InvestMacro

What is Chen buying? Right now, silver. Lots of silver.

The asset manager and author of the What is Chen Buying? What is Chen Selling? newsletter said he is bullish on the precious metal because the push for greener energy will lead to the adoption of more solar energy, a technology that requires large amounts of it.

“The rising silver loading factor times explosive growth of solar panel demand will create a silver tsunami,” Chen wrote.

“The rising silver loading factor times explosive growth of solar panel demand will create a silver tsunami,” Chen wrote in his newsletter in December.

“Silver mine production, mostly as a by-product, has been very stable for the past decade. As we know, it takes years to explore, then years to permit and build a new mine. So, it will likely take a decade to bring up the production even as the demand explodes.”

The Silver Institute has predicted that global silver demand will reach a new high of 1.21 billion ounces in 2022, up 16% from last year. Industrial demand is on course to grow to 539 million ounces (Moz). And it won’t be just for solar panels.

Chen also suggests that those who wish to have a happy new year invest in companies specializing in rare metals, biotech, and/or energy stocks.

“Developments such as ongoing vehicle electrification (despite sluggish vehicle sales), growing adoption of 5G technologies, and government commitments to green infrastructure will have industrial demand overcome macro-economic headwinds and weaker consumer electronics demand,” the report said.

The global silver market is forecasted to record a second consecutive deficit between supply and demand this year, the Institute said. At 194 Moz, it will be a multi-decade high and four times 2021’s level.

Chen also suggests that those who wish to have a happy new year invest in companies specializing in rare metals, biotech, and/or energy stocks.

SilverCrest

Chen says he has a collection of silver companies, large and small, in his portfolio, but he is especially interested in SilverCrest Metals Inc. (SIL:TSX.V; SILV:NYSE.American).

Are you one of the many people who go through life with a vague curiosity about investing?

Perhaps you think you’ll get to it when you’re older or when you have more disposable income. Maybe you see it as gambling and, although interested, you don’t really know where to begin. If that sounds like you, then this guide will serve as a pathway to your investing future. We’ll help you explore the major types of metals people buy and show you some places to buy them.

Explore the most popular types of metal stocks people invest in, including what they are, where you can research them, and how you can begin investing the moment you finish this article.

Which Metals Do People Invest In? 

While the most common mining stocks people invest in are gold and silver stocks, most others are viable investments as well. When you buy the stock of a particular metal, like gold stocks, you’re actually investing in one of the companies that mines that particular mineral. It’s these types of metal stocks that are covered in this article, not purchasing physical metals.

Nevertheless, it helps as an investor to understand what makes these metals so highly valued in the first place. From the beginning of time and throughout every culture, gold, silver, nickel, and other metals have been used as currency.

When America issued its first paper money in 1690, these metals remained valuable. From jewelry to circuitry, building to computing, these metals are deeply ingrained into our society.

Unique for their hardness, beauty, and rarity, precious metals are known as one of the safest and most traditionally stable assets you can invest in.

Precious Metals

The main type of metals people invest in is also the rarest and most valuable. Precious metal stocks are primarily used as a hedge against inflation, and gold, silver, and platinum are the most popular.

Each metal has its own traits, tendencies in the market, and uses in society. Learn more about precious metals and consider which might be worth adding to your portfolio.

Gold

Ancient civilizations placed a lot of value on gold; thousands of years later, it’s still one of the most highly-coveted substances on Earth. Most frequently used as jewelry and a form of currency, gold has special traits that add to its mystique. These include

Unique Facts About Gold

– Gold is special in that it doesn’t rust or corrode and can conduct heat and electricity.

– The United States has the largest reserve of gold in the world, with 8,867 tons.

– Investors love gold and gold stocks for their tendency to hold value in volatile markets.

Where Can You Learn More About Investing in Gold?

As the most widely-invested metal, there are numerous sources of information on gold stocks and other gold-related investments.  Some reputable sources you may want to explore include The Gold Report, Barron’s, and USAGOLD.

