Sirwin
Sirwin
Sugar and silver's positive correlation

Lousy Commodities Silver And Sugar - Starting To Taste Sweet Again?


After a two and a half week hiatus from writing. I'm back with an interesting update on an article I published in January, 2022 titled, 'Commodities silver and sugar biggest losers of last 42 years' in which I made a quick comparison of valuable commodities in the metals, energy and food sectors and discovered that both silver and sugar had suffered in a depressed state for so many years while all the other commodities soared in price.

I had determined that both silver and sugar saw prices collapse over 50% each since their 1980 highs. The reason I am revisiting this topic is because one of these two commodities, sugar has begun making headlines as of late. For example, just yesterday Kitco News published an article titled, 'Elevated sugar prices means that inflation and gold have not peaked yet'.  This immediately caught my attention. As it turns out, sugar hit a multi-year high above 21 cents per pound last month after crashing to just 10 cents in 2020 at the onset of the lockdowns. Sugar previously fell to 10 cent lows in August 2018 and before that, in August of 2015 (See chart here).

Prior to 2015, sugar hit a high of 34 cents in January, 2011. Just a few months later, in May, 2011 silver shot up to almost $50 per ounce. Over the next 4 years, both silver and sugar dropped to the lows we saw in August, 2015 (See Chart here).

If you were to superimpose these two charts together, you will see a positive correlation. In fact, they are almost identical. In 2007, sugar was trading at a measly 9 cents per pound and by January, 2011 it peaked at 34 cents. In august 2007, silver was about $11.70. By May, 2011 silver was selling for close to $50 per ounce, a similar markup to sugar.

Why there's this correlation between the two, I don't know but I can say that it exists. These two commodities could not be more different from each other yet they appear to act in tandem. As sugar charged upward in price at the beginning of 2011, it appears to be rhyming by increasing in value at the beginning of 2023.

Since silver lagged by about 4 or 5 months back in 2011 before catching up with sugar, are we to see a similar rhyme with silver in coming months, say in June or July. The Kitco article correctly states that rising sugar prices will surely fuel inflation since sugar is in almost everything we eat, therefore food prices will go up.

Like they haven't gone up already! Everything seems to be costing more. The truth is, things aren't costing more, it's the purchasing power of your currency that's gone down. This is the curse of inflation. It robs us of our purchasing power. The title of the Kitco article alone suggests inflation AND gold have NOT peaked yet.

You know the old saying... "Where gold goes, so does silver"!

So is sugar really a leading indicator for silver. The charts I mentioned above certainly suggests this. Therefore, I'm going to put my foot in my mouth and declare, "Silver will rally in a few months time". We'll find out by summer if I'm wrong. I should also point out the FED will likely add another 50 basis points to their interest rate, presently at 4.5%, later this month after their monthly FOMC meeting. 2022 saw the most aggressive rate hikes by western central banks in their history. It all started exactly a year ago this month. It takes a good 9 months to a year or so before rate hike effects are felt on the economy.

Now, I'm seeing headlines like these:

U.S. bankruptcy filings surge at fastest pace since 2009.

How much longer before the most aggressive hiking cycle in history triggers the recession.

Is the recession already here?

Subprime auto lender and used car retailer collapses as distress cycle finally arrives.

"Tape is nearing max frustration" JP Morgan trading desk warns break below 3900 could spark global selloff.

Baltic Dry Index suffers biggest one day decline since 1984.

Hints are popping up everywhere that we are in or are about to enter a nasty recession and that while inflation has taken a little break, it's about to blast off again. I expect it to be unlike any previous recession. The one tool us poor folks can utilize to counter runaway inflation is silver. Right now, silver is at remarkably depressed levels, still below $21! Just last month, silver charged to $24.50 before immediately getting smacked down again. Bix Weir explained what happened after 600 million ounces of PAPER derivatives were dumped on the market over a two day period. The powers that be are losing control and that's a good thing.

Spot Silver - March 2, 2023

Sugar, of all things is hinting that silver is about to shoot the moon. This presents a 'golden' opportunity as we head into a recession that quite possibly could turn into a depression. During times of depression, two things that rise in value are gold and silver. During the last depression of the 1930s, gold was outlawed in the U.S.A. but not gold mining stocks. Homestake Mining shares went from $65 in 1929 to  $373 in 1933 for a 474% gain while Dome Mining saw it shares go from $6 to $39.50 for  558% increase.

At present, gold mining stocks in general are depressed. Are they about to jump higher? The U.S. government has reached its debt ceiling and still hasn't resolved the issue. The Treasury is set to run out of money sometime this summer, right on cue for when I expect silver to rally.

Connecting the dots, and there are many, can be tricky indeed. Sometimes the dots are so obvious, it's similar to 'paint by numbers', where you know exactly where each dot goes, eventually forming a picture that it easy to decipher.

I'm working really hard to form this picture and what i'm seeing so far is a late spring / summer rally in silver and gold. I bought 8 one ounce Silver Maples last month (photo below). What great timing! Fortunately, you still have a bit of time to get in on the ground floor. Consider investing in silver, the sooner the better! Click the OwnX link below to get started.

Bank of Canada 2019 Reverse Proof Privy 'Gramophone' Silver Maple Coin

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Check out some of my previous posts.

Core Scientific to pay debts with mining rigs.

Bix Weir exposes last week's 600M0z silver derivatives smackdown.

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Gold and silver smacked down again. What just happened?

The 'N' of CNN!

Success! My first Bitcoin purchase went through.

India crushes it with record silver imports.

El Salvador's President lashes out at lying legacy media.

Crypto lender Genesis files for bankruptcy.

 

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SweptOverNiagara
SweptOverNiagara

Name's Joe and I live in Ontario, Canada. I like writing on a wide variety of topics. I enjoy keeping track of markets, investing and commodities and the crypto sector. Also do some coding for web browsers.


The Brave New World
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