Summary
➡ The article discusses the trends in gold and silver markets, noting that the open interest numbers in gold are promising for a potential increase. It also highlights the gold to silver ratio, indicating a possible major silver rally if a 12-13 year trend line is broken. The author compares current market conditions to those in 2010 and 2011, suggesting a possible repeat of the market behavior from that time. Lastly, the article mentions the potential for a rally in mining stocks and discusses historical instances of inflation affecting real estate prices.
Transcript
We’re going to compare this to what was going on in 2010 and 2011. It is actually very similar. A long-term look at what bubbles are. We are actually stuck at the 1929 top and it’s been that way for months in the Dow versus gold ratio and you’ll see three progressive bubbles made and pumped up by the Fed. That one got higher than the next except for this last one which is a little bit deflated or a lot a bit deflated and we’re just waiting for this final one to fully deflate to 1980 levels and I’ll show you that chart forthwithly.
Gold open interest resets downward. We are at around 450,000 contracts again which is good news and shows that we have the fuel front of the leg up doesn’t necessarily mean it’s going to start right now but open interest is low enough in the futures market that we have room. We have fuel for a rally when it decides to begin. The gold to silver ratio bounced off trend line this week, a trend line made since 2011 and remember when I said that in Weimar Germany at the peak of the hyperinflation you could buy a swanky house in Berlin for about 75 ounces of silver.
Well, I found an even more extreme example than that and if we do go through a monetary crisis which I fully expect we should be seeing similar numbers in real estate relative to gold and silver and on my channel, my latest video, we’ll talk about, I haven’t uploaded yet but it’s coming, we’ll talk about why this makes sense from a back end perspective why real estate falls so hard relative to real money compared to other goods and services. It has to do with a magnification factor and debt and by the way the news on the street is that war is going to break out here in the next two weeks.
I don’t know if this is true but if there are technical problems with the silver report over the next few weeks then I’m probably evacuating south. I don’t expect to but I should be able to report down south. I have a place to go if I need to. I have friends down there. Everything’s fine right now but I don’t think I will be in this studio if I have to evacuate because I can’t bring it with me and what about my stacks? Well, they’re already divided amongst friends throughout the country, people I trust and so hopefully everything will be peaceful and this war will be called off for good reasons.
By the way, this is a picture of my block from last week when a rocket hit just outside of the city and lit up the skies with smoke and fire. So that’s fun. Thank God nobody was injured or killed and no property was damaged except for some twigs. I like twigs so I’m upset. But let’s continue with this week’s silver report brought to you by Fortuna Silver Mine, a symbol of FSM. I want to compare two slides on their corporate presentation here. This shows each of their major mines or I think all of their mines and the production for each.
So we have here we’re going to compare this to the all-instaining costs for each mine. So basically the point is when you see lists of all-instaining costs for mines you have to weigh them by how much production per mine. So you see the Segella Mine is the most productive at 126 to 138,000 ounces of gold for 2024 estimated production. Runner up is the Yaramoko Mine in Burkina Faso at 105 to 119 equivalent ounces of gold and then Lindero at 3rd 93 to 105,000 and San Jose is the main silver mine and kyloma the least productive.
So remember that Segella Yaramoko Lindero San Jose kyloma and here we have the same order Segella Yaramoko Lindero San Jose kyloma and the most productive mine is also the most efficient at between 110 to 1230 dollars per ounce all in sustaining costs of production and here Yaramoko is runner up remember it was the second most productive and the second most expensive. So the company basically Fortuna Silver mines what I’m saying is that it is heavily weighted towards the most efficient mines and so its costs of production are very very good compared to the price of gold and silver going forward the least productive mine is also the most expensive still comfortably profitable gold is now at about 2400 dollars an ounce and the upper end of the estimation here is 1950 per ounce in Lindero.
