Gold-silver-ratio-2-20-17

Silver is Outperforming Gold. What Does it Mean?

OWNx Team Gold & Silver Market, News & Commentary

Thus far in 2017 the price of silver has outperformed the price of gold on a relative basis. That means that the gold-to-silver ratio (the number of ounces of silver it takes to buy one ounce of gold) is falling. It began the year near 71 and now sits at 68.5. A year ago it was well over 80.

What does a falling ratio indicate? Silver has nearly always had a higher “beta” than gold, meaning that its price rises and falls more rapidly on a percentage basis. Therefore, during a bear market the silver price falls more rapidly than gold. This pushes the gold-to-silver ratio higher.

However, when the market turns and a new bull market begins, the price of silver rises more quickly than gold and the ratio falls. The accompanying chart shows that after rising for four years (during a difficult bear market), the ratio has turned and now is steadily falling. The reversal in the ratio is yet another indication that a long term bottom appears to have been set in the price of gold and silver.

Which metal to buy?

Most of our clients prefer a mix of both gold and silver. However, for those who do not mind the more dramatic price swings that accompany silver, the long term returns in a bull market favor silver holders.

Regardless of which metal you choose, the falling gold-to-silver ratio is another welcome indicator of a renewed bull market. Now is the time to begin or continue accumulating gold and silver bullion as part of your long term savings and investment plan.

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Owning Gold & Silver as Savings: Millennial Focus

OWNx Team Blog, Money & Finance

In the new world of FinTech applications are popping up that are focused on serving the generation who are the most heavy users of tech – the Millennials. This 18-30ish group of young adults has grown up with smart phones and instant access to a wide variety of information and services. They are tech savvy and growing in buying and saving power.

As such some global FinTech companies are leveraging technology to help this demographic improve their saving habits. In a global economy that has become built around spending, this business model may seem counter to the prevailing trend. As one founder of a recent FinTech startup observed…

“It was hard to convince people that we were building a business around savings, when businesses are almost always built around spending.”Vidur Malik, founder Hektor.

While this may be a challenge in today’s world of hyper-consumption, he is on the right track. Financial and economic trends follow a reasonably consistent pattern of cycles. Some of these cycles are short in duration while others span generations. It appears as though the world has entered a long term cycle where the preference of spending over saving is beginning to reverse.

As the following article notes however, “Just because millennials are interested in saving for retirement does not necessarily mean they are doing it properly.”

Why Millennials Are More Interested in Saving for Retirement

This can be said for savers of any age, whether Gen-X, Boomers, or Millennials. Today’s savings and investment world is more complex and must take into consideration more economic and geopolitical variables than at any other time in history. The key now is to provide technology platforms that will help this trend along rather than introduce confusion.

That is why we began in 2008 to build our business around making access to physical gold and silver available to everyone. Before FinTech was a word, our goal was simply to empower you with the freedom, control, and protection that comes with a diversified savings portfolio.

How can we help you?

The OWNx Team

Photo credit (401k 2012)

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Is A New Commodity Bull Market Good for Gold?

OWNx Team Global Finance and Economics, Gold & Silver Market, News & Commentary

Gold and silver prices have suffered over the past few years through a grueling down market. 2016 appears at this point to have set a firm bottom in place for the price of precious metals. The same appears to be true for a broader basket of commodities. In fact there is a growing number of analysts that believe a new commodity bull market is ready to begin.

Will 2017 Herald a Commodity Bull Market?

If they are right and a new bull market in commodities is beginning, then that should bode well for precious metals. The price of gold and silver bullion have a strong correlation to other commodities over the course of the bull market period.

In the early phases of a turn in the broader commodity markets, gold and silver may lag for a few months depending on monetary policy and economic and geopolitical stability. Both of those are still in question. However, once firmly underway a commodity bull market is inflationary. Gold and silver then take their place as a hedge against inflation.  This makes the onset of a commodity bull market a good time to accumulate gold and silver.

Time will tell if 2017 is indeed the beginning of a new commodity bull market. Some of the conditions are there, which will support gold and silver prices over the intermediate to long term.

(photo credit Dominic Rivard)

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The Future of Money, FinTech, Gold and Silver

OWNx Team Blog, Global Finance and Economics, Money & Finance, News & Commentary 0 Comments

We live in very interesting times to say the least. Financial innovation using new technology has been percolating for years. The advent and rising popularity of Bitcoin, and more importantly its underlying blockchain technology, has thrust the question of our world’s financial future into the spotlight.

Between 2014 and mid-2016 an increasing number of people questioned how FinTech would impact the global economy as the trend toward globalism marched ahead unabated. What a difference nine months makes. Brexit. President Trump. Looming elections in France and Italy that could swing those two nations into a posture of leaving the European Union.

All of these have given pause to the idea that we were destined to a world with a more centrally controlled and consolidated monetary system. Suddenly national sovereignty is popular again. National sovereignty has historically brought with it sovereign currencies.