Silver

Also a staple in jewelry, in addition to numerous other things, silver is less precious but far more useful than gold. From scrap to batteries, smartphones to car parts, silver is highly-versatile and constantly in demand.

Unique Facts About Silver

– Silver is one of the easiest investments to liquidate; jewelers will pay the market price for silver.

– Unlike stocks, silver is never likely to crash because it holds real-world, inherent value.

– One of the oldest elements, silver has been traded as a currency since 700 BC.

Whether you choose to invest in silver or silver stocks, consider it a viable and popular investment to add to your portfolio.

Platinum

Rounding out the top three precious metals, platinum is just as highly-coveted as gold and silver. As the only material suitable for the electrodes in pacemakers, platinum is extremely valuable to humanity as well as savvy investors.

Unique Facts About Platinum

– The price of platinum typically fluctuates with manufacturing and industrial industries.

– Platinum is even rarer than gold; all the platinum ever found would fill a pool up to your ankles.

– Platinum is among the heaviest metals: a 6-inch cube weighs as much as an average person.

Palladium and Other Precious Metals

The list of precious metals goes far beyond the three most popular options. From palladium to rhodium, there are numerous metals available, each with its own value as an investment.

If you’re curious about some of the other precious metals you can invest in, here’s a list of some that are worth exploring:

• Palladium
• Rhodium
• Ruthenium
• Osmium
• Iridium

Whichever precious metal appeals most to you, it’s worth taking some time to research how they’re known to perform as an investment.

Brief Note on Base Metals

In addition to precious metals, you can also choose to invest in base metals. Base metals are used in manufacturing and are typically more vulnerable to corrosion than precious metals.

Common examples of base metals include iron, steel, copper, nickel, aluminum, lead, zinc, tin, and tungsten. While they lack the rarity of precious metals, base metals are in high demand nonetheless, so consider investing in them to balance your portfolio.

How to Start Investing in Mining Stocks

Whenever you’re ready to buy stocks from a company that mines a particular metal, there are many safe places to do it online.

The first thing you’ll need to begin trading stocks online is your credit card, bank account info, or another account, like PayPal for example. This information will be required when making an account so you can buy stocks and metals online.

Making purchases is easy, regardless of the site you’re using. I recommend a few you may want to look into below.

When reviewing investments, there are numbers and symbols that can get confusing until you know what they mean. Remember that it’s critical to understand the measurements of the metals you’re buying and to stay within your budget while investing.

Once you’ve bought metal stocks, you can monitor their progress over time. If you need to liquidate your money by selling the stocks, every stock site will have slightly different guidelines for doing so.

Important Notes on Mining Stocks

If you plan on buying precious metals stocks, it’s worth having a formidable understanding of mining stocks. Here are some useful things to know before purchasing silver stocks or any other mining stock.

The Two Types of Mining Stocks: Juniors and Majors

Juniors are typically related to mining commodities like oil and natural gas. It’s important to know that they’re a risky investment compared to majors.

Junior mining companies are involved in exploring, preparing, and attaining permits for various metals.

Majors are widely considered a safer and much more mature investment. Majors are typically much larger companies that have been successfully mining and producing metals for many years.

What Factors Affect Mining Stocks?

Every type of stock is impacted by different factors, and the same is true for mining stocks.

Factors like fluctuating cost of the metal their mining and external problems at the physical mine, including geopolitical conflict and weather, all affect mining stock prices.

Where are the Best Places to Invest Online?

It’s worthwhile to check out multiple options before choosing which site to purchase mining stocks from. Each site will have unique pricing plans, features, and rules for liquidating your money and making trades.

Investing online is completely normal now with numerous options, and many precautions are in place to keep it as safe as possible.

