Another very slow day in terms of newsflow.
It seems like the ramification of probable US QE is still working its way through the market.
Gold continues to surge and bonds are being bid up. US dollar continues to slide versus most currencies.
In the middle of all this what’s being missed is the action around silver.
Since end of April when markets started tanking, silver is up 13%. During the same period gold is up 9% and SP500 is down 4%.
Silver has benefitted lately on two fronts:
Much better than expected manufacturing data out of US and China on Sep 1 are what kickstarted this Sep rally. Silver, unlike gold, derives huge part of its demand from manufacturing and industrial activities – around 60% of total demand. Better than expected manufacturing activities are restoring faith in silver. We believe that while the peak in manufacturing activities was reached earlier this year, they will continue to remain in expansionary territory (i.e. it would not fall into “recession”) for the foreseeable future. This will lend support to silver.
Gold has pierced through its all-time high and continues to march higher. There are many investors who feel like gold may be overvalued at this point and are reluctant to jump onboard. These people tend to look to silver which is still about 40% below its all time high.
Until 2006, gold’s previous all time nominal (not inflation adjusted) high was $667 in Sep 1980. Silver’s all time nominal high still rests at $35 back in Feb 1980. Silver trades at $21 today. Jim Rogers put it succinctly : one is at all time high and one is well below its all time high. Which is a better value?
Tomorrow would be a big day. September flash PMI data comes out across the Euroland. It would be very interesting to see if Germany can continue to hold up. My guess is that Germany would be ok through this month but show slowdown starting Oct.
And of course US weekly initial jobless claims. I expect it to stay at an elevated level around 440-450k.
Without further good news the stock market rally we have seen this month could very well slip from here.
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