GLD Gold vs Silver and currencies

I’m going to be making a set of “standard live chart” postings that will be in the stock charts category. There will not be any analysis or description of the status or meaning of these charts, just a live chart that will change over time.

For analysis or meaning, look at particular postings in the WSW series or the Economics and Trading category.

Why do this? It effectively replaces the function of the “Racing Stocks” tab up top. Not only have all those links been broken (thanks to BigCharts changing their URL structure) but the statistics say nobody but me used the tab as a tool anyway. This will also let me make the WSW posting much more efficiently as it will just have a constant format with a link to the standard chart page. Any static charts I want to save I can save via a download of the image. This will also let me put notes about any particular type of trade vehicle with the chart, so I do not need to repeat them from posting to posting.

It will take time to get all these in place, just like it took a long time to build the “Racing Stocks” tab in the first place. Along the way I’m going to update some of these for changes in my interests and market changes, too. You can click on, or open, the graph to get a much larger one that is easier to read.

GLD Gold vs SLV Siver and selected currencies

GLD Gold vs SLV Siver and selected currencies

GLD  -  Gold ETF 
SLV  -  Silver ETF
UUP  -  $US "up" bet via ETN
EUO  -  Euro "down" bet via ETN - double short of Euro
FXF  -  Swiss Franc ETF
FXE  -  Euro ETF
FXY  -  Japanese Yen ETF
FXA  -  Australian Dollar ETF

The purpose of this chart is to let you see, at a glance, the major reserve currencies and the “money metals” of gold and silver.

A similar chart of GLD vs FXF and SLV with Volume+, Rate Of Change, and Williams %R at BigCharts.com

Metals are prone to bubbles and crashes, but retain value over time. Currencies only have whatever value that central bank chooses, so while they tend to be stable against short term bubble and plunge (unless the bankers make one) they also tend to reliably evaporate value over the decade time scale.

The $US, since it decoupled from the gold standard, has lost about 95% of its purchasing power; as compared via ‘prices when I was a kid’ vs prices now. Gasoline was 25 cents a gallon, stamps were 5 cents, loaf of bread a dime, new car $1500. Now it’s $4.00, 44 cents, $3.00, and $15,000 to $30,000. My parent’s home that was bought for $7,000 sold for $87,000 before the housing bubble / crash.

In proper usage, “money” is a medium of exchange AND a store of value. A “currency” is only a medium of exchange. In modern (sloppy) usage, the meaning of “money” is used for “currency” far too often. In present usage “hard money” is used to speak of metals as money and other things that are both a “store of value” and a “medium of exchange”. I tend to use the old terms…

This chart lets you compare the money metals with the major reserve currencies and calibrate our $US “rubber ruler”. It also lets us look specifically at any tendency for the money metals to be in supply excess (when central bankers are selling, typically) or demand excess (often forming bubbles).

For trading gold and silver, you MUST watch for the formation of bubbles and dump holdings before they pop, as they move down very swiftly when everyone heads for the exits. For currencies, especially “thinly traded” ones with aggressive central bankers, like the FXF Swiss Franc, you MUST watch out for central bank intervention when they get high enough to make trading difficult for those countries. On the falling side, few countries force their currencies up…

ETN is an Exchange Traded Note – holds options and futures. These are NOT long term investments, only trade vehicles for short duration. The "time value" of options evaporates in months so there is a constant leakage of 'value' out of these funds into options time decay.

ETF is an Exchange Traded Fund. In theory these hold real assets and can be held longer term. In reality, there are many trade related behaviours that can cause an ETF to have risk. In downtrends a fund may experience forced redemptions, so forced to sell a position at a loss or at a bad time. This is especially seen in bond ETFs where forced sales can eliminate the stability of the average principle.

For GLD and SLV, those ETFs are significant holders of real metals. In the case of redemptions of the ETF, these forced sales can cause significant oversupply to the market and drive down the underlying asset. During bubbles, such buying can force prices higher. So "first big guys out" may cause all the slower sellers to have a significant loss. In general, though, for broadly traded assets like currencies, these effects are not evident.

Here is a chart of gold with volume and volatility on it:

GLD with Volume, Volatility, and Momentum

GLD with Volume, Volatility, and Momentum

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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15 Responses to GLD Gold vs Silver and currencies

  1. sandy mcclintock says:

    I was in my 20s in the 1970s and had taken on a big mortgage, I was happy to see inflation running ahead of the mortgage interest rate. It meant that my salary was much increasing faster than my mortgage debt. I saw this as a transfer of wealth from lenders to borrowers and imagined it was actually a transfer from the older generation to the younger generation.
    Now I am one of the older generation and I wonder when its going to be my turn to transfer wealth to the younger (borrowing) generation. This would only happen when the real inflation rate is larger than the investors interest rate. This has not happened in Australia (yet) – but has this now happened in USA?

  2. R. Shearer says:

    Forever stamps ought to be an excellent investment.

  3. E.M.Smith says:

    @Sandy McClintock:

    IMHO, sort of. Mortgages about 4%, T-Bills about 2-3%. BUT, it depends on just which inflation and which investment.

    Bank deposits are down in the 1% kind of range. Clearly the depositors are not keeping up with inflation. If you use ‘food and fuel’ and similar things in the inflation index, it’s up abut 7% and that’s clearly way over the mortgage rate.

    Then again, new savings and investment are way off and new mortgages are way off; so I’m not sure there’s much “real” going on. The synthetic money created by The Fed is likely what’s being lent out. The Average Joe just doesn’t put much in the bank any more…

    So in large part, it’s just The Fed “funny money” that isn’t getting a ROI (and that is sort of a goal… to inflate the home value such as to justify the existing mortgages).

    @R. Shearere:

    If the post office stays in business ;-)

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