Silver was the shining star yesterday as it rallied above $17.00 for the first time since June of 2015. The rest of the complex followed suit as all recorded solid gains with platinum breaking back above $1,000.00. Silver, which has been the headline story recently, has been consistently supported by physical demand from our corner of the market all year and most recently by a surge in physical demand reported to be coming out of China. The gold / silver ratio, which is a favorite subject of mine and something I watch very closely, has also been in play since I mentioned it a few weeks ago when I was looking for silver to lead the complex higher. As witnessed by the holdings of the major silver ETF’s which have risen sharply in the past 6 weeks and are now 30 million ounces higher than where they were at the beginning of the year, it has become clear that most investors have looked more favorably upon silver than gold. This is further supported by looking at the gold / silver ratio which was flirting with 80 not to long ago and is now testing 73. With silver having done its part rallying up to a well-defined band of resistance, from $17.25 to $17.40, it may be up to gold if the rally is to continue. The next objective for me is gold testing $1,285.00 and the gold / silver ratio dropping a bit further to 72 which takes silver to $17.85.
As China continues to flex its might on the global economy, it has also set its sight on the global precious metals market where it clearly intends to be a leader. This week, China launched the SGE Gold Benchmark. As the world’s largest producer, importer and consumer of gold, China’s new “gold fixing price” is based on the price of .9999 gold and is priced in Chinese Yuan.