Over the last 45 years or so (post-Bretton Woods) one recurring problem has been that of creating an effective mechanism to manage both the exchange rates between sovereign currencies, and the actual exchange of those currencies between entities. One of the answers was to consolidate currencies to simplify the number of variables in the global monetary system equation.

Is FinTech a Better Answer?

What is just now entering the conscience of the world’s citizens is that money is more an idea than a thing. We have seen it in a static fashion for decades. US dollars. Canadian dollars. Euros. Yuan. Yen. We identify these as things. But money as an idea is making a comeback. Bitcoin was created on a set of ideas and principles. The coin itself is the product of those ideas.  It’s use has become widespread enough that in some areas, you can actually live on it – at least for awhile.

21 Things I Learned About Bitcoin From Living on it For a Week

This is just the beginning. Exchange rate platforms for alternative and crypto currencies will be developed using technology and the blockchain. This will give much needed liquidity and stability to this emerging monetary ecosystem. Silver and gold bullion can and will play a part in this world. They could be money. They might back a currency fully or partially.

Or, gold and silver may play another yet undefined role. But their 5000 year history as being an intimate part of the world monetary system will not vanish due to technology. Rather, technology will only enhance their role as it makes access to these time-tested assets easier, whether as part a currency, accumulated as savings, or as a means to insure your retirement.

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Brick and Mortar Banks, Gold, and the FinTech Revolution

OWNx Team Blog, Global Finance and Economics, Gold & Silver Market, Money & Finance, News & Commentary 0 Comments

One of the more visible signs that FinTech is real and growing is the trend toward smaller, more technology focused branch banks. Bank of America recently accounted that it has opened three branches in the United States with zero workers.

Bank of America Opens Branches Without Workers

This is the traditional mega-bank’s response to the thousands of micro-bank-like companies that are springing up like wild flowers around the world. There is a great debate going on about what the banking industry will look like in just a few years. Problems with the financial system not withstanding, large banks with thousands of brick and mortar branches are finding it difficult to envision a transition to what many believe will soon be a “bank on your smart phone” world.

One thing is for certain. Companies that deal with financial assets, including gold and silver bullion, must align their business models with the financial technology revolution. Those that fail to do so are going to find survival difficult in the emerging new financial world.

This is why fractional ownership of large bars of physical gold and silver makes so much sense. Not only will people maintain their ownership of the real thing, but they have the option to instantly liquidate their holdings, and move their cash to other investments instantly, or choose to convert their gold and silver into smaller coins and bars for delivery. It’s the smarter, easier way to own gold and silver.

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National Currencies Looking to Blockchain Technology?

OWNx Team Blog, Global Finance and Economics, Money & Finance, News & Commentary 0 Comments

For those following trends in global currencies, one has emerged that has significant long term implications. That is the move toward purely digital currencies. This trend has gained momentum over the last several months.

India seems to be leading the way. One of the questions that obviously must be answered is how to implement a digital currency and on what platform. Surprisingly, over the past two years Bitcoin’s blockchain technology has emerged as a primary target for further study by the world’s central banks.

In fact, the Reserve Bank of India released a white paper last month outlining a process by which the nation could implement blockchain technology across their currency and banking industry. In it they noted:

“In a bid to evolve towards a cashless society, many central banks around the globe including Canada, England, Sweden, and Netherlands have started exploring the use of BCT [blockchain technology] for digitizing their currency, and many more are converging to the idea. From a technological perspective, we feel that BCT has matured enough and there is sufficient awareness among the stakeholders which makes this an appropriate time for initiating suitable efforts towards digitizing the Indian Rupee through BCT.” (emphasis added)

It is an interesting turn of events that Bitcoin, which was viewed by global central banks with great skepticism, is now seeing its underlying technology being fully embraced by them. This is largely the product of a booming FinTech industry which is forcing everyone to rethink the role of money, along with its structure and delivery systems.

When dealing with something as powerful and as intimately tied to our lives as money, there are valid questions and concerns that arise.

  • How will the emerging monetary paradigm be structured in a way that creates healthy ethical boundaries which will insulate the system from abuse?
  • How will basic privacy rights be maintained if every transaction must pass through an electronic delivery system?
  • How reliable can access to such a system be made?

These questions and more mean silver and gold bullion can, should, and in some way will play a role in this newly emerging monetary paradigm. Exactly what role they will play is yet to be seen. However, as we transition into this new way of defining and handling money, it seems apparent that their place in every person’s portfolio of savings, investment, and currency holdings is more important than ever.

P.S. It may be a good idea if your silver and gold dealer is aware of these trends and is positioned to help you navigate them. Just sayin’.

(photo credit Ramnath Bhat under cc 2.0)

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Regulations, FinTech, and the Future

OWNx Team Blog, Current Events, Global Finance and Economics, Money & Finance, News & Commentary 0 Comments

As promised, President Trump has taken an ax to the regulatory burden that many feel has hindered economic growth. His actions have been swift and far reaching. It’s too early to tell how much of an impact changes in financial regulations will have because the scope isn’t yet known. However today he took a major step by halting the DOL fiduciary rule and ordering a sweeping review of Dodd-Frank.