If you’re interested in purchasing metal mining stocks such as gold stocks, check out these popular sites: 

• TradeStation
• TD Ameritrade
• E*TRADE
• Stash

Fine-Tuning Your Investment Strategy

Depending on how deep you want to take your investment knowledge, you may opt to do additional research online. Many stock experts eagerly offer guidance and advice on maximizing your portfolio.

While you’ll find experts on every side of an investment argument, it’s critical to remember that it’s your money being invested.

Expert opinions may be valuable, but it’s ultimately you who will be celebrating the gains or suffering the losses in your portfolio. For that reason, it’s typically best to look at a variety of sources before making an investment decision.

How To Use Stock Advice From Experts

As a new investor, seeing detailed stock reports may initially seem overwhelming. When first starting, if you can focus on one or two key takeaways and truly understand them, you’ll become increasingly familiar with the terms and concepts.

Over time, some investment experts or websites may resonate with you, becoming a critical part of your research process.

Examples of Popular Sources of Investment Information

Consider these popular sources of stock news and updates, along with a key takeaway from each of them.

• Stockhead: “Gold to Shine in 2023, says Bloomberg”

This article is immensely useful for metal investors, as it provides updates on iron ore, gold, and lithium.

Among the many details is this key takeaway: Bloomberg senior strategist, Mike McGlome, explains how gold is already trending more positively and that it’s poised to go up in value in 2023.

• The Gold Report: “Expert Says Silver May Have a ‘Stellar Performance in 2023’”

Always a valuable source due to many knowledgeable contributors, The Gold Report covers all metal mining stocks, including gold. This highly-detailed article focuses on comments by expert Michael Ballanger.

One key takeaway is that Ballanger explained the parallel between the performance of silver and that of copper and stated that silver is in a position for a “stellar performance in 2023.”

Ultimately, understanding how to interpret investment news and advice will get easier with practice and will likely help you become a smarter, more savvy investor.

Trust Streetwise Reports for the Latest News on Metals

Streetwise Reports is a one-stop hub for anyone whose curious about investing. Featuring articles and valuable information you won’t find anywhere else, you can count on Streetwise Reports to provide detailed and updated investment news daily.

Those interested in mining stocks will want to check out the Gold Report. There you’ll find new, in-depth articles on the events affecting stock prices worldwide.

Our team at Streetwise Reports works around the clock to compile meaningful stock information from a wide range of sources. We hope you’ll make Streetwise Reports the main source for investment news that matters.

Want more insight before your next stock purchase? Sign up for one of our FREE newsletters to get information that can help you make better investment decisions

Disclosures:
1) Nicholas Napier wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. They members of their household own securities of the following companies mentioned in the article: None. They or members of their household are paid by the following companies mentioned in this article: None.

2) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

3) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Gold is flirting with US$1,800, and it’s only a matter of time before it breaks through.

Gold shines when the market senses that the central banks will be unable to contain inflation.

Many gold fans believed that this year, with a war in Europe, rising inflation, and a shaky stock market, should have been gold’s year to shine, leaving many disappointed, frustrated, and worse. Gold’s performance should be put in context, however.

Now, as I write, gold is within kissing distance of breaking even (in U.S. dollar terms) for the year, down less than 2% year, while the dollar (per the DXY index) remains up almost 10%.

In addition, in a period of deflating asset prices, gold has held up far better than U.S. and foreign stocks and bonds, as well as other assets such as crypto. This is quite amazing comparative strength for bullion.

Should Investors Be Disappointed in Gold’s Performance This Year?

There are some misunderstandings in the simple narrative that gold “should” be higher.

• Wars or other geopolitical events tend to have only a short-lived effect on the price unless there is concern about it spreading; the Russia-Ukraine conflict has
been contained.

• High inflation in itself is not in fact the main driver of gold, as we shall discuss below.

• And although weak stocks can be positive for gold, much depends on the reasons for the weakness.

Offsetting those ostensibly bullish factors for gold have been two critical negatives: rising interest rates and a strong dollar. For much of the year, a relentlessly strong dollar was a significant headwind for gold, but all along, gold’s decline was meaningfully less than the dollar’s strength.

