by Gabriel Andre on November 27, 2008
You probably know that silver prices usually track and follow gold prices but often amplify them during declines.
Silver is both a precious metal used as a value reserve, but it’s also an industrial metal well known for its physical qualities, and used in numerous technical applications. Those two features make silver very attractive not only for industrial players but also for financial investors.
Silver prices are therefore driven by real factors like mining extractions or industrial demand, but also by speculation and other financial factors. Some of them become more significant over the time, depending on the economic and financial context. It appears that the leading factor recently has been the financial deleveraging. Indeed, the massive liquidations of positions from hedge funds which chase cash to face redemptions and therefore reduce drastically their risk exposure have been the key factor of the recent sell-off.
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by Gabriel Andre on October 22, 2008
The gold market is dual: there is the physical market and the financial (paper, futures) market. The spread between those 2 markets is currently widening. Indeed, on one hand the demand of physical gold is growing everywhere in the world in the current context of economic and financial crises. The holders of physical gold don’t sell anymore as they expect a future rise in the prices.
On the other hand, the financial market is impacted by the deleveraging done by the hedge funds that are obliged to sell to cope with their redemptions.
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by Gabriel Andre on October 6, 2008
Silver prices usually track and follow gold prices but often amplify them during declines. This is what happened recently during the sell-off on commodities markets. On July 15 silver closing price was $US19.12 an ounce. Last Friday, it closed at $US11.32. It’s a 41% decline in 2 months and a half, much more important than the pull back on gold prices.
The chart shows the strong positive correlation between gold (red line) and silver prices (black bars). Since the beginning of 2008, this correlation was almost perfect. However, since mid-August, silver prices have been failing to keep up the pace and are much more “heavy” than gold prices. What is going on?
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by Gabriel Andre on September 29, 2008
Gold prices have strongly rebounded since September 11. They jumped from $745.50 to a top of $926 one week later. Gold is currently trading around $877 but it is probable that it will move higher into the $900/950 area.
Why? There are a swarm of reasons.
The non-farm payrolls and employment figures published on Friday in the US should be quite weak, and the amount of debts has been rising. The confidence crisis in the US Dollar is not over and the recent bounce back of the Greenback is temporary.
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by Gabriel Andre on September 18, 2008
Sino Gold Limited (ASX:SGX) is an Australian company involved in the exploration, development and production of gold exclusively in China. The company is primarily focused on the development of the Jinfeng Project.
As many other commodities-related stocks, SGX has suffered from the broad decline of the tangible assets those past two months. But it had also declined between March and May, while the equity markets were sharply rebounding. The fact is that Gold prices was effectively retracing from the peak posted above 1,000$ an ounce. As a result, there is a strong positive correlation between gold prices and the SGX price development. The chart shows the SGX price action (in black) and the Gold price action (in red).
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