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In spite of the President’s declaration on Saturday that the dollar was “too strong”, King Dollar is holding its own and, in turn, gold continues to get battered. It has tumbled hard pretty much every day since February 20th. I wanted to mention, however, that it could be finding a reasonable area of strength soon.
Miners, too, should be watched closely for support a little north of $21.
I reserve most of the work on precious metals for NFTRH weekly reports and in-week updates because it is done on a consistent basis, with the work done previously key to the narrative making sense in real time and going forward. In other words, in order to not be out there stabbing in the dark you need to have an ongoing, adjustable plan that makes sense at all times with the macro markets around it.
So that said, let’s take a snapshot of where things stand currently with the understanding that this work will need future updates, which will probably not be made publicly. It is up to the reader to do the work required to put context to the picture. Meanwhile, this will free up more space in next week’s NFTRH 538 to focus on some quality miner charts, which sometimes take a back seat to the macro/sector stuff.
In honor of the men staring at silver’s daily chart, let’s highlight NFTRH 518’s Precious Metals segment this morning. We have 60% of the new trading week in the books and not much has changed for the PMs since this was written. You’ll notice that this man who stares at charts gets a little wordy at the end. There is much context that would-be gold bugs need to have in hand.
First, the intro per our anniversary series of posts…
To celebrate NFTRH’s 10 year anniversary (Friday, Sept. 28) I’d like to present one segment from this week’s report, NFTRH 518 each day until Friday. These excerpts will give you an idea of what it takes to provide a top tier, best of breed product. But there is much more to a single weekly report than will be shown here publicly. Oh and don’t forget the dynamic in-week market updates as events dictate.
All for 30% less per day than you spend on your single cup of small regular coffee at Dunkin Donuts! Think about that. I mean, I don’t want to downplay the importance of coffee – it makes NFTRH run – but what is the value of consistent, focused and proven market intelligence at your fingertips day to day, week to week and year after year?
Here is how I see the precious metals situation. It’s one or the other of…
US dollar declines short-term and the precious metals bounce with the rest of the anti-USD trade, or…
US dollar rises (likely along with the Gold/Silver ratio) and the precious metals decline again into a real buying opportunity.
…in a shocking development, it turns out to be the way IKN described it, not the BS and nonsense waved at you by Palisade and the other paid pushers.
Eric Sprott does this September 25th Youtube interview and it’s all good fun (ty reader D for the hesds-up), but to get to the point move to minute 2:40 and listen to this. The subject is the Australian Pilbara (Novo Resources etc) and here the transcript of what he has to say (author’s bold type):
“Well it’s very interesting that you know, I can’t imagine that Canadians are greater punters than Australians are, but one of the interesting things I’ve found with the Pilbara is that there’s this potential to have, and I’m not saying we have, but potential of billions of ounces, if you believe in the precipitation theory and it’s throughout the whole Pilbara like it could be a very very large…world’s largest or second largest rivaling Witwatersrand type of discovery. And maybe we’re just more risk takers but we’ve been involved with the gold mining sector probably more than any other country, investors in Canada, so that kind of possible fairy tale answer is something we’re always looking for, and there’s lots of potential there with any of those companies that they could find the nest big one and lots of people in Canada are prepared to invest on the basis that, you know ‘you put up X and if you’re right you make ten times X and if you lose X well that’s fine, that’s just part of the game here’, so we’re prepared to do that.”
A general review of the current status across different asset markets. This is not comprehensive, forward-looking analysis as per NFTRH, but it is an up to the minute summary (as of Friday afternoon).
Gold, silver and Gold Stock indexes/ETFs made what I had thought were bear flags yesterday, but today painted them as short-term ‘W’ bottom patterns, in silver and the miners anyway.
This chart of gold (courtesy of Barchart.com) shows a flag breakdown, whipsaw and new closing high for the short-term move. As we’ve noted for weeks now, the Commitments of Traders (CoT) is in a contrary bullish alignment with large Specs all but wrung out of the market (they were fleeced again; don’t believe hype about their increased shorting being some sort of conspiracy). All in all, not bad for the relic. The bounce lives on.
There is nothing bullish happening on the gold and silver charts. Nothing bullish on the miner Index/ETF charts. Nothing bullish on the HUI/Gold ratio. In other words, when it comes to a segment as volatile and sentiment-dependent as the precious metals, we are in the kill zone.
That can be read a couple of different ways. First, the inflationist gold bugs are getting exterminated as the US dollar first rose and since has stubbornly refused to take a pullback.
But the time to buy the gold sector is pretty reliably when the bugs are dead or at least hiding deep in the woodwork; so deep that you’d not even know they are still there. Just as you should have caution when gold bugs are trumpeting loudly, you should be brave when they are in full retreat… or worse, dead.
On that same day we had an NFTRH update (still password protected, but below is the screenshot of the intro) illustrating for subscribers a developing positive risk vs. reward proposition in gold and silver.
From this week’s Notes From the Rabbit Hole, an excerpt from NFTRH 502‘s Precious Metals segment, since I haven’t given the PMs much airplay on the public site lately. It gets a little prickly at one point, with some views on the gold sector’s perma-pompoms but then gets back on track.
First off, let’s review some macro fundamental charts. We know that bond yield dynamics are not yet favorable and neither is gold’s standing vs. major stock markets.
Gold vs. Commodities is still generally not good. Now, this (including gold/silver) is actually a sign that the inflation trades live on. Ref. our thoughts in the commodity segment that it may regenerate for one more thrust. An inflation trade can keep the gold sector afloat, but it is not the preferable fundamental backdrop for buying long-term positions. If this does not change I’d look to sell any decent rallies.
With gold testing its 200 day moving average this morning I thought I’d reproduce the first part of the precious metals segment from week’s Notes From the Rabbit Hole(NFTRH 497), including a daily chart of gold at the end showing the anticipated SMA 200 test.
We have done a lot of work delineating what the best investment environment would be for gold and especially the gold mining sector. The gold miners leverage (for better or worse) gold’s performance vs. cyclical items like stocks, commodities and materials. Gold vs. stocks is a macro fundamental indicator on investor confidence, or lack thereof. Gold vs. Energy and Materials are gold sector fundamentals directly informing a gold mining company’s bottom line performance (their product vs. mining cost inputs).
When inflation is taking root and the economic cycle is up, the gold sector is suspect for the reasons stated above. It is and has been suspect to this point by definition, because gold is either in long-term down trends (vs. stocks) or has been flat lining for 2 years (vs. commodities). Let’s realize that gold and the gold sector can and probably would go up in an inflationary boom (assuming gold were out performing stocks) but the fundamentals would degrade as long as the economy remained firm.