Inflation Alone Is Not Good for Gold

Inflation itself is not necessarily the optimum environment for gold. Markets, being forward-looking, fear central bank tightening in an inflationary environment. If the market believes that central banks will be able to contain inflation, even as it rages, that is negative for gold.

Gold shines when the market senses that the central banks will be unable to contain inflation.

One only has to look to the inflationary decade of the 1970s to see this. The market did not have confidence that Arthur Burns, as Fed Chairman, would succeed in bringing down inflation.

But far higher inflation under Volker resulted in gold falling because the market believed he would control inflation. The market was correct in both cases.

When Will Gold Move Up?

Since gold’s drop in March, my response to repeated questions about when gold will “finally” respond to inflation has been the same: gold will turn when more investors realize that the Federal Reserve will be unlikely to achieve its 2% inflation goal. Its current policies — the most rapid interest rate appreciation ever — will likely provoke a serious recession, and at that point, it will not follow through and quash inflation.

In short, the market is beginning to sense that the Fed will not be able to bring inflation down towards its target any time soon and certainly will be unable to do so without provoking a recession that could be quite serious.

For most of this year, investors swallowed the Fed narrative; all indicators of inflation expectations, from surveys to markets such as the TIPs, were for inflation to drop significantly next year towards the Fed’s target and for it to happen without a recession. If you believe that, then you do not need gold.

Now, though, expectations are starting to shift. Although inflation expectations two and more years out are still in line with the Fed’s own targets, for next year, investors are forecasting a higher inflation rate than the Fed. And concerns about a recession have increased.

In short, the market is beginning to sense that the Fed will not be able to bring inflation down towards its target any time soon and certainly will be unable to do so without provoking a recession that could be quite serious (though FedHead Jerome Powell still believes a soft landing is possible).

Why a Recession Can Be Good for Gold

Again, since markets are forward-looking, a recession would be positive for gold if the market sees a shift in Fed policy towards easing. The Fed does not have to “pivot” — a misunderstood phenomenon in any event — for gold to move.

The market simply has to believe that the Fed will have to because it will be unable to achieve its inflation goals without a recession. Tough talk from Powell following this week’s final Fed meeting for the year might see gold pullback; that might be our last, best opportunity to load up.

The Economic Pain Is Only Beginning

The signs of an imminent recession are becoming more and more clear if, indeed, the U.S. is not already in one. The Fed recently noted Milton Friedman’s dictum that monetary policy acts with long and variable lags. Indeed, the effects of what the Fed has already done have barely registered so far in the headline numbers.

Even if the Fed were to pause right now, more economic harm is already baked in. Interest rate-sensitive sectors such as housing and automobiles are the first to feel the impact of rising (or indeed declining) rates.

For other sectors, the impact can be delayed, and it can be nine or 18 months before it is clear; meanwhile, everything looks rosy on the surface.

The Fed will likely try to tame optimism in the stock market — it doesn’t really care about gold — but that will also have the effect of dampening the gold price. That may well be a great opportunity to buy.

Retail sales are a good example. Since March, retail sales have been mostly flat or moderately higher. On the surface, there appears to be no problem. Dig deeper, and some things become apparent.

First, if consumer prices are increasing at a nearly 10% rate, then if sales remain flat, that means that people are, in effect, buying nearly 10% fewer goods.

Second, look at other indicators: the savings rate has collapsed to a 17-year low, while credit card debt has shot up at its fastest rate in over 20 years. (Vanguard reported last week that it had experienced record “emergency” withdrawals from 401k plans, another sign of consumer stress.)

Consumers are not buying from income; depleting savings and running up debt can last only so long. It is only a matter of time before the stress shows up in declining retail sales. As it becomes obvious that the U.S. is in a recession without the inflation goal being achieved — a stagflationary environment — then the focus becomes when the Fed will ease.

