Insights: Silver sends a sunny signal

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May 29th, 2020

In today's newsletter, we draw from the commentary in our Top Energy and Top Gold reports distributed earlier this week for Canadian Insider Club and Club Ultra members. In our gold report, we pointed out that governments around the world continue to inject trillions of dollars into the global economy with the goal of offsetting the deflationary impact of COVID-19. This week alone, Japan indicated that more than one trillion US dollars' worth of stimulus is on the way. That move towered over the European Commission's plan to provide about US$500 billion in aid to member states to help deal with COVID-19. We suspect, however, that once Europe gets the ball rolling, the number of grants will grow as COVID-19 threats linger. We see the initial proposal as just trying to get the horse out of the barn. Once it is loose, there is no telling where it will stop.

At this point, it is too early to tell if governments will be successful at inflating the world out of the COVID-19 downturn. If they are, it could lead to our G-economy scenario where inflation returns and starts to play havoc with bond markets and consumer purchasing power. That could lead to a rush to find stores of value for wealth. Traditionally, investors have turned to precious metals. While gold is often viewed as a safe haven in both inflationary and deflationary times, other precious metals with more exposure to the industrial economy such as silver would probably be relatively better suited to play the store of value role during an inflationary period.

Consequently, we are keeping a close eye on whether our pro-inflationary G-economy scenario unfolds. As we explain in our Spring INK Quarterly Rebalancing presentation available for free on INK Ultra Money, inflation expectations is an indicator that we are watching closely for clues as to whether a G-economy may be on the horizon. We also have the gold-silver ratio on our radar screen. If the ratio falls, it means silver is outperforming gold, signalling an inflationary impulse in the economy. Indeed, the ratio has been falling over the past month from 123 to just under 100.

 

Soaring silver (blue) versus gold (red) has pushed the gold-silver ratio lower (click for larger)

Meanwhile, the Canadian Energy Sector continues its impressive stock market recovery. Over the last two months, the S&P/TSX Capped Energy Index is up more than 50%. We have finally received confirmation from our insider sector indicator that stocks have put in a meaningful low and have a good chance of maintaining some momentum. However, the broad sector is still trading below its 200-day moving average so there is still some work ahead before investors will have confidence that the group is in a long-term upswing. In contrast to the broad sector, which is arguably still fighting long-term headwinds, we are finding individual stocks in the group that are managing to regain the 200-day moving average high ground. The tide seems to be starting to turn, led by natural gas-focused players.

Finally, to celebrate the launch of live digital currency prices including bitcoin on Canadian Insider, we are offering 50% off the first year of a new Canadian Insider Club Ultra membership. Just redeem coupon code BTCLIVE at checkout. This coupon expires Saturday and only new Club Ultra memberships are eligible. Benefits of an Ultra membership include access to INK core reports and Real Vison videos via INK Ultra Money and much more. Read about the benefits here>>


Top 3 Gainers Last Week

Company NameStock Symbol1 Week %
Frontera Energy FEC19.1
Lithium AmericasLAC17.5
ARC ResourcesARX12.0

Top 3 Losers Last Week

Company NameStock Symbol1 Week %
Barrick GoldABX-7.0
Aptose BiosciencesAPS-5.3
LinamarLNR-4.2

Returns are as of the last trading day of the previous week.

Featured Broadcast

Insider of the Week

George Fink of Pine Cliff Energy (PNE)

Pine Cliff Energy (PNE) may be small, but it is emerging as a big leader in terms of price action within the sector. The stock is trading above its 200-day moving average, an achievement attained by very few of its peers. George Fink, who is the executive chairman, has been providing leadership at the firm since its early days.

INK Canadian Insider Index

1 Year Total Return Performance


Historical Performance

Annualized Total Return as of May 29, 2020 04:49 pm
1 Year -14.86%
3 Years -6.63%
5 Years -1.64%
10 Years 4.96%

5 Year Total Return Performance


The INK Canadian Insider Index is used by the Horizons Cdn Insider Index ETF (HII), a 2017 and 2018 Fundata Fundgrade A+ ® award winner.

To learn more about th ETF please visit:
https://www.horizonsetfs.com/ETF/HII

To learn more about the Index please visit
https://index.inkresearch.com
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