Gold and silver extend record run
Summary
The Fast Money panel discusses gold and silver setting new record highs, with gold nearing $5,000 and silver above $100. Tim remains long-term bullish on gold but warns the short-term trade is overdone and expects a 5% correction. He prefers silver on supply deficit and likes gold miners. Mike is watching for a downside reversal in SLV after a surge in options activity. The panel also debates diversification away from U.S. Treasuries and the risk that parabolic hedges may fail.
- Gold and silver hit new record highs, with gold near $5,000 and silver above $100.
- India reduced U.S. debt holdings to five-year lows, diversifying reserves.
- Tim is long-term bullish gold but sees near-term overbought conditions and a potential 5% correction.
- Tim prefers silver on a 200-300 million ounce annual supply deficit and industrial demand.
- Tim is bullish on gold miners (GDX) as profitability improves and valuation models lag.
- Mike is watching SLV for a downside reversal day after excessive options activity.
- Panel concerns include parabolic moves in hedges and potential downside correlation.
- Davos discussions focused on diversifying away from U.S. assets and the new world order.
Ideas
Long-term gold bullish on central bank buying.
Long-term bullish on gold because central banks are diversifying reserves away from U.S. Treasuries, China's gold reserve ratio is only 8% versus Germany's 80%, and both money managers and retail are underweight. Geopolitical tensions, Fed policy, Venezuela, and Iran add to the bid. He thinks gold ultimately goes higher.
Gold miners profitable; models lag gold price.
Bullish on gold miners via GDX. Miners are becoming more profitable and efficient, and valuation models still use overly low gold price inputs. He stopped selling upside calls in GDX because he is happy with the trade and sees further valuation upside.
Silver buy on supply deficit, industrial demand.
Silver is the preferred metal at these levels because it has a physical supply/demand deficit of about 200-300 million ounces per year and is an industrial metal. Geopolitical sanctions and reserve diversification are driving gold buying, but silver offers a fundamental reason to buy beyond emotion.
SLV exuberance, watch downside reversal.
Watching for a downside reversal in the precious metals complex, especially SLV. SLV traded 2.9 million options contracts today versus a half-million six months ago, signaling excessive enthusiasm. He is looking for a gap to a new high that closes sharply lower, a classic bearish reversal pattern in commodities.