Gold and Gold Stocks Are Inexpensive

We are, then, entering the sweet spot for gold. A recession will result in a lower dollar and falling stock prices–the result of a weak economy — while gold looks to the eventual Fed reaction. The outlook is positive, and while gold has moved convincingly off its lows, it remains low relative to its price for most of the past two years. With gold almost $200 off the October lows, there has been very little response by investors in the gold ETFs, another indication of the lack of interest among investors in general for gold.

Last week’s action was perhaps a little aggressive for gold, particularly ahead of the last Fed meeting of the year. The Fed will likely try to tame optimism in the stock market — it doesn’t really care about gold — but that will also have the effect of dampening the gold price. That may well be a great opportunity to buy.

It is an anomaly for gold miners to be less expensive, have better balance sheets, and pay higher dividends than the broad market, and investors should take advantage of the opportunities in bullion and in the stocks before the crowd starts buying.

The gold stocks (per the XAU index), meanwhile, though up over 30% in the last two months, are trading, for the most part, well below their average historical valuations. The stocks are near their lows relative to bullion itself. While gold is up around 550% since 2000, gold stocks are up a little more than 100% and are still well below their levels from 2009 to 2013.

Let’s not forget that with the gold price at almost US$1800 and all-in-sustaining costs (AISC) below US$1,200 an ounce, while cash costs are far lower, margins are very strong. The sector in aggregate is net cash positive, while valuations are low: price-to-cash flow of fewer than nine times against 13.7 times for the S&P; price-to-NAV of 0.65 times against a seven-year average 50% higher; and with a yield 25% above that of the broad market.

It is an anomaly for gold miners to be less expensive, have better balance sheets, and pay higher dividends than the broad market, and investors should take advantage of the opportunities in bullion and in the stocks before the crowd starts buying.

From our list, the top stocks to buy if you do not own them would be Barrick Gold Corp. (ABX:TSX; GOLD:NYSE); Midland Exploration Inc. (MD:TSX.V); Lara Exploration Ltd. (LRA:TSX.V); and Orogen Royalties Inc. (OGN:TSX.V). Some of these I suspect we shall be able to buy at a somewhat lower price over the next week or two, but you should be alert if you do not currently own positions.

Adrian Day Disclosures:

Adrian Day’s Global Analyst is distributed for $990 per year by Investment Consultants International, Ltd., P.O. Box 6644, Annapolis, MD 21401. (410) 224-8885. www.AdrianDayGlobalAnalyst.com. Publisher: Adrian Day. Owner: Investment Consultants International, Ltd. Staff may have positions in securities discussed herein. Adrian Day is also President of Global Strategic Management (GSM), a registered investment advisor, and a separate company from this service. In his capacity as GSM president, Adrian Day may be buying or selling for clients securities recommended herein concurrently, before or after recommendations herein, and may be acting for clients in a manner contrary to recommendations herein. This is not a solicitation for GSM. Views herein are the editor’s opinion and not fact. All information is believed to be correct, but its accuracy cannot be guaranteed. The owner and editor are not responsible for errors and omissions. © 2022. Adrian Day’s Global Analyst. Information and advice herein are intended purely for the subscriber’s own account. Under no circumstances may any part of a Global Analyst e-mail be copied or distributed without prior written permission of the editor. Given the nature of this service, we will pursue any violations aggressively.

Disclosures:

1) Adrian Day: I, or members of my immediate household or family, own securities of the following companies mentioned in this article: All. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management, which is unaffiliated with Adrian Day’s newsletter, hold shares of the following companies mentioned in this article: All. I determined which companies would be included in this article based on my research and understanding of the sector.

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4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services, or securities of any company mentioned on Streetwise Reports.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees, or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in the securities mentioned. Directors, officers, employees, or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company release.

I will discuss gold in a few paragraphs, but first. . .

