Notwithstanding today’s absurdly phony and propagandistic employment report, it’s becoming more apparent by the week that the Fed and the U.S. Government are once again preparing to print more money. I don’t know when the Fed will revert to more QE but I would argue that the intense effort by the banks to use the Comex as a conduit to control the price of gold is a probable signal – just like in 2008 from March to October. Several FOMC officials have already hinted at the possibility of employing “radical” policy measures to keep the system from falling apart.
Silver Liberties invited on its podcast to discuss the extreme overvaluation of financial “assets” and the extreme undervaluation of real money – gold and silver – and the related derivative of real money – mining stocks.
“They may try to run this poor thing straight up and over a cliff. Recall the 2000 top was in March but they briefly ran it back in Sep 00. Ditto in Oct 07. When warning signs are ignored, the endings are abrupt. Maintain safety nets, but don’t assume stupidity has limits.” – John Hussman
This is the nastiest bear market rally that I have seen in my over 34 years of experience as a financial markets professional. It would be a mistake to make the assumption that there has not been some official intervention to help the stock market recover from the December sell-off.
Rob Kientz of goldsilverpros.com – a relatively new website that focuses on gold and silver market news and research – and I had a conversation about the extreme negative divergence between the economy and the stock market. And, of course, we discussed gold, silver and mining stocks:
A quiet bull market in mining stocks is underway. The GDX ETF closed trading on New Year’s Eve up 2.37%. Through Monday, the GDX has risen 20% since hitting a 52-week low close of $17.57 on September 11, 2018. In popular parlance, GDX is now in a “bull market.”
We expect that a significant bull move will occur and a significant amount of capital will pull out of “risk assets” and move into physical gold and silver for wealth preservation/flight-to-safety.
Click on the image below to hear the short and sweet 2019 inaugural Mining Stock Daily Podcast:
“People have to remember, mining stocks are like tech stocks where everybody and their car or Uber driver piles into them when they’re moving higher. It’s not a well-followed, well-understood sector which is what I like about it because it means there’s plenty of opportunities to make a lot money in stocks that don’t end up featured on CNBC or everybody’s favorite newsletter.”
Elijah Johnson of Silver Doctor’s (silverdoctors.com) invited me on his podcast to discuss the fast-approaching economic crisis and my outlook for the precious metals sector:
I’ll be presenting a detailed analysis of the COT report plus a larger cap silver stock that has had the crap beat out of it but has tremendous upside potential in my next issue of the Mining Stock Journal. You can learn more about the Mining Stock Journal here: Mining Stock Journal information
It’s important to keep in mind that the mining stocks have been sold to levels well-below their intrinsic value – in the case of larger-cap producing miners. Or their “optionality” value – in the case of junior mining companies with projects that have a good chance eventually of converting their deposits into mines. “Optionality” value is based on the idea that junior exploration companies with projects that have strong mineralization or a compliant resource have an implied value based on the varying degrees of probability that their projects will eventually be developed into a producing mine.
In relation to the price of gold and silver, the mining stocks generically (i.e. the various mining stock indices like the HUI or GDX) have rarely traded at cheaper levels than where they are trading now.
Bill Powers invited me on to his Mining Stock Education podcast to discuss why the price of gold and silver is going higher and why the mining stocks are historically undervalued:
In the next issue of the Mining Stock Journal, I dissect my favorite junior mining stock ideas. These are stocks that have unreasonably sold-off and have at least 10-bagger potential. You can learn more about this here: Mining Stock Journal information.
If you have gold, you have money – If you don’t have gold, you have a problem – Alisdair Macleod
With the massive net short position in both gold and silver Comex paper precious metals, offset by the historic net long position of the “commercials” (banks, mining companies, users, hedgers), numerous rumors are swirling around the precious metals market. For certain, the availability of physical gold bars in London that can be delivered to the large eastern hemisphere buyers who demand delivery is growing tight. Apparently the retail silver coin/bar market is starting to feel supply strains.
Miles Franklin’s Chris Marcus invited me onto this podcast to discuss the precious metals markets, mining stocks, Trump’s Trade War and the status of the gold held in custody by the Fed on behalf of the American public:
The September 7th COT report is probably the most bullish I’ve seen since the beginning of my involvement in the precious metals sector in 2001. As most of you probably know by now, the “commercial” trader category is now net long both gold and silver for the first time going back to at least 1994. The banks (“swap dealers”) net long position in both paper metals increased. Conversely the hedge fund net short increased in both.
