Spectators in a storm

It’s damn near sweltering here in London. Tropical weather, humid as hell.

Inside or out, the heat feels inescapable. And the moist air clings to your form wherever you go.

It’s like we’ve started importing foreign weather now that we can’t take a holiday abroad and experience it over there.

I’m damn glad I’ve not got any WuFlu symptoms – locked up and cooking indoors must be grim indeed.

Having my fan on max doesn’t seem to have made any difference in my flat, so I’ve headed upstairs and am writing this on the roof, where the clouds are keeping me company.

It’s quiet, except for the odd cackles of laughter echoing out from below, and the occasional shouting of a couple having a domestic a street or so away.

The sky looks halfway clear, and there’s a little breeze stirring the trees nearby. Despite the heat, it’s quite peaceful.

Dark clouds may not be smudging the sky just yet, but a storm is brewing. It may not arrive today or tomorrow, but the sky should buckle soon enough.

A few years back in this same flat I saw lightning flash on the horizon, and absent-mindedly climbed on to the roof to get a better view. It took several minutes before I suddenly realised the sheer stupidity of what I was doing.

But nature doesn’t have boundaries – there’s no difference between the field and the stands, between players and private boxes. When the storm arrives, he argues, those who aren’t prepared will be torched by lightning and swept away.

Whatever you may think on the nature, spread, and response to the WuFlu, the phenomenon is sadly not going away any time soon. This storm hasn’t passed – though plenty of folks are behaving like it is. Could we still be in the “eye”, with the rest of the storm yet to hit? It won’t just be social distancing you’ll need to be wary of if so – but “financial distancing” too…

I want to know your thoughts on the second wave – do you think there will be another country-wide lockdown as we saw in March? I want to know your thoughts – I’m gonna set up a simple poll for you in tomorrow’s letter. I understand many of you are busy, and don’t always have time to write in, so this’ll be a simple “click yes or click no” affair – keep an eye out in tomorrow’s letter.

That said, I’ve been thoroughly enjoying some of the letters I’ve been receiving recently. As you’ll know if you’ve been reading Capital & Conflict in recent weeks, I’ve watched with great interest the storm that’s begun to rage in the precious metals market.

One reader has been riding the gale-force winds hitting silver himself:

 … I’ve been watching, slack-jawed at times, as the price continues to rise. Each time I sell off a little bit more, thinking that it surely can’t go any higher without pulling back first, it does exactly that. I set up a sell order for a ridiculously high price just in case it might get there later in the week, and I come down to breakfast next morning to find that it has already gone through. If I had had a crystal ball I’d have been more patient, of course, but that’s a useless way of thinking, and hanging on for a better price often leads to missed opportunities of the opposite kind.

Why am I selling my silver already? It’s not to raise cash, but because of the way the ratios between the [precious metals] are changing so fast. Last night I sold some silver at £700/kg to buy platinum at just over £24000/kg — that’s a Pt/Ag ratio of slightly less than 35:1, an absolute all-time low, at least since 1990 when the chart I’m using begins. The all-time high during that period was >150:1.

The Au/Ag ratio has also fallen, although not as much: 75:1 is still historically high, although it peaked around 120 on the first day of the UK lockdown — and I was buying as much silver as I could afford then. Platinum remains at an extraordinary all-time low against gold, but it is already starting to catch the fever. So, even if silver continues to rise, ‘transmuting’ it into (also rising) platinum at this ratio seems like a sensible idea.

I know that reversion of these ratios towards their means isn’t inevitable but it does have a long history. With PGM mining hampered by Covid-19 rules in SA, so-called ‘mild diesel hybrids’ becoming popular in Europe, and the hydrogen economy ramping up its need for Pt catalysts in electrolysers and fuel cells (especially for trains and trucks) I feel reasonably safe in having most of my precious metal allocation in (physical, vaulted, unloved) platinum for the present, and waiting for its price to catch up.  

That’s a bold move to “transmute” silver into platinum. I agree almost entirely regarding precious metals rations – the difference in prices may not be destined to revert to an average through history, but they do send valuable signals.

Platinum has been unloved indeed for a very long time – especially after Volkswagen’s “dieselgate” scandal in 2015, and the price appears to have plumbed its depths in March, like silver.

But it’ll need industrial demand as this reader describes to get back on its feet, and that’ll be a real test of how eager consumers are to spend on green cars right now. Silver also requires industrial demand, though its applications are not so narrow as platinum.

On a related note, gold is now finally taking a breather from its relentless rise. I expect we’re seeing the beginning of a shakeout, one of several squalls which will temporarily blow precious metals off course. But there’s a wild gale behind gold, and the world will look a lot different once this storm has passed.

That’s all for today – I’ll be back again tomorrow.

Happy storm chasing,

Boaz Shoshan
Editor, Capital & Conflict

PS While everyone knows the “social distancing” routine by now… financial distancing has flown under the radar for many. It’s a skill few are familiar with – but when crisis strikes, such “dark arts” can pay off big time. In fact, my colleague Nickolai Hubble has just published his findings on what he’s calling the No. 1 asset to own in a looming crisis, and it’s not crypto, or stocks, bonds, gold, silver, farmland, or any traditional investment. Click here to learn more.

Category: Investing in Gold

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