Andrew Ross Sorkin

At the exact moment where I thought I could move on from this incessant preoccupation with FTX founder Sam Bankman-Fried, along comes one of the Wall Street media “royalty,” author of the book Too Big to Fail and a regular morning anchor on CNBC, Andrew Ross Sorkin, who makes the fateful decision to interview SBF in a global broadcast effectively allowing the alleged mastermind of the largest “misallocation” of customer funds in history a virtually unchallenged opportunity to pre-plead his case.

Notwithstanding the softball questions and buddy-buddy repartee between them, Sorkin and the NT Times audience actually applauded Bankman-Fried at the end of the interview.

Granted that the young man has not been indicted for any crime yet, these media gluttons are free to take whatever cash he transferred their way in return for the venue. They were (and still are) free to do anything they so choose with him because he is innocent until proven guilty, despite the admissions of the comingling of customer funds with that of his private trading entity, Alameda, as well as failure to adequately explain why he felt it excusable to buy tens of millions of dollars of real estate and put it in his own name or that of his parents.

The only reason I bring this up lies in the now-famous quote by the late, brilliant comedian George Carlin, when he said in reference to the elites that run the nation, “It is one big club, and you ain’t in it!”

Now, I am not going to continue to beat this dead mule as it truly serves no purpose but what I will say is that I find these interviews in poor taste at best and obscenely greed-driven at worst with the determination of legality to be decided at a later date.

To think that political parties on both sides of the aisle were given enormous amounts of campaign funding as well as all of the media companies, is an absolute abomination and an abject conflict of interest of staggering proportions.

The only reason I bring this up lies in the now-famous quote by the late, brilliant comedian George Carlin, when he said in reference to the elites that run the nation, “It is one big club, and you ain’t in it!”

To have such a prominent Wall Street cheerleader like Ross-Sorkin sit there and serve up overhand smashes for the fully-prepared SBF was, at least for me, an offense. It makes one wonder just how much the average investor is getting played by the Wall Street titans that control the behemoth software programs that are able to identify trades nanoseconds before they occur.

As my late friend and technical analyst Ian McAvity used to say, “In the hold of every sunken ship, you will always find a chart.”

It makes you wonder whether the bid offer for a particular security is real and whether the research report recommending an issuer is the product of actual research (as in “unbiased”) or whether it is part of an investment banking agreement where the only research generated with positive tilts are those attached to banking fees.

“Plus ça change, plus c’est la meme chose,” (The more things change, the more they remain the same.) wrote French writer Alphonse Karr and in the case of Wall Street, it is a most-fitting and very apropos phrase for describing an event that mirrors the unbridled hubris of the 2001 DotCom crash and the 2008 Subprime crash, two of the most recent examples of Wall Street Gone Wild under the influence of the most powerful narcotic known to mankind — greed.

I want this chapter to be the last in the sequence, but until someone actually goes to jail for white-collar crimes of ever-increasing magnitude and audacity, it is an exercise in futility.

The Fed Concerned About Overtightening

Moving along, this week was dominated by Fed Chairman Jerome Powell, so I will provide a sample of Email Alert 2022-109 sent to subscribers on Thursday morning pre-opening:

“I am concerned about overtightening.”

— Jerome Powell, November 30^th, 2022

Yesterday afternoon, one solitary word  — “overtightening” —  sent the Dow Jones Industrials up 2.18% on the hope and prayer that the rate-hike cycle is soon coming to a close.

The S&P 500 popped 3.09%, with the NASDAQ an impressive 4.41% as the beaten-up technology issues caught a hefty, short-covering bid. That he reaffirmed the Fed’s intention to continue increasing — as opposed to lowering — borrowing costs means nothing when the bulls decide to charge.

What I take to the bank about yesterday’s reaction to Powell’s speech is that it was most certainly not his preferred outcome because rising stock prices are in direct opposition to the stated goal of reducing demand in the economy.

