• FREE Shipping & Insurance on Orders Over $500
    FREE Shipping & Insurance on Orders Over $500
back to top
News

COMEX Silver and the GDX | Gold and Silver Price Analysis

COMEX Silver Price and the GDX

Did you know you can get the Sprott Money Monthly Wrap Ups, Ask The Expert, 

special promotions and insightful blog posts sent right to your inbox?

Sign up to the Sprott Money Newsletter here.

 

The price of gold is up over $100 year-to-date and yet precious metal enthusiasts are suffering through some of the worst sentiment and depression on record. Why? It's hard to say, but the performance of the mining shares thus far in 2023 has a lot to do with it.

Let's start with the gold price. As I type this on June 20, COMEX gold is up $118 on the year or about 6.5%. This is right in line and moving toward the annual average gain since the new century began, as you can see below in this chart from Ronnie Stoeferle and his team at Incrementum.

Annual Gold price Performance  in Various Currencies 2000 to 2023

So, with gold prices higher and physical gold performing the function so many of us had in mind when we bought it, why is sentiment so poor? I believe much of the issue is related to the underperforming mining shares, which many people own as "leverage" to the gold price and as a way to make some extra fiat via potential gains.

But, as you can see below, the GDX ETF (which can be used as a proxy for the mining shares) is up just 5.6% year-to date. That's not as much of a gain as the S&P 500, but what else is new? The sector remains out of favor with general investors and has been for quite a while. As such, the mining shares are not providing the sort of "price leverage" that many of us had hoped for.

GDX - Vaneck Gold Miners ETF Chart

Digging deeper, why are the gold mining shares not keeping pace with the gold price? Well, there are all sorts of reasons for this: high energy costs, compressed margins, poor management, you name it. But the biggest frustration can be traced to the chart below. As you can see, when the gold price topped at $1920 in September of 2011, the price of the GDX was above $60/share. Today the share price of the GDX is about half that, with a major decoupling over just the past four years. (COMEX gold in candlesticks, the GDX as a blue line.)

COMEX gold price in candlesticks, the GDX chart 2011-2023

So what has caused this current "decoupling"? Hmmm...that's a good question. Perhaps the price of COMEX gold and the GDX were never correlated in the first place? What if, instead, the price of COMEX silver is what drives the GDX? That would be weird, wouldn't it? But let's see. Here's the correlation year-to date. GDX is still displayed as a blue line, but this time it's COMEX silver that's in candlesticks.

COMEX gold price in candlesticks, the GDX chart 2022-2023

But that's just the past six months. What about the past four years—that time since what appeared to be that "decouple" with the COMEX gold price?

COMEX gold price  in candlesticks, the GDX chart 2019-2023

I don't know. Maybe you think I'm cherry-picking dates? If so, let's go back ten years.

COMEX gold price  in candlesticks, the GDX chart 2013-2023

Still with me? Good. Then let's go back as far as we can, to the inception of the GDX on May 16, 2006.

Inception of the GDX on May 16, COMEX gold price

And now I can hear you murmuring the old saying people use when they want to sound smart: "Correlation is not causation." Yeah, well, maybe so. But not in this case. To my eye, that's about a pretty tight correlation since 2011, and as you're likely aware, over 80% of all equity trades on a daily basis can be attributed to high frequency trading and computer algorithms. See this study from late 2022:

High Frequency Traders and Liquidity

From here, I will allow you to draw your own conclusions. Perhaps that whole correlation/causation thing is the reality? Maybe this is nothing and there is no basis for the GDX price to track the price of COMEX silver? After all, the fund primarily holds gold producers and royalty companies. You have to get all the way down to holding #14 before you find Pan American Silver at 2.37% weighting. Why would there be a link to silver? That makes no sense.

GDX VanEck Gold Miners ETF

However, here's something that might make sense:

If sentiment for the precious metals can be controlled by sentiment for the mining shares...

And if sentiment for the mining shares can be measured by the relative performance of a major ETF...

And if, via HFT, you can link the performance of that ETF to the price of COMEX silver...

And if you can easily control and manipulate the price of COMEX silver...

Then it's possible to control the entire sector by simply managing the COMEX silver price.

"Oh, there he goes again, blaming everything on bullion bank price manipulation! That's just a conspiracy theory!" Really?

Again, I'll let you make up your own mind on all of this. Maybe there's an ongoing Bank plot to control everything within the precious metals space. Maybe there isn't. However, the next time you see gold prices soaring while the mining shares remain grounded, you might check the COMEX silver price. If it's down on the day, chances are the mining shares are down too.

The more you know, the more wisely you invest.

Feeling inspired to invest in silver? Browse our selection of silver bars, coins, or our exclusive Sprott Silver.

About Sprott Money

Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.

Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.

Learn More
about-sprott-skyline
Head shot of Craig Hemke

About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

no_comments

Looks like there are no comments yet.