Gold News

Silver Trading Surge Crushes Gold/Silver Ratio as Brexit Spurs Central-Bank QE Expectations

SILVER TRADING sent prices shooting higher overnight Monday, touching 2-year highs above $21 per ounce as Asian stockmarkets also rose sharply amid talk of fresh central-bank stimulus to avoid economic damage from the UK's Brexit vote to leave the European Union.
 
That crushed the Gold/Silver Ratio of the two precious metals' relative prices to its lowest level since 2014, down sharply from January's fresh 7-year highs.
Daily chart of the Gold/Silver Ratio, basis London benchmark, last decade
 
"Had we been in the London or NY time zone," says a trading note from David Govett at brokers Marex Spectron in London, "it is highly unlikely that [silver] would have risen as far.
 
"Asia is a time zone with very little liquidity, especially on a Monday morning and this has without doubt added to the ferocity of the move."
 
But having been overtaken Friday by the value of silver trading in Shanghai, spot gold surged back on Monday, with turnover jumping to the second highest ever, some 40% below Brexit Friday's new record.
 
Shanghai's silver trading held steady near record levels.
 
After the Bank of England said it stands ready to re-start QE money creation and bond purchases after the Brexit vote, "I am concerned that, in their quest to boost asset prices, central banks around the world have created another credit-induced gigantic asset bubble," said Swiss money manager Marc Faber to CNBC.
 
"Precious metals will likely outperform cash and other financial assets in years to come," Faber said. "Investors should accumulate here, or on any weakness..."
 
Rising gold prices already meant India's official imports – the world's largest behind China – fell by more than 50% during April to May compared with the same period last year, new figures show.
 
With gold-backed trust fund vehicles expanding quickly once more, speculation by hedge funds and other non-industry players in Comex gold futures and options rose again last week to another record level, data from US regulator the CFTC said Friday.
 
Speculation in silver also rose to another fresh record by number of contracts, approaching the all-time peaks of 2012 and 2011 in Dollar value.
Chart of Large Speculators' net long position in Comex silver futures and options combined
 
UK construction activity shrank at the worst pace since the depths of the 2009 global financial crisis in June, a new PMI survey from the Markit data agency said Monday.
 
Some 80% of responses by purchasing managers in the building sector were collected before 24 June's result.
 
This week brings US jobs data for June with the private-sector ADP estimate on Wednesday, and then the official government estimate for non-farm payrolls on Friday.

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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