
Uh, you're going to hear a lot of stories about supply demand increase or whatever China's doing this, uh, or the issue you just brought up about futures versus real bullion or whatever. Uh, the Chinese pricing versus our pricing of silver. Big difference there. All these things are just going to be rumbling around on the side. Some positive, most of them probably positive, but some negative. People can say, "Oh, that's that's all that matters." No, it doesn't. What matters is the ongoing decay in the money unit. And silver is money.
People think of it only as an industrial metal now, but it moves with gold. It does not move. If you go back and look at the Bloomberg Commodity Index, for example, they think, well, silver moves like a commodity. No, it doesn't. It moves with gold. Now, often it moves with gold to a lesser extent. I mean, gold might have a good move and silver has a good move, but less than gold. Right now, that has totally shifted. That changed back last November. Silver broke out relative to gold. When you plot a spread chart of the two, broke out over a 10-year range, still very dirt cheap.
So, as this money supply is the real issue, as that increases because the Fed has to print, print to save the bonds. And I, I take that quote from the, uh, prime minister of Japan, who was elected a year or so ago, and she said she's supposed to be a conservative site. Uh, we're going to print, print the same bonds. Well, I mean, increase the money supply. Well, we take the book from Japan all the time. Bernanke did back in 2008 after we crashed the stock market in October, a full year off the high, 2007 and October 2008. In October 2008, you had like a crash month, and Lehman Brothers went out the month before. Finally, Bernanke said, "Screw it. I'm going to do QES. Took a book out of the Japanese page out of the Japanese book." We're doing the same thing now.
So, really, the main issue is not this, that, or the other short-term metric, like, uh, commitment to traders report or open interest in the Comex, so forth and so on. Reality lives underneath all that. And ultimately, these seeming deviations or whatever you might see, they got to be flushed out of the way. And also manipulation will too. I mean, if silver was manipulated, and I can buy that argument, I'll tell you why in a minute. But, um, it's no longer it's saying, "I'm out of here, guys. So, I'm not going to stay in that 50-year confinement that I was in."
Heck, copper didn't stay in its. Copper was in a range for decades between 50 cents and a buck 50 a pound. In 20 late 2005, it broke out. And you know what happened? In several quarters, it quadrupled in price. Several quarters. $4, $10. Now we're $6, $30. Okay. Uh, same thing with lead. Lead did the same thing. A multi-decade sleepy little range, like silver had, $5 to $5.5 to $55, etc. Lead broke out in 2010, quadrupled in several quarters. Went to a new reality. Boom. Didn't even have headlines. Now silver broke out of that $50 range, and we're not that far above it now. You know, we're $69, $68 right now on a pullback. Um, it has yet to reach its new reality. And our assessment is on a variety of reasons, technical, archival history of other markets that have done the same thing like copper and lead. Some are going to $3 to $500 and do so very rapidly. In fact, my bet is you come out of this congestion zone that we're in, let's say you show the evidence of that in the next several weeks or month, our our momentum evidence, you don't have to wait for price to go to $100 to prove the issue. U and I think you could be in that zone within a handful of months.
So, all these issues you raised, they're, they're, they're noise, you know. And whoever tried to restrain silver for 50 years, copper wasn't, gold wasn't, lead wasn't. How come silver was stuck in a 50-year range? What's wrong with it? You know, uh, it says, "Hey, no more. I made a mistake. I'm coming out of here." And I think it's in a tantrum, and we've not even seen the tantrum yet.
Yeah. What are you seeing on the on the momentum basis for for silver? Uh, I know that's, uh, the metric you track and you've followed that closely. What are you seeing there?
Uh, well, we measure all markets on different time scales. The main emphasis for an investor is long-term trend momentum, not what happens this week or next or the next three or four, five months. That doesn't matter unless you're a trader. Okay? If you look at silver and gold since 2015, they've risen nicely. Okay, silver far more erratic than gold, but nevertheless an upward bias. And if you've tried to, if you flicked out of your position every time there was a shakeout of double-digit percentages, thinking, "Oh, that's it." You were wrong. Because the real problem then is once you got out, assuming you didn't sell the top tick of the of the congestion zone before the congestion occurred. Uh, where did you get back in or did you get back in? And I bet if you got back in, you got in higher than where you got out. Okay, so the the guy who did better looked at long-term factors. And we look at long-term momentum like silver and gold's annual momentum. What's that? It's where we measure each month's action in its oscillator relationship to let's say a 36-month average or a three-year average. When we plot the bar, where is it in relation to that? Not on a price chart, but on an oscillator. And are you above it or you below the zero line? And when you plot the oscillator, there's been no breakage in this break. It's a sharp break, but still in the context of an ongoing long-term momentum uptrend. The only thing that broke in silver and gold in that January, February break, day and a half collapse, you broke intermediate trend factors. So you you cracked a knee bone and you slumped. But if you really look at what's happened since then in the healing process is sideways on price. Up, down, up, down, above that low. In fact, silver right now is above the Feb low. Feb low was $64. Was six months later, five, five and a half, six months later, and where are you? You're still above it.
Okay, gold slightly below it. $150 below it. But the point is that what we've seen over the last 5 months plus is a healing process by what was broken intermediate trend factors. Intermediate and short-term. Nothing has upset the investment grade decision to be long silver or gold. Okay.
So, right now, silver, uh, just as you mentioned, like it's, you know, it's hovering around that $64 and above. Uh, so how long could you see this consolidation happening?
I think it's probably ending. Probably ending now with this week's low. Last week in our weekend report, we suggested, especially regarding the miners, because they made a prominent low back in, I think it was March. It's when silver made its low at $61. By the way, when it swept the February low at $64, nothing happened. Silver immediately shot back up. The miners broke through that price low. So, anybody looking at a price chart said, "Oh, that's it. It's over with. That's the top, etc., etc." You closed the week back above it. Would you, you blew through the low, ran all the sell stops and reversed the week, closed back above that low that you broke that supposedly was the end of the world break. Okay, you're going to go down forever.
Uh, I think that was probably the flush low in the monetary metals, this week's action. And it's not going to take much follow-through next week to trigger enough intermediate trend momentum factors, the ones that were broken back in that Jan, Feb break, to say, okay, we've writed that issue where now the intermediate stuff that was broken has now healed itself. It's now positive and it's rejoining the long-term trend because they were in opposite trends. You know, one was still positive, one said I'm negative now. I think the intermediate's about to shift back to positive, at which point then we'll pound the table, define it with some numbers, and suggest to people that this the rally that you're seeing is not just another rally. It's this time you're coming up out of here. I think that's where we are.