I have often referred to the asymmetrical wealth effect, which was first introduced in the 1980s and assumes that rising equity prices have a positive effect on consumer spending habits. A big year-end rally that begins at the end of November will give the holiday shopping season a boost from improved month-end statements and portfolio values.

Gold Advancing

The good news for me was that while everyone was mesmerized with stocks, the gold and silver markets advanced 1.28% and 4.45%, respectively, in response to Powell’s “overtightening” fears.

In markets dominated by apprehension, knee-jerk reactions tend to be overblown by abnormally-large short positions and/or FOMO (fear of missing out), but while I think that applies to stocks, it was not the case for the precious metals, where an orderly advance simply gathered steam as the session wore on.

What is usually absent from the gold and silver markets is next-day follow-through, so to have gold nudging up against US$1,800 resistance and silver blowing through US$22.00 resistance is encouraging (verging upon exciting).”

The highlighted part is particularly important as Thursday saw an extremely powerful follow-through, with February gold punching out through that US$1,800 resistance and actually settling at US$1,815.30.

From the CME pit session close Wednesday to the pit session close Thursday saw a US$55.30/ounce pop, which broke it out through the 200-DMA as well.

The next two resistance levels are US$1,825 and US$1,875, but with the RSI settling on Thursday at US$71.22, gold moved into an overbought condition and in need of a sideways consolidation with which to work it off while holding US$1,800.

Mind you, it should be known that coming off the COVID crash lows of March 2020, gold stayed in overbought condition for eleven days, with RSI eventually topping out at US$91.57.

As I have been discussing for the better part of twenty years, the prices for precious metals are inextricably linked to the U.S. dollar because all commodities are priced in the reserve currency of the globe.

It is akin to a “peg” only because if your domestic currency is the British pound and you step into the London Metals Exchange to buy a carload of gold, you are paying the dollar quote, not the pound quote.

Weakness in non-dollar units of exchange will buy less gold per unit and vice-versa.

This chart is a clear illustration of the near 1:1 inverse correlation between gold and the U.S. greenback, with tops in the dollar on September 28 and November 3 coinciding perfectly with lows in gold US$1,622 and US$1,618 before embarking on the current almost US$200 per ounce rally.

To try to map out the course for gold and the dollar for the next six months is more an exercise in mindreading rather than an analysis of the economic or geopolitical landscapes.

There are just so many possible policy alternatives, all being weighed upon by domestic and foreign policy agendas related to inflation, oil prices, and partisan politics, that you have to read multiple minds to achieve accuracy.

Since mind reading is only possible if one wears a cape and goes by the title of “The Amazing Kreskin,” I depend on the predictive power of technical analysis to guide me in the general vicinity of accuracy because all of those head-and-shoulders tops and bottoms and ascending cup-and-handle mumbo-jumbo “signals” are simply clues to the mystery and not the ultimate solution.

As my late friend and technical analyst Ian McAvity used to say, “In the hold of every sunken ship, you will always find a chart.”

In all successful starts to bull moves in the precious metals, you need a combination of positive events occurring simultaneously. You need the more speculative assets classes to outperform the more conservative — i.e. junior gold miners (GDXJ:US) outperforming senior gold miners (GDX:US) and silver (SLV:US) outperforming gold (GLD:US) with the shares outperforming the metals.

This is exactly what we have seen off the September 28 lows all coincident with U.S. dollar weakness and declining bond yields.

Gold Versus the Basket

There used to be an expression about a certain profession that went like this:

“How do you tell if a <insert profession> is lying?”

“His lips are moving.”

Well, the profession that has earned that reputation is now all central bank governors, presidents, and vice presidents, with the chairman being the leader.

As the former head of the European Central bank, Jean-Claude Juncker, once said, “When it becomes serious, you have to lie.” So with the global economy, with particular emphasis on the U.S. economy, decelerating rapidly, I would surmise that we have reached the point of “seriousness.”

