Gold/Silver: Laser eyes on China, copper, and crypto

It was an ugly week in almost all asset classes, with one by one falling like dominos. What seemingly started with a tech-driven selloff spilled over into cryptocurrencies and ultimately found its way into precious metals. The culprit mainly points to how various countries are handling the skyrocketing inflation. The U.S., for instance, has set on the path to beat inflation by instructing the Fed to aggressively raise interest rates at the expense of new homeowners and the stock market. That new cost of capital is the main reason the Nasdaq is down 29% since its November highs.

China’s strategy to tackle inflation is to decrease demand by extending lockdowns which have essentially crushed the industrial metals complex. Remember, China accounts for 54% of the Global copper demand. On the other hand, China cannot raise borrowing costs, which is evident from the recent developments of its fourth-largest property developer defaulting on its bond payments.

Daily copper chart

Daily silver chart

Daily gold/silver ratio chart

To put the correlation into perspective between copper and silver, I want to highlight the similarities…


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