It may take a few weeks for gold to push through $1215-1220, as the hedge fund algos will be looking to attack the price until they have covered their enormous net short position. That said, it will take only one particularly surprisingly bad economic report or unexpected geopolitical event (Syria, trade war, domestic political surprise, reckless Trump tweet, etc) to trigger a spike-up in the price of gold. Once this occurs, the hedge fund computers will race to cover their shorts, which will drive the price higher very quickly.
Trevor Hall and I co-produce the Mining Stock Daily, a brief, daily overview of news and events connected to the precious metals and mining stock market. We focus on junior mining stocks. We are looking to exploit audio information distribution on 10 different digital platforms including Anchor, Alexa, Apple Podcasts, etc. Trevor and I discussed why there is cause for optimism in the precious metals sector for MSD’s Friday feature interview segment (click on graphic to listen):
“The housing market is 100% a function of the Fed’s money printing. Half the money the Fed printed, $2.2 trillion, went directly into the housing market.”
Analysts and financial media meatheads look at the $4.5 trillion created by the Fed and truly believe that it wasn’t money printing because it’s “backed” by Treasury bonds and mortgages. But this is pure ignorance. Not taken into consideration is the amount of credit and debt issuance enabled by using the $4.5 trillion as the “reserve capital.” It’s fractional banking on steroids.
As the U.S. financial system reaches its limit on the amount of debt that can be serviced from the current level of wealth output, what happens next? We’re already seeing what happens in the housing market per the fact that the homebuilder stocks are in an “official” bear market, with some of them down over 30% since late January.
Then what? The Fed will have to print multiples of the original amount it printed or face systemic collapse. At that point the precious metals sector will soar beyond anyone’s imagination at this point in time.
Phil Kennedy (Kennedy Financial) invited me to discuss these issues on his podcast. Phil’s podcasts blend truthseeking, facts, humor, humility and sarcasm. It’s well-worth the time spent to listen:
“When it starts to happen, I think it could happen a lot more quickly than people realize.” The rest of the world is methodically “weaning” itself off its dependence on the U.S. dollar. Perhaps the latest EM collapse will accelerate this reset. At the same time, the U.S. Government is on track to issue a record amount of Treasury bonds to fund its rapidly expanding spending deficit. Who is going to buy these Treasuries? When the bid for Treasuries disappears, the dollar will begin to collapse, gold will soar. Demand will far exceed supply as the price rises and the paper gold shorts will be slaughtered.
My colleague Chris Marcus invited me on to his Miles Franklin podcast to discuss what appears to be an extreme version of the 2008 de facto financial system collapse and a likely “reset” of the global monetary system:
In the next issue of the Mining Stock Journal, I analyze the latest COT report and present the price-point at which hedge funds will start to cover their large short position. I also update my favorite junior mining stock ideas and present my favorite shorter term trading plays. You can learn more about this here: Mining Stock Journal information.
According to the latest Commitment of Traders Report released Friday and which accounts for Comex trader positioning through Tuesday, August 21, the hedge fund net short position in Comex paper gold futures soared to an all-time high of 89,972 contracts. This represents nearly 9 million ounces of paper gold. It’s more gold than is produced by gold mines in the U.S. annually. As of Thursday, Comex vault operators reported a total of 8.4 million ounces of gold, only 282,000 of which were available for delivery. In other words, the hedge fund paper gold short position exceeds the total amount of gold in Comex vaults.
Conversely, the Comex banks are taking the other side of the massive hedge fund short bet. Given the history of extreme positioning by the hedge funds and the banks (the banks are normally short paper gold – thus a long position by the banks is considered “extreme”), it’s a safe bet that at some point in the near future gold (and silver) are set to soar. Perhaps the more interesting question would be to ask why the banks have assumed a large long position in gold. What is it that the banks “see” that has them positioned for a big move higher in the precious metals?
Meanwhile, Tesla is the ultimate evidence that no price discovery is not possible in the U.S. stock market. In a market with true price discovery, TSLA would no longer exist. It appears as if Elon Musk was indeed under the influence of illicit psychotropic drugs when he claimed that funding was secured for a going-private transaction.
In this episode of “WTF Just Happened?” we discuss the massive hedge fund paper gold short position plus lift our leg the idea that Tesla will be around in two year (WTF Just Happened is a produced in association with Wall St. For Main Street – Eric Dubin may be reached at Facebook.com/EricDubin):