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The Great Market Disconnect: A ticking time bomb

Feb 27th, 2017

4 Years ago a time bomb was activated when a great market disconnect started between the precious metals market and the wider general market. The Silver : Gold ratio is positively correlated historically to the S+P500 index and in early 2012 they parted company and became inversely correlated, reflecting both the increased suppression of precious metals prices and the highly inflated general equity markets.

This is essentially the result of Central Bank destruction of currency values which continue to successfully elevate the broader stock, bond and real estate markets worldwide, while precious metal prices have been held down like a coiled spring. The more this condition continues the more spectacular will be the inevitable return to historic correlation in general equity collapse and precious metal price explosion.

Consider the chart below, by courtesy of Steve St. Angelo who’s article I urge you to read here https://srsroccoreport.com/the-great-precious-metals-market-disconnect-a-ticking-time-bomb/

The red graph is the Silver : Gold ratio and the black the S+P 500. Note the clear correlation up to the start of 2012 and the broadening disparity after, with depressed metal prices and the S&P 500 index surging upward to new record highs to a percentage disconnect level of 65%.

Additional research of the S&P 500 ÷ by the silver price (not the silver:gold ratio) since 1981 reveals the same disconnect in 2012 with the value turning up instead of continuing down. Again by courtesy of Steve St. Angelo.

The current S&P 500 Index : Silver ratio is about 130 which means 130 ounces of silver would buy the S&P 500 today.  In 2011 it was 28 and in 1981 it was 10. If we applied the 1981 ratio value of 10 today the price of silver would be $230.

But regardless of this arithmetic , the YELLOW ARROW in the chart shows that the S&P500-Silver ratio should have continued lower to 10, if it were not for the disconnect of excessively inflated equity prices and suppressed metal prices.

When you consider that the disconnect is supported by dropping volumes in the equity market and rising volumes in the silver market you realise The Great Market Disconnect is a ticking Time Bomb.

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