The Precious Accelerate

Acting Man: Silver is on Fire
How much higher can the price of silver go? One talk show host appealed to the “silver faithful” with a promise of a price to skyrocket to levels even they will find “stunning”. Our response is to point to the basis (blue line). Note that we switched from May to July.

If gold is showing some signs of abundance, silver is practically lying about in the market landscape. To carry silver for July delivery yields an annualized profit of over 1.1%. The flow of metal into the carry trade must be a torrent. If anything occurs that will stun the silver faithful, it will be the epic drop in the silver price. This will be decried as a smash-down.
I remained heavily overweight the precious metals these past few years despite deflation expectations, mainly because I expect gold would remonetize amid deflation. It's also a good hedge though: even if I'm completely wrong on commodities, I will make money thanks to holdings in the precious.

Slope: Gold Breaks Out Again

The moves look extended, but the U.S. Dollar Index is right at the low of its trading range today. The dollar will likely decide whether commodities and precious metals correct or rally further.

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