Gold and Precious Metals

The modern gold bug mariner

  1. “Water, water everywhere and not a drop to drink.” – A famous line from Sam Coleridge’s “Rime of the Ancient Mariner”.
  2. Inflation, inflation everywhere and no higher gold or silver prices to drink!” – Rime of the Modern Gold Bug Mariner, July 12, 2022?
  3. Double-click to enlarge this long-term USDX chart.  Sometimes the dollar rises as money pours into the US stock market from investors around the world.
  4. That’s not the case now; money is pouring out of the stock market and into the dollar, as the Fed hikes rates to contain the inflation that has finally seeped out of the stock, bond, and real estate markets… and into the mainstream economy of America.
  5. One of World War Two vet and Dow Theory master Richard Russell’s main mantras was, “Own lots of gold… and lots of cash!”
  6. It’s a mantra I first learned while reading my father’s Harry Schultz newsletter in bed with a flashlight when I was eight years old, and it’s stuck with me like crazy glue.  The bottom line is this:
  7. All government money eventually fails completely against gold, and as it does, governments (and banks) become more reckless, but also more ruthless.  In the medium term, that ruthlessness can temporarily push up the value of fiat against almost everything.  Fiat is also needed to buy necessities; even though gold is money, governments don’t price goods in grams of gold.
  8.  Double-click to enlarge this key US rates chart.  The 3% zone for the ten-year bond is significant resistance, but more hikes from the Fed will eventually overwhelm the resistance.
  9. Double-click to enlarge this TBF bear bonds ETF chart.  An uptrend line has broken, but the break likely ushers in nothing more than a simple consolidation… one that could end with a big July 27 rate hike from Jay.
  10. I’m always adamant that gold bugs need to short bonds soon after the start of an inflation cycle because that’s when the central banks begin hiking.  From the $2000 area high, gold has fallen about 15% while the TBF fund is up about 30%.  I expect TBF to rise hundreds of percent before the end of the inflation cycle. 
  11. Amateur investors are trying to fight the Fed because they believe Jay et al will “blink” since US government debt is so enormous.  They correctly believe that if the Fed were to hike to above the inflation rate like Volker did in the 1970s, the dollar, the bond market, real estate, and the stock market would all completely incinerate, and civil war would likely be an almost instantaneous event in America… the most citizen-armed nation in the world.
  12. The Fed will probably blink, but not until 2023, and it won’t be much of a blink.  If investors blink, they may miss it! 
  13. Double-click to enlarge this long-term rate chart.  The current war and Corona handouts-oriented inflation is not related to the vastly more ominous commodity super cycle inflation.  That will begin in another two or three years. 
  14. Commodity super cycle inflation will likely drive US rates (and gold, silver, and miners) much higher… not just for a year or two, but for the next 20 to 30 years.
  15. This commodity super cycle inflation is related to the growth of China and India (and Africa), as well as the long-term transition from oil/gas to clean energy.  
  16. Double-click to enlarge this weekly gold chart.  My 14,5,5 Stochastics oscillator is oversold, but flatling, and RSI is not quite fully oversold.
  17. There’s some support at $1720, and more at $1675.  The bottom line: Both gold and the dollar are behaving “about as expected”, given where inflation and Fed are in this cycle.
  18. Double-click to enlarge.  The commercial traders have been buying long positions on the COMEX into this substantial price sale. 
  19. That’s not a sign of an “instant turnaround” or “parabolic rally“, but it’s positive action.
  20. Double-click to enlarge this daily chart for gold.  Both RSI and Stochastics are oversold.  As noted, I’m expecting some kind of “all the bad news is in” or “less inflation than expected” mainstream media take on tomorrow’s CPI report.
  21. I’m positioned for profit with ETF’s like XME, GDX, SIL, etc.  It’s time to buy key individual miners as well.  Gold stock bugs who followed my recommendation to buy “fire insurance” GDX put options are emotionally stable in what is becoming an ever-more unstable world. 
  22. The cost of the insurance is minimal, and it’s never too late to buy some.  I consider put option insurance essential for investors who have minimal cash and gold bullion, but heavy exposure to the miners.
  23. Double-click to enlarge this GOAU ETF. There is “volume symmetry” in play.  It looks like the pros who sold into the highs are on back on the buy. 

    Next. Double-click to enlarge this XME chart.  I bought at $40, and I invited base and precious metal bugs to do so too! 

  24. A big blast of volume and a Goldilocks inflation report tomorrow likely mark a medium-term low for the miners.  The modern gold bug mariner has lots of cash, lots of gold, put option fire insurance, and doesn’t leave home without it!

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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