A very weak US dollar helped to buoy gold and silver Wednesday, moving the gold/silver ratio lower, close to our first "action target."
The uncommonly weak US Dollar Index (DXY) closed Wednesday at 74.37, within "sniffing" distance of its November 2009 turning low of 74.23. As we write this early Thursday, well before sunrise, the DXY continues lower, currently trading through the 73.80s, which is, of course, below the lows of 18 months ago. So the dollar index has already cut a lower low, at least intra-day today.
Should the "Dixie" not rebound and rebound substantially today, that leaves only the 2008 nadir of 70.70 as a "support suggestion" on the 27-year monthly history of the dollar just below.
Dollar Index, 1984 to date, monthly.
Clearly the US dollar is under heavy pressure as the world seems eager to trade dollars for just about anything else at the moment. Let us not forget that the DXY is a measure of the greenback versus a basket of six other fiat currencies. It is not a measure of the dollar versus gold. Gold, of course, is such a measure and gold has managed to gain a tentative toehold above the psychologically important $1,500 USD level, trading at $1,507 and change at the moment. Gold closed Wednesday, April 20 at $1,502.
Gold, daily since March, 2010.
Silver has answered gold and then some. Indeed silver is outperforming gold by leaps and bounds. The current "definition move" for silver is by far the most robust and most decisive dash higher for the second most popular precious metal of this bull market. As we write, silver has eclipsed $46 to the upside. The chart just below was as of the New York close yesterday, $45.22 on the cash market.
Silver, since 1991, monthly. Note that the tremendous outperformance of silver to gold is a relatively recent development.
The action has been "good" for the gold/silver ratio, as or better than we expected as shown in the gold/silver ratio chart just below.
Note that the gold/silver ratio is within striking distance of its 1983 low of 32.12 ounces of silver to "buy" one ounce of gold metal. As we write, with the sun just a hint in the eastern sky and the lake calling to us sweetly (we are, after all, on vacation), we mark the GSR in the 32.60s, new 28-year lows and within a "whisper" of new 31-year lows.
Indeed, as we head out to the lake, where our most important decision today will be what color plastic worm to throw or which top water bait might draw the best action, ... as we leave the trading action behind us on the computer, the GSR has come to within about three full points of when we shall lock in the first tranche of our intended conversion of accumulated physical silver metal into gold, as we mentioned to Vultures and shared with all readers in this post.
We wonder if today will be the day we end up calling and locking in that first "trade," ... or if it will have to wait for another time and another place. We suspect that we will be waiting for a while longer to make that first trade call, if for no other reason than one of our best canaries in the "precious metal coal mine," the CDNX:Gold ratio, is not - that's not - answering the higher prices for gold and silver. Not yet, at least and not now.
CDNX:Gold Ratio, 1-year, daily, performance. The Little Guys are in disbelief just ahead of the typical May weak period, it seems.
We would be more optimistic were that ratio showing relative strength instead of the weakness it reflects at present, but it is, after all just one indicator. An important one, but just one.
As we send this off to be posted, we think today and this place is about as good as any to make that first silver-to-gold conversion trade call, we reckon, but we will, of course, go with what the market decides, and when. For right this minute, we have other fish to fry!
That is all for now, but there is more to come just ahead.
A land developer, professional numismatist, self-taught bullion trader and investor since 1980, Gene Arensberg analyzes technical and fundamental developments in the precious metals markets. In 2000 Gene started sharing his own market research with fellow traders and fund managers. Those email reports evolved into his popular Got Gold Report, a biweekly look at important indicators for gold and silver published on the web. Gene's more in-depth market reports, insights and trading ideas are available at www.GotGoldReport.com.