originally published Thursday, February 29, 2024

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I must say that I find it rather concerning that people like Larry Fink, the CEO of Blackrock, are starting to sing the praises of Bitcoin – this automatically raises the suspicion that Bitcoin may be some kind of honey pot or trap in which to corral the capital of the masses. After all, if you are going to “own nothing and be happy” by 2030, it means that they are going to steal all of your wealth and they have plenty of ways to do it.

It’s a lot more difficult to steal all of your wealth if you have a good part of it in physical gold and silver. True, they can pass some law like they did in 1933 declaring the ownership of gold illegal, but then they have got to find it, and a key point to note is that they are a lot less likely to come after any silver you own, because the wealth is physically less concentrated than it is with gold and you can stash it all over the place, mindful of course of how they might be able to locate it with metal detectors. The big appeal of the Precious Metals is that they enable you to go “off grid” and escape the clutches of the tyrannical CBDC system that is rapidly bearing down on us.

We have already deduced that in order to herd the masses into the CBDC system they are likely to precipitate a global financial crash in order to strip them of their wealth and turn them into frightened sheep looking to the government for their salvation and of course this will enable them to wipe out all the debt by, in effect, telling creditors like Treasury holders to “go and get stuffed”. With respect to this there is a big date coming up, I believe about the 10th March, when, after enjoying a long period of zero reserve requirements Banks are suddenly going to have to come up with a significant reserve requirement. The problem is that many of them are strapped for cash and will simply be unable to do it, which means that later this year and perhaps sooner rather than later we will find ourselves in another banking crisis considerably worse than the last one. When you understand this the recent heavy dumping of stocks at high prices by various plutocrats starts to make sense – it looks like they are getting out of the way before a major selloff hits. With respect to this we will be having an updated look at the broad stockmarket charts soon.

The performance of Bitcoin and a number of other cryptos has left the Precious Metals sector in the dust in recent weeks and the reason for this article is to point out that the sector is so out of favor now that, according to time honored contrarianism, it is in favor with us.

Just how out of favor the Precious Metals sector is we can quickly discover by looking at some ratio charts and we will start by looking at a most useful chart that we frequently refer to, that of the silver to gold ratio.

We’ll begin by looking at the silver to gold ratio on a chart which goes all the way back to 1980 and so catches the very end of the 1970’s spectacular bullmarket. We can see that it now takes 5 times as much silver to buy one ounce of gold as it did back at the start of 1980 since the ratio now is at 0.011 and back then it was 0.055. The prices of gold and silver themselves are shown at the top and bottom of the chart.

Now we’ll look at the same chart, but only going back to 2002, in order to get rid of the 1980 anomaly and so “open out” the chart so that we can more easily see the lows in this ratio and where they occurred. The rationale behind looking at this chart for guidance is that the silver to gold ratio tends to be high when there is great interest in the sector, when investors are less risk averse and want to maximize leverage by buying more volatile silver, and conversely, when they are more cautious towards the sector they tend to favor gold over silver as it is considered to be safer. As we can see on this chart, apart from the freak Covid Crash anomaly in the Spring of 2020 when the world was gripped by a carefully orchestrated mass hysteria and oil became temporarily worthless, the ratio now is pretty much as low as it has ever been at levels that it saw briefly in the depths of the 2008 market crash, which was followed by a big PM sector rally, and it is even below the level it fell to by early 2016 when the sector was totally out of favor and a recovery rally followed and it is slightly above the level it dropped to by the Fall of 2022 when again the sector was totally out of favor. So, regardless of what happens near-term this has to be regarded as strongly bullish for the sector over the medium and long-term.

When we factor in that Banks are buying tons and tons of gold and Big Money is generally dumping stocks it looks like when this ship goes down, which could be soon now there will be a massive flight to gold and silver as a safe haven, and they could therefore rally strongly even if markets generally are tanking.

As you probably don’t need reminding, PM stocks have performed abyssmally in the recent past, especially compared to something like Bitcoin and here again ratio charts assist us in understanding that the sector is terribly undervalued at this time with huge upside potential. The rationale is similar to that pertaining to the silver to gold ratio. When investors are bullish on the PM sector they are looking to maximise gains and therefore are more attracted to PM stocks than to gold and silver themselves, so at times like these, the GDX to gold ratio is high as we see on our chart from 1995 shown below. But on the other hand, when they are very cautious towards the sector, they prefer the safety of gold itself to PM stocks, and the ratio is low. So we can see lows in the ratio corresponding with important lows for the sector, as was the case at the 2008 market crash low, the late 2015 sector slump when it was totally out of favor giving birth to a recovery rally and the Covid Crash low early in 2020 when most everything was out of favor. Right now it is very close to these extreme lows which is therefore viewed as a great time to accumulate battered down stocks across the sector. We are believed to be at or very close to a major sector low here.

With Bitcoin all the rage and silver still “down in the dumps” it is interesting for us to observe the ratio chart of the Bitcoin price to silver. This chart does suggest that some sort of reversion to mean is in order, which would mean either Bitcoin reacting back or silver taking off higher, and perhaps both.

The Bitcoin to gold ratio does not look so extreme and suggests that the current Bitcoin rally may have somewhat further to run before it burns out, but we should keep in mind that if this banking crisis gets really out of hand we could easily seeing the biggest bank runs of all time and they will be global, with a veritable tsunami of cash fleeing into Bitcoin, cryptos generally and gold and silver.

End of update.

Posted at 4.30 pm EST on 29th February 24.

The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment or securities advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market technical analyst, Clive Maund is not a Registered Investment Advisor or Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks cannot be construed as a recommendation or solicitation to buy and sell securities.