Welcome to 2023, as market action this past week got underway. Today we will look at how silver and gold have started the year and, most importantly, where they are likely headed based on current respective valuations versus historical precedence.
For example, the US stock market is still historically overvalued based on a range of long-term data sets. Wall Street Legend Burton Malkiel hurt stock market bulls' ears today by stating the following on CNBC.
The CAPE Ratio he cited is still at historically high levels, and +5 to 6% returns over the next decade are likely to underperform real price inflation by more than half as the fiat Federal Reserve note is poised to go into a secular bear market. With commodity values melting higher versus paper assets and bubble real estate valuations to come.
One of the best precious commodities to use in judging long term valuations is gold bullion. This is an over 100-year chart illustrating the S&P 500 stock index divided by the spot price of gold.
Similar to the prior CAPE ratio chart, since 1990, we have only seen brief dips below historic overvaluation levels.
The S&P 500 closed today under 3,900, valued at just over two ounces of spot-price gold. When I look at this chart, given the fundamentals of markets and historic debt and unfunded promise pile coming due in the decades unfolding. My intermediate long-term target is to, at a minimum, get back to the 2011 low seen by the yellow line there.
How much further it might fall beyond that is a question no one can intelligently guess, at least not yet.
Silver bullion stackers increasingly seem confident they have placed the right long-term bet owning silver, especially considering the monumental drain of underlying bullion in the COMEX over nearly two years running.
My Twitter friend @MikeSay98 posted some incredible COMEX silver-related charts today.
The first of which comparatively lays out just how large the 1,000 oz silver bullion bar withdrawals from the COMEX in 2022, compared on a relative percentage basis over the past 20 years ongoing. Only in 2004 did we see a larger percentage decline in underlying silver bullion in the COMEX versus the last year, 2022.
In 2005 silver prices had a large run-up in value to follow.
Currently, registered or deliverable silver stands at just over 34 million ounces. But last year's decline in registered silver on a percentage basis was unprecedented, gapping down -58%, the largest percentage decline in two decades of data.
Not only does silver start the year on a bullish fundamental foundation, its long-term price chart spanning this entire full fiat currency era is signaling a cup and handle that looks poised to produce violent moves to the upside in time.
Turning to the physical gold bullion market, central banks last year bought bullion at the fastest pace since the 1960s. It has become obvious central banks are trying to quickly add gold bullion allocations to their foreign reserves, often to lessen their dependence on reserve fiat currency holdings of the inflating fiat US dollar or fiat euro, for instance.
Even after the last few years of western gold ETF sell offs and west-to-east gold bullion outflows, the spot gold price continues to show strength. What happens when institutions and western momentum traders begin reallocating back into gold allocations?
The silver and gold markets had a mixed but positive week of trading price action.
The gold-silver ratio (GSR) climbed this week to close at 78, and it remains a question for me and many onlookers on how this important ratio will trade in the coming months to start this year.
I've seen bears claim the GSR is going higher in the short term, while some silver bulls out there are pointing out key lower levels of support for silver outperforming gold in the months and years to come.
And while a GSR of 64 or 46 is a technical support level on the charts, count me in the camp that targets gold-silver ratio history and our eventual going back to the 2011 low near 33 and perhaps lower. Bull manias in bullion typically propel historic tightenings of this important ratio, with silver outperforming gold over key timeframes.
Moving on to look at some closing record bullion coin sales data for respective sovereign mints in 2022 relative to recent history. Last year was a record-setter in terms of gold coin sales not merely with the US Mint but also at Australia's Perth Mint and the Austrian Mint in Europe.
This photo was reportedly taken just about a week ago, you can see a line stretching out of the Austrian Mint as bullion buyers wait in the cold rain to get their chance to swap fiat Euros for physical bullion coins struck by that government mint.
Perhaps they, too, heard the news this week.
The ECB is planning on a "realization phase, scheduled for autumn Q3 2023" for the potential fiat Euro CDBC system launch by the end of this year or sometime in 2024.
And finally, to close this week's SD Bullion Market Update.
Here is a heads up on a sneak peek video filmed behind the scenes a few days ago at SD Bullion's new state-of-the-art pick-pack facility.
The Yankee Stacking channel on YouTube visited SD Bullion last month, and I will leave the link to that video for you here to check out. Our company CEO Tyler Wall gives Yankee and you a tour behind the scenes of our high-volume bullion business.
I think many of you will find it fun and worth checking out.
As for me, I'll be here next week, God willing.
And as always to you out there, take great care of yourselves and those you love.