Friday May Have Been the Day (but don’t count on it), From IKN 483

By Otto Rock

Here’s the intro to last Sunday’s edition of The IKN Weekly, IKN483:

Friday may have been the day (but don’t count on it)

If there is one thing you can count upon in the wild and whacky world of gold stocks and all who sail with her, it’s that sentiment among its investors and speculators will turn on a sixpence. By way of example, we’ve just come out of an eight week period when gold was repeatedly hammered by the strong dollar, by Trade Wars!, by disdain for the whole precious metals complex and talk of dying demand. Most recently, gold spent two weeks under the U$1,200/oz line and spiked as low as $1,152/oz at one point and the whole process has been boring, painful or just plain horrible in turns.

And then, suddenly, Friday wakes up and gold pops over U$20/oz, going back above the U$1,200/oz and bringing a welcome relief rally to the sector. That’s why I decided to run this small poll on Twitter that day and here are the results of the 169 people who took a click of their time to answer:

I find that most impressive (and with 169 replies, the margin of error is reasonable). Eight weeks of gloom, two weeks of sub-$1,200/oz prices, just hours after gold rebounds (and it never got beyond U$1,210/oz either) and only 18% of respondents thought we’d go back down again. As for the other choices, they were kind of evenly spread but the object of the exercise was not that, it was to gauge the market mood and sure enough, hope once again sprung eternal in the precious metals sector.

Now for sure I’d like it to be true as well, because one thing is to play the “call the bottom” game, another is to put your money where your mouth is and that’s exactly where I am today, betting on a better September than August (and beyond, of course). However we shouldn’t take this as a given, especially not on just one day of trading in this most volatile of sectors that sits under a nervous and volatile broad market. You don’t have to look far to find data that points gold back down, either:

While all was merry and bright in the gold market Friday, GLD inventories actually sold off further and ended the week at 764.58 metric tonnes gold. That’s 2.7mt down on the day, nearly eight tonnes on the week and the lowest inventory position since the 26th of February 2016. I want to believe and the forecast is a public one too, as per Thursday evening (1) and the “put up or shut up” post. But I’m not above being wrong, not counting any sort of chickens yet and I’m aware that what the dollar does is vastly more important than any set of results in my chosen portfolio companies right now. This time next week I may be writing with more confidence about a nascent bull run in our sector of focus, we’ll see on that.

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Gary

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