If you are for less governmental regulation then the trend is your friend as they say in the investment world. If regulatory rollbacks reach into the world of FinTech, it will open the door for major structural financial system reforms. And that we believe is a very good thing.  Streamlined and low cost access to financial and investment instruments is good for everyone.

At OWNx, we see these trends taking shape. Our streamlined process for owning gold and silver bullion within a self directed IRA has set the industry standard for cost effectiveness, flexibility, and control. In other markets, thousands of companies are disrupting the financial world with their own innovations. This leaves ahead of all of us an exciting future that will help put the power and control of our financial wellness back into our own hands.

Much of the rest of the world is confused about whether we will continue to use cash or not and what will define our future financial system. The answers may be yet unknown, but they are just over the horizon. OWNx will be there to provide you with powerful tools to manage your gold and silver assets with a variety of choices that fit your lifestyle.

(photo credit Ben Woosley)

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The Curse of Cash Part 1

OWNx Team Global Finance and Economics, News & Commentary 0 Comments

Many gold and silver bullion owners are all for hard currency. They see a need for some form of physical money.  Reasons vary. Privacy is among the top concerns. However, as we wrote about last month, there is a move underfoot to move toward a cashless society.

That proposal has been championed in a book recently written by Kenneth S. Rogoff called “The Curse of Cash.” In it he makes a case for removing nearly all cash from circulation, focusing first on $50 and $100 bills. Now, I don’t know about you, but I don’t think it would be wise to tell Grandma and Grandpa they can’t give their grand kids a crisp new $100 bill for Christmas – or the grandkids that they can’t get one.

An insightful summary of the book by William J. Luther can be found at The Sound Money Project: Curse of Cash op ed.

The point of the book is that large cash bills are primarily used to buy and sell illegal goods and services and to avoid taxes. His assertion is that if something is made illegal, then there should be no way to trade in it. Also, he says that government goods and services are all valuable, and thus avoiding taxes hinders funding these valuable services.

A final argument he makes is that cash hinders central bank monetary policy by giving people a way to escape negative interest rate policies that may be imposed in order to jump start growth.

At this time we will refrain from commenting on these assertions as we await the next op-ed piece by Mr. Luther. However, please know that the debate over cash is now going mainstream.

(photo credit Howard Lake)

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Gold and Silver in a Confusing World

OWNx Team Gold & Silver Market, News & Commentary 0 Comments

It is not unusual for markets that are either in the process of setting a long term top or bottom to confuse investors. A few weeks ago we indicated that it looks like gold is carving out a long term bottom. As 2017 turns into a major transition year politically, geopolitically, and financially, is should be no surprise that gold and silver prices are now confusing some gold traders.

Gold Traders Confused

This isn’t a major issue for those who have a three to five year horizon for holding their metals. In fact it is the best time to steadily accumulate gold and silver through disciplined dollar cost averaging, which has been proven as one of the best ways to buy gold and silver.

During times like this, it is important to stay focused on the reasons to buy gold and silver rather than the daily, weekly, and monthly price swings.

  • Portfolio insurance
  • Hedge against uncertainty
  • Hedge against inflation pressures
  • Its long term store of value
  • Its long term role as money

Remembering these great reasons to own gold will help you avoid becoming confused even when the rest of the world does.

 

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Interest Rates and Gold: Reversal vs. Range Bound

OWNx Team Global Finance and Economics, Gold & Silver Market, News & Commentary 0 Comments

As interest rates signal a trend change it is important to consider all the possibilities. Certainly one can make a case for rising interest rates due to inflationary pressures. However because of all the cross currents that rising rates and a strong dollar would create, it is possible that it will be years before we see a major upward thrust in interest rates.

In his article “Secular Shift in Interest Rates,” Matthew Kerkhoff makes a case that we could see the continuation of a five year sideways movement of rates, bound within a range of 1.5% and 3% on the 10 year US Treasury. Is this possible?  Absolutely.

With massive sovereign debt, the governments of the world are in no way cheer leading for higher rates. Above 3% budget deficits explode. Yet these same governments are cheer leading for stronger economic growth and relief from a persistent threat of deflation. If they get their way, natural market forces would agitate for higher rates. There is the rub. While they do not want higher rates, they want the conditions that generate higher rates.

These competing needs could produce a tug-of-war that extends the time period where rates remain bound in the 1.5% to 3% range. Such is the tangled web governments and central banks have weaved post the 2008 crisis.

What then happens in the spot gold and silver markets?

It is possible that with a tug-of-war in interest rates, gold and silver prices may continue to be range bound for awhile as well. However, if this tug-of-war creates uncertainty and instability in the financial system, gold and silver prices very well could lead interest rates to the upside in the years to come.

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