So even its less efficient mines are well within profitability and that’s just another reason why I like FSM and why I own it do your own due diligence and we’ll continue with this week’s silver report. Okay this chart I conjugated from gold charts are us really they conjugated I just brought it up uh stuck at the 1929 Dow Jones top by the Dow Jones top in 1929 right before the crash of 1929 I’m in a great depression mood because I’m reading a diary about the Great Depression and I’ll show you the entry at the end of these slides about the more extreme note that I found than the uh 75 ounces of silver for a house in Germany even more extreme than that and then at the end here but anyway stuck at the 1929 Dow Jones top this is relative to gold so the Dow relative to gold was about 19 ounces uh to buy the Dow and this was in 1929 and you can see here that we’ve been stuck in this range since about 2018 it looks like 2019 I don’t know the exact year but in the last five six years that’s where we’ve been stuck at the 1929 top of stocks versus gold the second bubble was in the 1960s 1970s with the fault one in gold pool and the end of convertibility the closing of the gold window by Nixon that led to a collapse of the bubble in the 1970s and here we have the third bubble which was the most extreme of all into the 2000 top into the NASDAQ top and we haven’t gotten anywhere near that spectacular bubble again we are stuck at the first bubble top in 1929 also I wanted to put some perspective on this this Great Depression over here on this gold to stocks ratio gold to dow ratio or dollar to gold ratio whatever it is when we’re down over here the problem what makes people poor in a depression is not necessarily that stocks are not expensive relative to go to they’re really cheap it’s that people bought on the way up up up over here and then they had to sell and they lost all their money so you have cheap stocks but nobody has any money and it’s the same thing with other goods and services they can’t afford food they can’t afford shelter they’re very poor and it’s but if somebody just held on and didn’t participate in this bubble and just held on to their money meaning their gold and their silver not necessarily their dollars because again the dollar is a derivative then they would have been fine they would have been able to pick up a bunch of stuff at a discount same thing over here 1970s 1980s this was also a depression but you see here the Fed tried to pump up the bubble again up to about 22 ounces of gold but haven’t gotten anywhere near the second or third bubble tops so we’re waiting for this final one to deflate or this half bubble to deflate and that should lead us to the endgame in my estimation let’s go to the next slide so gold open interest this is important for traders uh it looks like we are down to about 444 000 contracts i think that was the low i think it went a little bit lower than this this is from two days ago this chart but it’s around here and we see that we have liquidated on the on the open interest in gold futures from about 400 540 000 contracts to about 440 000 countries but it’s about 100 000 contracts liquidated uh since mid-may and the price of gold has not gone down they’ve gone from highs about 24 50 to about 2400 now so about 50 bucks that’s not really anything uh these days meaning we have plenty of fuel for new contracts to be opened and the price to head higher whether it starts now i do not know but the fuel is there to make it sustain once it does start and we see a longer view a longer term view going back 2022 of open interest we can see that we are uh in the average range that we’ve been in below average really i mean i think most of the time we were on top of here and we see here the peaks and we’re way below that so yeah we can go a little bit lower in open interest and that would be helpful the low is 400 000 over here and this is when i was calling for a pretty big rally which is exactly what happened over here this was a major low and then we’ve been rallying ever since so uh yeah open interest numbers in gold look good we have the fuel for a another takeoff exactly when it starts we’ll see that the fuel is there gold to silver ratio looking back to 2011 we have a trend line here from 2011 when it was about 30 to 1 to 2021 this is the silver squeeze top over here when it was about 65 63 something like that to one and we’ve hit the trend line again over here at about 76 to 1 is that the number 76 i can’t tell the red line’s like probably a six yeah so we have to break this trend line uh to get to the next uh silver major silver rally and i think we will pretty soon we’ll see if we can break it here we might have a little bit of a bounce and then a breakthrough once this trend line breaks and it’s a 12 year 13 year trend line i think we’re going to be in for some fireworks is the point i want to talk about this week this is speculation on my part the case isn’t that strong here but i just wanted to make it anyway um as a possibility so i looked at the charts from 2010 to 2011 and if you remember a few weeks ago on the silver report i talked about the top in the 1970s at 650 corresponding to the top in 2010 the triple top the triple tops are this triple top at 650 in the 1970s