Upside price action in gold, silver as USDX, equities back off
KITCO/Jim Wyckoff

Gold and silver futures prices are trading firmer in early U.S. dealings Tuesday, as a weaker U.S. dollar index and a pause in the U.S. stock market rally are giving the metals bulls some strength. Some chart-based buying is also featured early this week from the shorter-term futures traders, as the near-term technical postures for gold and silver have improved a bit. April gold futures were last up $8.70 at $1,842.90 and March Comex silver was last up $0.094 at $27.665 an ounce.

Global stock markets were mixed overnight. U.S. stock indexes are pointed toward weaker openings when the New York day session begins, after setting record highs Monday. U.S. stock market bulls are taking a pause Tuesday, but risk sentiment remains upbeat as new U.S. Covid-19 cases are starting to decline as vaccinations continue to roll out. Also, hopes are high that the Biden administration will implement a big financial stimulus package by springtime.

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Silver is Preferred to Gold as Global Economy Recovers and Green Energy Gains Attention

While silver’s retreat from the 8-year high suggests that the media-inspired short squeeze has failed and further correction is likely, the metal should benefit from the global economic recovery and the new US fiscal stimulus package in the longer-term. Although both are in the precious metal category, silver will be a better play than gold in terms of fundamentals. The latter is positioned to benefit from a green energy theme.

silver’s use in the industrial sector suggests that the metal is well-positioned to benefit from global economic recovery. GFMS’s data shows that industrial demand contributes to about 50% of total silver demand. The industrial use of silver mainly lies on automotive and solar energy, the rise in hybrid (including mild-hybrids) and battery electric vehicles, both require higher silver loadings than vehicles with an internal combustion engine, will in the longer-term increase silver use.

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US stocks are in a bubble, and it’s unclear when it will pop, hedge fund manager says
CNN Business/Matt Egan

Yusko’s bubble warning echoes ones made in recent weeks by other well-known market players.

Last month famed investor Jeremy Grantham said the bull market that began in 2009 had “matured into a full-fledged epic bubble” marked by “extreme overvaluation, explosive price increases, frenzied issuance and hysterically speculative investor behavior.”

Of course, no one can time when a bubble will pop. And overheated markets can get much hotter before finally cooling off.

“The challenge with extreme valuations is they can go on longer than you think,” Yusko said.

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