Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver - Not too Late to Hedge Against Dollar Stock Market Investment Losses

Commodities / Gold & Silver Jan 25, 2008 - 12:10 PM GMT

By: Roland_Watson

Commodities Best Financial Markets Analysis ArticleLike many silver and gold investors, my eyes were glued to the ticker tape this week wondering how silver and its derivative stocks would fare during this downturn in the global markets. To think that silver would be unaffected would be naïve but of course the question was in which way would it be affected? Would it go up, down or move in a channel?


Indeed it was not difficult to find commentaries which said that a stock market downturn was positive for silver because it provided a safe haven for investors while there were those who predicted that silver as a commodity must suffer since the stock market is a leading indicator of economic activity. The question being, do investors treat silver like money or a commodity?

Well, what has silver actually done in comparison to the US stock market? Using a broad index as a measure, I first plotted a semi-log graph of the silver (black) and the S&P500 index (green) for the last 40 years.

On this broad sweep we can safely say that silver and the stock market are poorly correlated. During 1980-2000 silver may not have followed the stock market on an upward trend, but silver never moved upwards when the market moved down.

However, during the 1970s, it was more mixed as silver went up while the stock market went down during the years of 1972-1974 and 1976-1978 as inflation fears began to concern investors but did follow the general trend at other times.

The reasons why the 1970s and this decade provided better correlation was due primarily to US Dollar bear markets while 1980-2000 was a dollar bull market in general and a disinflationary environment which is a safe haven for fiat money investors. Moving into this decade and the present silver bull market we get just as confused a picture.

For our three silver surges of 2004, 2006 and 2008 the S&P500 index has respectively been strong, neutral and weak! In other words, if you want indications of where the price of silver may be going, do not use stock market indices to help you!

Again, let me iterate that the silver bull market is about money - fiat money versus real money. The fiat dollar has been rapidly inflating away in value for the last 6 years. At this rate it could approach half of its 2000 value but we think it will stop short of that. When the fiat money balloon expands full of worthless air, investors shift to hard money as in gold and silver. That's the situation in a nutshell.

When the markets rallied this week on the Fed 0.75% cut, silver was certainly not rising on the tails of a stock market recovery. Rather it was responding to a large rate cut that spelled further weakness for the US Dollar and a visit to the realms of negative real interest rates.

Ben Bernanke has helped set up gold and silver for a further surge in prices. It is still not too late to get on board to hedge against the dollar losses in your other investments.

By Roland Watson
http://silveranalyst.blogspot.com

Further analysis of the SLI indicator and more can be obtained by going to our silver blog at http://silveranalyst.blogspot.com where readers can obtain the first issue of The Silver Analyst free and learn about subscription details. Comments and questions are also invited via email to silveranalysis@yahoo.co.uk .

Roland Watson Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in