Silver and its yellow cousin gold took a beating a few weeks ago on Black Friday of which had the worst showing in 70 years. The bad news was quickly followed by the WHO's warning concerning the Omicron variant which caused panic right across the board. Bitcoin was monkey-hammered down more than 17%, bringing down the entire crypto space with it. At time of writing, Bitcoin is at $47,002, a $19,000 drop from its all time high of $66,685 recorded on October 20th which at that time was a 130% gain for the year.
On that same Black Friday, gold dropped about $30 as shown below - courtesy of www.kitco.com.
Since then, gold has been inching higher. At one point yesterday, gold touched $1816 but ended up closing just below the $1800 mark, settling at $1798.70 per ounce, with only a 70 cent difference from the previous day's closing.
My favorite precious metal, silver had been moving sideways for the past couple of weeks after a nasty week+ long tumble that began around November 17, ending on Black Friday. Is it just me or did silver foretell an ominous move downward for the broader markets? Maybe Bitcoin HODLers should keep an eye on silver as it might actually be precursor to big moves up or down. The graph below shows the averages of the last 30 days, ending December 17.
Between Wednesday and yesterday's closing, silver jumped up a full dollar following the Federal Reserve's FOMC meeting after it announced they would double their tapering from $15 billion to $30 Billion per month and that rate hikes were coming in 2022, spurned by the present inflationary environment. 3 rate hikes are now expected with the first hike coming in September, 2022 and more to follow in 2023.
One thing I should point out is that through centuries and millennia, the silver to gold ratio averaged 15 to 1, meaning fifteen ounces of silver could buy one ounce of gold. The ratio has been severely out of whack for the last decade, hovering around 70:1 but in early spring 2020 when the global lockdowns began, the ratio briefly hit an astonishing 124:1, something which has never been seen throughout history. The ratio quickly recovered but it's back in the news this week after climbing back up and hitting 80:1.
The ratio is a big red light and shows us just how undervalued silver really is. Now that the FED has signaled its tapering intentions and interest rate increases, this will impose a damper on liquidity and make it harder and costlier for people to borrow. With the implementation of Basil III on January 1, 2022 that imposes stricter lending rules on banks, expect the economy to take a hit. When Basil I was implemented in the late 80s, it was quickly followed by a recession. The Basil II rules were approved on November 1, 2007. The stock market crashed the very next month and sparked the Great Recession. Basil III is to be fully implemented in just a couple of weeks. You can guess what comes next.
Silver is a fantastic hedge against inflation, especially in times of uncertainty. Considering that gold and silver rose in 2011 to new highs within 2 years of Basil II's full implementation, is the same going to happen with precious metals over the next 2 years after Basil III? At this point, I'm surprised that silver hasn't hit triple digits yet but I do believe it's just a matter of time now.
It's definitely not too late to get your hands on some silver. Get in before the inevitable rush. See the links I've placed below.
Charts courtesy of Kitco.
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