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LAWRIE WILLIAMS: Gold and silver defying HFT take-down efforts

Feb
17

The past few days have been somewhat encouraging for precious metals investors.  Despite some seeming attempts, probably by the bullion banks, to bring gold and silver prices downwards, both made some significant recoveries. While the price recoveries may have been subsequently capped, with gold at around the $1,240 level and silver at around $18, this has to be seen as something of a victory for the gold bulls, although perhaps a pyrrhic one as the HF traders are probably not finished with their attacks yet.

Indeed this all happened in the light of some seemingly gold-negative news: An apparently slightly more hawkish Janet Yellen, some fairly positive U.S. economic data, news that long time gold supporter John Paulsen had liquidated some of his gold holdings in the GLD gold ETF and that George Soros had sold his Barrick Gold stock, taking some substantial profits.  All seemingly bad news for gold, and by association for the other precious metals.  Yet, despite all this gold has risen almost 8% year to date and silver around 13% and the major gold ETFs have been adding gold so far.  The biggest of all, GLD, has added just short of 30 tonnes of gold this year, much of it in the past 2 weeks after seeing around 15 tonnes of sales in January. 

This ‘safe haven’ gold demand seems to show few signs of diminishing, particularly given the apparent unpredictability of the USA’s new President and his unpopularity with much of the media, the self-styled intelligentsia, the intelligence community and the deep state.  There is already talk of impeachment, but then there are major concerns about the kind of Administration a President Pence might preside over.  Could be a case of ‘better the devil you know’!

If anything, silver has been performing better than gold with the Gold:Silver ratio (GSR) at around 69, down from around 72 at the beginning of the year.  Indeed the GSR had been back at 68.6 during the past couple of days before coming back to just over 69 in today’s trading.  Generally silver outperforms in a rising gold price scenario so if gold can break out above $1,250 there is a good chance the GSR will fall further.  We have been predicting 65 as a likely level to be reached during the  current year.  Some consider this unrealistic but if anything we think a 65 level may prove to be conservative.

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com