Month: December 2016

Shanghai Gold and Silver Premiums Through The Roof

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This is unprecedented. I have never seen such high premiums before in Shanghai. 3.5% premium (that’s $35/ounce) on gold and 12% premium (that’s $2/ounce) on silver (VAT tax not included). Just based on this, precious metals could be bottoming out.

Also dealers like APMEX have high premiums for gold.

Silver is somewhat lower in premium.

But what is most striking is that mining companies refuse to lower their physical bullion sale price. This leads to very high premiums.

Where is the U.S. Dollar headed?

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In one simple chart. If you believe U.S. bond yields will go up, the U.S. dollar will go down. I just watched Gundlach’s live presentation and the most interesting part was that inflation expectations are going up, so you can be absolutely sure that bond yields will be going up, which will put pressure on the U.S. dollar.
 

Where do we go from here for gold?

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Gold investors have not been doing good lately, but there is light at the end of the tunnel.
The 10 year bond yield has been rising from 1.8% to 2.4% since the election, but 10 year TIPS yields have only been rising from 0.14% to 0.45%. So that means there is more demand for TIPS bonds than for normal bonds.
 

People buy TIPS bonds to hedge against inflation, so I expect there will be a higher inflation rate going forward.

The CPI has been consistently rising year over year.

If the CPI rises faster than bond yields rise, then that would be good for gold. And it looks like the blue line here (TIPS yield) is trending to the downside, which means the red line (gold price) will be rising.

The COT report for this week was bullish for gold. Managed money shorts have been rising and commercials have been covering their shorts. At this rate I will be buying gold end December-January.

Silver is less bullish, but will eventually follow where gold is headed.