Major Signals Emerge on Gold’s Next Bull Run
Youtube link with a fairly comprehensive review of the gold market...
Bottom line is still a "wait for it"... options are not yet over-balanced on the upside... market momentum is still net negative... but we are in a market context where the focus is "looking for a bottom" to be put in. The questions are... where / when is the bottom going to be found. It may be getting close, but the downtrend remains pretty solidly intact for now, the recent rebound to 1700 not overly convincing, a very high probability that we will see 1675 again, perhaps bottoming as low as 1650 but it may bottom at 1675 over the next few weeks... but betting on lower than that is also not likely to prove useful.
Link does a good job of including futures market insights... and briefly discusses a few banking related issues, while still missing big picture elements in the banking interest and its relationship with gold...
At 28:45, he does note, correctly in my view, that what's needed to see a more convincing bullish case for gold... is a more convincing bit of evidence of accumulating stresses in the banking system. He discounts the recent noise re the Ten Year by noting it is a single date issue... while the other dates aren't showing the same issue... and addresses that even with that bit of noise, real rates are still overall negative as a function of inflation being understated relative to sustained lower rates... All correct. So, the Ten Year is a bit of noise being introduced... for purpose ?
He doesn't proceed far into developing larger bond market arguments or making any predictions about how, when, or why banking system stresses are likely to emerge... as accelerating inflation, other rates rising, etc. Nor does he attempt to link gold market potentials to other market events, and their relationship to the bond market indicators, including other risks (beyond inflation or rising yields) existing or risks potentially being realized in the broader market or the larger economy... both of which are likely necessary elements to focus on in understanding bond market issues, as well as the context in which gold market future events are going to be decided.
He does address the long term pattern as being about "accumulation" and sees recent evidence as about a "capitulation of the shorts"... but misses that the real end of short interest, and any real end of accumulation in the parallel trade that is enabled by it... probably wouldn't have the physical market so tight that there's not enough metal on the COMEX to meet the delivery demand ? Reality of backwardization in the market says "accumulation continues" not that we've seen an end of it working as a proof of a market shift from accumulation with short suppression... into a market in which shorts quit trying and prices are allowed to run without resistance. The chart pattern... does suggest that's an argument about "scale" more than on balance issues... at a point before "larger market interest" in introduced to the idea of gold's value in future market context that all gold bugs understand... along with all banks... and almost no one else.
I'd add that awareness of longer term focus... in a shift in the market that has been, or has tried to be, "away from gold" since Nixon closed the gold window... and portfolio managers have removed it over time as a necessary component of any balanced interest in countering both "return of capital" and inflation risks...
The shift in the narrative this week to a more positive tone in larger markets... after some difficult days... being paired with the ending of the "commodity super-cycle" talk... doesn't mean the commodity super-cycle isn't a real issue... but it does suggest the talk being allowed until now has had the intended effect of shifting enough capital in investment into the exploration sector to jump start moribund efforts in exploration "well enough"... without that demanding any ongoing follow up in larger market demand being directed to the commodities... yet... if at all ?
Current situation seems consistent with an awareness of a need to act to forestall future shortages... not necessarily with that evidence in itself suggesting the relative position of commodities in the market is intended to be rotated back into the limelight anytime soon...
Confused narratives... between hoping to spawn a major economic expansion off a pandemic response induced depression... while avoiding inflation accelerating... while also still choking the markets to constrain where that impact is allowed to be felt... to keep commodities down ? That won't work. But it may bias the nature of the market and banking stresses that will emerge over the next six months to a year.... more toward stagflation and crackup boom scenarios... than the alternatives.
The wheels coming off in the larger markets... is not just a risk confined narrowly to banking and credit... so how broadly focused the impacts of any "black swan" type events might be... will strongly condition what happens in the commodities... including gold and silver...
Oil, on the other hand ? Watching for bifurcations in risks breaking along the lines suggested above... makes it reasonable to hedge gold and silver market risks... with oil exposure.... as oil, like gold and silver, is an inflation hedge that has major market actors persistently engaged in price manipulation... but in oil that interest favors investors rather than working against them... to constrain supply and raise prices, instead of making fictional surpluses to sustain depressed commodities prices... as a purposeful transfer of wealth from miners to industry... or miners to bankers ?
Tier One:
Oil, silver, gold... as inflation hedges and as leverage in balance against particular economic risks...
Tier Two:
Other commodities as hedges against gross errors in demand calculation if an economic boom were to occur... as "state planning" crafts a dysfunctional "can't get there from here" strategy... Or, in targeted instances as "minor metals" where economic reality in shifting demand imposes targeted shortages... "the energy metals" as one obvious instance that has already seen a 4X on average since the second half of last year. REE issues in risks emergent again.
In those and others, prioritize mines already in development over explorers... as nearer term beneficiaries of the dual suppression of the residual in long term commodities cycle suppression... and the additive price suppression imposed by capital being applied in development...
The conflict in pricing cycles in mines in development... derived as a conflict or falsity in NI43-101 direction in upward valuation of resources as proven... is opposed by reality in banking, in which capital applied is risked at 30% of value invested during development, until production begins and removes risk and large risk based discounts). |
