We have followed the work of the “Optimist” for quite some time especially the unique way that he looks at gold and silver. In his latest update, the Optimist makes the point that measured in terms of value instead of price gold and silver reached new highs last week (all time record high for gold, bull market high for silver). Here it is according to the Optimist:
The value of silver and the value of gold reached new all time highs this week. The Gold & Silver tab at the top of the page discusses the concepts of value (which is independent of currency) instead of price (which depends on the currency unit the price is measured in). A typical price chart shows a combination of changes in the value of the silver or gold and the changes in price that are caused by the currency that the chart is priced in. The change in value is what would result if one buys (long) silver or gold futures in US$ and simultaneously buys (long) an equivalent amount of the USDX US$ exchange rate futures. Then the USDX long futures will cancel out the silver or gold price changes that result from currency variations, and the combination will leave only the changes in real value which is independent of any specific currency. (Note that I have not actually done that futures spread trade, and I do not recommend it to anyone else.) The current charts of the value of silver and gold are copied below. I update those charts each week at the links below:
MoreAG charts the value of Silver
MoreAU charts the value of Gold


Now for some thoughts on the above.
First, these Optimist “MoreAG” and “MoreAU” charts are great for getting a very good overview of the bull market in gold and silver in terms of solely their “real” price increases instead of the price increases that have occurred directly as a result of the bear market in the U.S. dollar. Kitco among others have attempted to do something similar. The approach utilized by the Optimist is simpler yet more aesthetic and more useful at the same time.
Second, these charts are probably as close as we are going to get to an international “standard” that allows investors across the globe to speak the same “language” in terms of gold and silver prices. Some of our subscribers have complained that we, like many others, have a U.S-centric focus on the gold and silver markets especially when discussing price action. Although we feel such focus is entirely reasonable given that the vast majority of global precious metal trading is still done in U.S. dollars, the criticism at its heart is valid because most individual investors don’t engage in “global precious metal trading” — they buy and sell precious metals in their own countries of residence where pricing is in the local currency. To them, the gold or silver price in U.S. dollars is at best an interesting abstraction that has no relevance to their own investment position. Therefore going forward we will be much more broad-based in our gold and silver market analysis and we hope to utilize charts such as those provided by the Optimist.
Third, we should be careful not to take technical analysis too far given that charts such as “MoreAG” and “MoreAU” are not widely followed by traders. Technical analysis works for the most part as either a reflection of trading psychology or a self-fulfilling prophecy. Esoteric yet useful charts like those created by the Optimist may have great value in providing a technical overview of a market but applying indicators, patterns and other technical factors to these charts would be quite useless. That said, we wouldn’t consider the trend lines and channels drawn by the Optimist on these charts to be technical factors but rather part and parcel of a “technical overview”. For example, one might generally discern from the MoreAU chart above that following a big rise in the “value” of gold, a new uptrend appears to be established and this uptrend is not only shifted upwards from the previous uptrend but it also appears to have a steeper slope.
There are certainly more than three useful observations to be made on these charts but let’s stop here for the sake of brevity and relevance. We’ll follow up on these charts periodically and in the meantime let’s see what some of our readers have to say.
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