Silver ‘Undervalued’ In Comparison to Gold

Cassie Bastien

6/13/2017 11:21:46 AM

Daily Gold & Silver Market Report – 06/13/2017

Director of research at BullionVault, Adrian Ash, says Precious Metal prices dropped again Tuesday “to one- and 3-week lows [for Gold and Silver] respectively as world stock markets rallied despite fresh political wrangling and uncertainty around the U.K.'s general election and looming Brexit negotiations.” The latest daily note from German financial services group Commerzbank said, “Silver [has come] under pressure...clearly dragged down by base metals. The underperformance of Silver as compared to Gold has driven the Gold/Silver ratio back up to nearly 75.” Commodity Specialists Mark Keenan and Michael Haigh at French investment bank Societe Generale said, “Based on our analysis of how Gold and Silver prices have behaved at ratios above 70, we suggest selling Gold and buying Silver.”

Could Gold Disappoint?

Many investors are questioning if it is time to build their positions in anticipation of potential gains for the yellow metal, or is this just another teaser warning of another turn lower for Gold prices? Bloomberg Reporter Shelley Goldberg says, “The fundamentals might suggest the former, [but] traders would be well advised to expect the latter.” According to Goldberg, Gold rates climbed last week to their highest level since November 4, and are currently up 10.5 percent this year for a number of reasons, one of those being expectations of an inflation hedge, as evidenced by money flowing into U.S. Treasury Inflation-Protected Securities and other inflation-linked instruments. Furthermore, Precious Metals are negatively correlated with the U.S. dollar, which has been steadily declining since February due to what Goldberg says are doubts surrounding President Donald Trump. An additional reason, Goldberg says, is “the U.S. stock market is trading at or near record highs, leading more pundits to warn investors of overvalued sectors (think tech) and to predict a market crash. Unlike equities, Gold doesn’t have inherent earnings per share value play, justifying its inclusion as a safe-haven asset.” Nevertheless, Goldberg says the yellow metal is an “emotional trade. ... One need not be a superstar technical analyst. Just consider that for both psychological and systematic reasons, traders and algorithms like to sell on landmark numbers that also serve as a testing ground for a rally’s sustainability.”

Is The EU Preparing to Steal One of Britain’s Crown Jewels?

Ivana Kottasova with CNNMoney.com said a whopping 83,000 London jobs are at risk due to the bloc proposing rules Tuesday that could give it the power to force a quite large amount of the city’s financial services to relocate after Brexit. As Kottasova reports, “The U.K. acts as the primary go-between for buyers and sellers of financial products priced in euros that play a vital role in Europe's economy. Known as euro clearing, it's a massive business involving transactions worth $1.5 trillion each day.” However, now that Britain is set to “ditch” the European Union (EU), Kottasova says all bets are off. “The proposal from the European Commission says that allowing the clearing houses to be based outside the EU could pose a risk to the continent's financial system,” instead recommending giving regulators the power to require “a limited number” of important clearing houses be based in the EU. However, Kottasova notes, “the rules still need to be debated and approved by EU states and members of the European parliament.”

At 12:21 p.m. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,265.70 Down $3.70
• Silver, $16.89 Down $0.17
• Platinum, $929.50 Down $18.00
• Palladium, $875.80 Down $0.50

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