Jerome Powell addressed the Brookings Institute on Wednesday afternoon, and despite reiterating all of his warnings about “higher for longer” (interest rate levels and duration), the infinitesimal wisdom of stock markets determined that Mr. Powell was “lying” and decided that the “pivot” was “on” and that seasonality would trump policy into year-end selling dollars and buying stocks and gold and bonds as if this was April of 2020.

Only time will tell, but I learned a long time ago that markets that spit in the eye of the consensus view are markets that should not be faded (sold).

This creates a monumental problem for the Fed (as discussed earlier), but it creates an even greater problem for me in that despite the awesome technical set-up for the precious metals as we move into December, one word out of Powell’s mouth at the December 14 FOMC meeting could derail the dollar decline and stock/gold/bond rally in a New York minute.

On the other hand, what if the events of September 28 in London, where the Band of England was forced to reverse their QT course and instead launch a QE rescue mission for their pension funds, was a precursor of systemic risks to the global financial system due — once again — to the excessive use of leverage in meeting yield requirements?

If that event is what is spooking Powell & Company, then the “pivot” actually began in clandestine fashion in late September, with all markets around the globe looking far beyond the futile jawboning of the Fed and its “honored representatives.”

Only time will tell, but I learned a long time ago that markets that spit in the eye of the consensus view are markets that should not be faded (sold).

The Friday Jobs Report came in hotter than expectations but failed to derail a major chunk of the weekly gains, most of which came after the Powell speech. I find it hilarious that a mere two days after the narrative turns “pivot positive” due to that one word — “overtighten” — a jobs report that is a lagging indicator of economic activity brings about yet another 180-degree shift in sentiment.

I suspect that in a couple of weeks, the NFP will come in under consensus with revisions to Friday’s report knocking it back to a “miss.” However, profits were taken before the Powell speech, so I am now looking for a suitable re-entry point in anticipation of a continuation of the seasonal rally into year-end.

I suspect that in a couple of weeks, the NFP will come in under consensus with revisions to Friday’s report knocking it back to a “miss.” However, profits were taken before the Powell speech, so I am now looking for a suitable re-entry point in anticipation of a continuation of the seasonal rally into year-end.

With the Dow actually up after being down US$350 on the opening, it did a complete 180 — to my absolute AWE — and closed up US$34.78 to add 82 points for the week. Astounding, but not unexpected for followers of my weekly diatribe . . .

I suspect that in a couple of weeks, the NFP will come in under consensus with revisions to Friday’s report knocking it back to a “miss.” However, profits were taken before the Powell speech, so I am now looking for a suitable re-entry point in anticipation of a continuation of the seasonal rally into year-end.

Ditto the precious metals, where I have been looking to add aggressively on dips under US$1,800 and did today with the early plunge under US$1,800. For an old gold trader like me, trained in the late 80’s bull market where a lifelong narcotic was injected into my bloodstream, the action in gold is reminiscent of the period 2009-2021 for tech stocks — all dips are bought, and no pops are sold (at least for long).

Silver went out with a US$0.57/ounce gain on a day where all other white metals (palladium, platinum) lost 2.48% and 2.80%, respectively. Copper also had not only a decent day; it had a decent week giving me great confidence in the outlook for 2023 for all these metals AND for the junior wannabes that are either searching for or developing them.

Today’s resiliency for all markets in the face of a hostile jobs report and in the face of overbought market conditions reeks of too many portfolio managers (not yet born when the market crashed in ’87) underweight equities and panicking to get back into “fully-invested” mode.

If this trend accelerates, there might be an EPIC short squeeze into year-end that could rival the one that nailed those fuzzy-cheeked whiz kids back in April of 2020 when they were certain that the global pandemic was going to throw us into the 1930s again, which was EXACTLY what I was told by one of the kiddies in 2008 after junior stocks all crashed.

It never happened then, and it won’t happen now as the BIG MONEY wants a rally, and that is all one needs to know.

End of story.

Michael Ballanger Disclaimer:

This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

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