the triple top at 20 going into 2010 2011 and now the triple top at 30 that was recently broken and now we’re on our way higher uh so this is from the triple top at 20 this final break over here in september 2010 uh you can see here the low and that week is a weekly chart the low was 1959 so i looked at the at the daily charts i didn’t put that daily chart in here it’s too tedious but just trust me the daily chart shows that after we broke 20 for the third time we were trading below 20 for about four trading days until this the trend was sustained much higher to uh another top another local top about 30 31 and then we had a three we had about a one month decline here and then all the way up to 50 uh so yeah four trading days below 20 and that is very similar to what’s happening now why because this is the daily chart of the 2024 break of 30 just like in 2010 we had a triple top break of 20 uh now we have a triple top break of 30 which corresponds to the cpi and i went through that about three weeks ago uh check the other silver reports and you’ll see it and so here’s 30 we had a break of 30 and if you go down here we had three trading days where we traded below 30 despite breaking the triple top at 30 it was three trading days uh breaking below 30 just like we had four trading days breaking below 20 before we headed to another top i’m surprised that we only broke through 30 very briefly i thought we were going to go to the uh 50 week moving average here 50 day moving average here yeah the 50 day moving average i was i wouldn’t be surprised if we went to 28 but we didn’t go that low so we’ll see what happens here uh it looks encouraging and could it be that this will be a repeat of 2010 where we broke 20 briefly and then headed up to 30 and then to 50 uh it could be i’m not predicting it necessarily in the next few months but the point is it could happen and you got to be in and don’t be surprised if it does because when it does happen it’s going to surprise everybody about the miners the miners are also on a trend line that it looks could be broken anytime now so we’ve been the higher this goes the worse uh mining stocks are performing relative to gold and silver so we have the uh the low here in 2022 uh which was strong mining stocks and we had a trend line hit over here in 2023 and this trend line is hitting again uh so if we can break below this trend line we can have a sustained rally and mining stocks looks like that’s what they wanted to do yesterday we’ll see if it can be sustained finally when i get into the goodies here i promised that i would talk about the more extreme case than 75 ounces of silver for a house in germany in Weimar Germany in 1923 so this is from the diary of benjamin roth the book that i’m reading a great depression a diary page 121 so i highlighted here if you want to try to make out my handwriting uh then you can try to uh tease out the reason that i figured out that this happens this is common sense back in 1933 not everyone had common sense back in 33 but uh benjamin roth had a a fair amount of it so he says inflation is a terrible thing and i hope it will never come to america this is an entry is from july 1st 1933 it penalizes saving and changing and changes the entire outlook of the prudent investor from government bonds life insurance etc it’s a speculative stocks and commodities yes we all know this it’s the same now the german mark before the war was worth almost 25 cents in american money but inflation ended right in 1923 is talking about a dollar would buy about a billion marks during inflation american speculators went into germany and bought huge pieces of valuable real estate for sums as low as 50 in our money hunger starvation and ruin were the results of german inflation in no country has it ever proven to be a blessing so 50 for a valuable piece of real estate he’s not specifying here exactly what valuable piece of real estate that could be i’m just saying it’s a house or it could be a building or whatever it is so 50 at $20 and 67 cents is about 2.4 ounces of gold for a house multiply that by 16 at a 16 to 1 historic monetary ratio for silver that’s about 39 ounces of silver for a house so 75 ounces for a swanky nice place in berlin and 39 ounces of silver for a run-of-the-mill uh family home let’s say i still believe this is going to happen and on my youtube channel you can look it up rafi farber i don’t know why i didn’t call the endgame investor but that’s just what it was it’s my name rafi farber and you can find out why i think mechanically from a balance sheet perspective this is going to happen again when it does it will be brief and that is the economy calling for silver to re-establish a division of labor and hold off a zombie apocalypse so what kills zombies silver bullets are really silver coins because it re-establishes a division of labor so instead of having to eat each other we can trade with each other and eat what we trade instead of each other’s brains i’m sorry i just can’t help it the brain’s the best part the part that makes me feel human again that’s such a nice thought and with that i wanted to leave you this week’s silver report for arcadia economics and i’ll see you guys next week
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