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Katchum
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Albert Sung is the author of Correlation Economics, monitoring breaking economic news on a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at Ashland, a... More
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Correlation Economics
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  • U.S. Mint Sales Surprisingly Favor Silver

    It is time to take a look at the U.S. Mint sales of gold and silver again to see if we can get some interesting conclusions out of it. We know that the U.S. Mint sales are a good proxy for global gold and silver investment demand.

    Here is the data:

    (click to enlarge)
    Chart 1: U.S. Mint gold and silver sales (april 2014 extrapolated)

    What immediately surprises me is that the two trends are in reverse (Chart 1). Gold sales (blue) have been hitting lows while silver sales (red) are booming. This urges me to look at the ratio between gold and silver sales.

    Apparently, for every ounce of gold sold, they sold 90 ounces of silver in 2014, which cannot last forever (Chart 2). This is because annual silver supply is 1 billion ounces and gold supply is 130 million ounces. This is a ratio of 1 billion / 130 million = 8. So there is only 8 times as much silver available as compared to gold.

    (click to enlarge)
    Chart 2: Ratio silver to gold ounces sold

    So, how can it be that people are buying 90 times more ounces of silver than ounces of gold? Supply and demand will eventually go to equilibrium. Which means either gold goes down or silver goes up in price.

    This is why I still think silver is grossly undervalued to gold and that's why I will buy silver and silver mines, waiting for a surge in silver.

    Tags: GLD, SLV
    Apr 20 4:47 AM | Link | Comment!
  • Run On GLD ETF Starting?

    It is very odd that Shanghai demand is now receding.

    Today the SGE withdrawals of gold fell again 16% from last week to only 21.4615 tonnes. See chart below, courtesy of Koos Jansen: In gold we trust. So demand for gold in China is really dropping fast as premiums between China and London are still at zero, indicating that demand for gold from China is very unnaturally low.

    (click to enlarge)

    However, the GLD ETF had something interesting to tell. The GLD physical stock finally started dropping hard since yesterday, while I had thought it would start increasing.

    (click to enlarge)

    GOFO rates are now very negative historically hitting new lows. Maybe this tells us that GLD is finally having a run on gold due to supply tightness. Because China isn't buying, so who is actually taking delivery from GLD now? Maybe the retail investors themselves, demanding for the physical. I'm just guessing around, could also just be storage fee payments.

    Tags: GLD
    Apr 18 4:42 AM | Link | Comment!
  • Capacity Utilization Pointing To 5% Annual Inflation Next Year

    Capacity utilization rate is a leading indicator for inflation. And the latest number is at 79.2, a new record high since the bottom of the crisis. If history is an indicator, we should see huge inflation rates in a year from now.

    The chart below points to a year over year CPI rate of 5% in the coming future. And we're already half to that number as the latest consumer prices pointed to a 0.2% increase in prices in the month of March, or a 2.4% inflation rate per annum.

    You can be sure that inflation is coming and you should prepare for that accordingly.

    Apr 16 3:38 PM | Link | Comment!
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