Investors aren’t limited to only investing in the S&P 500 and the Dow Jones Industrial Average. Every week we share the market trends we are following. We are interested in whether the trends in those markets are continuing or if they are experiencing a temporary or complete reversal.
When we identify trends, we are only concerned about the price data and what it says about any given market. We don’t need to know why a trend has formed to invest, but our human nature wants to understand what is driving them. Each week we try to offer some perspective on what we think the most substantial moves are and what critical drivers are behind them. Here we look at what is going in our globally diversified, non-correlated Crystal Bay Ubitrend strategy.
Last week’s continuing trends:
- Lumber
- Silver
- Gold
- Japanese Equities
- Nickel
Last week’s reversing trends:
- Coffee
- Orange Juice
- European Rapeseed
- Copper
- UK Government Bonds
What we are taking note of:
Silver has had a phenomenal run this summer. Silver prices are up 50% since July 1st.
Silver has a split personality. About half of global Silver production is used in industrial applications, ranging widely from electronics to wood preservatives. In the past, the photographic film industry was a big consumer of Silver; today, solar cells represent a growing market.
The second side of Silver’s personality is its use as a monetary metal, the poor man’s gold. One half of global Silver production ends up as jewelry and investments. In times of monetary debauchery, Silver soars in value, usually at a much faster pace than gold. Conversely, in times of deflation, Silver value as an investment craters and it has to fall back on industrial demand to provide a price floor.
During the last gold bull market of 2011-2012, Silver prices briefly touched $45 per ounce. They fell down to $15 per ounce by 2015 as inflation remained under control. Interest in Silver disappeared, and Silver volatility dropped to its lowest level in decades. During the last five years, the price of Silver stayed in the range of $15-18 per ounce and experienced an unprecedented period of stability.
The year 2020 put an end to that. Silver market’s first reaction to the pandemic shutdown was to worry about the industrial demand for the metal: silver prices swiftly collapsed to $12 per ounce, together with a range of other economically sensitive commodities. Starting in July 2020, however, Silver’s other personality asserted itself as governments around the world abandoned all restraint and made their money printers go brrrrr. Silver has returned to its role as an extremely sensitive indicator of inflationary pressures. What it tells us is that we should be afraid, very afraid.
How are we heading into next week?
The Crystal Bay Ubitrend has a long position in Silver and continues to hold.