IKN

Take physic, pomp

This call last weekend is looking pretty good

Here’s the opening section of The IKN Weekly, issue 266, out last Sunday evening:

Something just changed for the better in the precious metals market. Maybe. 

I added that “maybe” on the end because however much I’d like to be more bold or definite about the call, one week (nay, three days) of evidence is much too thin and we’ve suffered through too many false dawns as it is. But last week’s market action looked great for the miners, whichever way you examine it. 

One of the very few charts I’ve cared about and keep caring about over the years is the Gold/Silver Ratio (GSR), because when it’s working it can give a useful signal about the risk appetite of our sector (very quickly a higher GSR means gold’s loved more than silver which means the market doesn’t want to take on as much risk or is battening down the hatches, the opposite applies too, of course). 

That looks like a change in tide to me, and when coupled with the way stocks bounced hard while gold put in reasonable but small percentage gains, it looks as though people are ready to bolt on more risk to their portfolios.  

Once again, I remind readers the same as I need to remind myself on occasion: We’re investors in companies at The IKN Weekly, not investors in metals. Those companies just happen to make (or want to make) metals as their finished product, but the difference is still a vast one. 

At the time the GSR was at 65X and just starting to roll over. Here’s the gold/silver ratio today, just four trading days later:

That’s not shabby at all, especially as both gold and silver have popped hard to the upside. I put that “maybe” in the title of last weekend’s intro setcion because there have just been way too many false dawns in the metals complex over the last couple of years. This one is by no means a done deal and could go either way too, but there’s zero zip nada no doubt that what we’ve seen this week fits right in with the call made by The IKN Weekly before it happened. We’re no sort of permabull round here, either.

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