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The Lunatic Fringe - Trading talk.

Zed

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We are killing science with politics.

 

Uglytruth

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Is the market being used to platicate the masses by making them think they are rich? Only to demoralize them when the rug gets pulled out from under them?

Face i8t we are hear because we want historic wealth values. As Buffet says when the tide goes out we will see who has a swim suit on. bI'm thinking many don't even know what one is. Their lifestyles are financed by personal debt.
 

Zed

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Is the market being used to placate the masses by making them think they are rich? Only to demoralize them when the rug gets pulled out from under them?

Hard to say really, it works the same way whatever the motivation. Back in the 90's I came to the conclusion that if your goal was to destroy the middle class the Fed was on track to do it.

Face i8t we are hear because we want historic wealth values. As Buffet says when the tide goes out we will see who has a swim suit on. bI'm thinking many don't even know what one is. Their lifestyles are financed by personal debt.

The whole damn lot is floating on a raft of debt... puncture the raft and you will soon see who can swim!
 

jelly

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I don't think that anybody is criticizing you, I'm sure not. It might be a great time to enter. But I would feel more optimistic if the broad market had been tanking instead of near all time highs. The miners are positioned very poorly in the event of an overall market dump.
Right now this is my only concern regarding the precious metals. The stock market is looking like it's days are numbered at these levels. When money begins coming out of the general markets, it could hurt the metals too. But, that's the risk we take with playing in the metals.
 

Zed

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HUI Weekly: 1997 to Date. The lower indicator is simply the HUI expressed as a % of the current gold price. The red dotted line is the approximate low and the green the approximate high. At it's highest sentiment level the HUI would be trading @ ~ 1200 given today's gold price. Roughly 5x current levels. We'd be trading in the 660's given average gold stock sentiment that existed just post 2008 and @ 900 given the average sentiment just pre 2008. Currently we are sitting @ the 12% odd level just 2% off the lows @ around 10%. Can it get worse? Sure! ...but given the likely risk reward it should not be hard to forecast that over time there is way more upside than down side available from these levels.

Here is some "feel good" math based on Mr Oliver's USD gold target of 8K. If the HUI gold back to its maximum sentiment and relative valuations hit the old high of 64% the HUI would be @ 5120 or approximately 21x today's print.

Be careful if you are buying, use stop losses etc, buy extreme weakness OR wait for a strong lead from the metals BUT either way, over time, mean reversion alone should make this a good trade with that tempting possibility of being a fantastic trade.

Not that it is like gold ever sets it's hair on fire and goes running though the crowd... is it? Gold never gets off the leash now does it? LOL.

PS> I didn't use GDX because as an ETF it is always depreciating in relation to gold at the rate of the fund management %. ETF's are a bull market instrument and you are paying for the convenience!

1631500487533.png
 

Lancers32

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CCJ. Up against the previous high now. 1/2 the highest selling price is 28. Not a place to go long. You missed this?


CCJ_2021-09-13_09-40-12.png
 

Lancers32

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SILJ is setting up a possible Bullish Engulfing. Still early.
 

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Uranium stocks going bonkers. I bought some a few weeks ago at the lows, and was planning on buying more once I shifted funds around. But they went ballistic before I could make the move. Ugh
 

dpong

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SILJ is setting up a possible Bullish Engulfing. Still early.
Yes, SILJ is trying to make a higher low. AG failed to make a higher low.
 

Lancers32

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Yeah it is not across the board.
 

jelly

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Anyone invested in oil and gas royalty companies? Looking into this space and seeing if others have experience or recommendations with it.
 

Lancers32

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Looking for a capitulation low near future.


sc-5689.png
 

Uglytruth

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Uranium stocks going bonkers. I bought some a few weeks ago at the lows, and was planning on buying more once I shifted funds around. But they went ballistic before I could make the move. Ugh
Sprott uranium not available from Vanguard. Sprott tole me they would contact me when ready to release. Nothing....... Missed it.
 

JayDubya

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What’s Wrong With Gold? Absolutely, Nothing.​

https://realinvestmentadvice.com/whats-wrong-with-gold-absolutely-nothing/

Gold. What’s wrong with it? From spiking inflation, falling real interest rates, and massive money printing, it seems logical that gold, a touted inflation hedge, should be rising. Yet, so far this year, gold has done little.

So, what’s wrong with this precious metal? Absolutely, nothing.

Is Gold Really An Inflation Hedge

One of the primary arguments for owning precious metals, particularly physical gold, is its effective hedge for inflation. However, is that still the case today?

The chart below shows the non-inflation-adjusted price and key events throughout history.

Gold, What’s Wrong With Gold? Absolutely, Nothing.
The U.S. being on a “gold standard” is a crucial consideration of the argument of gold being an effective hedge against inflation.

“The gold standard is a monetary system where a country’s currency or paper money has a value directly linked to gold. With the gold standard, countries agreed to convert paper money into a fixed amount of gold. A country that uses the gold standard sets a fixed price for gold and buys and sells gold at that price. That fixed price is used to determine the value of the currency. For example, if the U.S. sets the price of gold at $500 an ounce, the value of the dollar would be 1/500th of an ounce of gold.”Investopedia

As you can see in the chart above, prices remained stable until the point that President Nixon ended the gold standard in the U.S. However, for this analysis, the question is whether the golden metal is, or was, a good hedge against inflation?

Timing Is Everything


The answer is both “yes” and “no.”

As with all things investing-related, it is always a function of when you start. For investors in the stock market, those who started when valuations were in low double to single digits did much better than those with high valuations. (That is a lesson many of the Millennial and Gen Z investing group will come to learn.)


The chart below shows $1 invested in gold (non-inflation adjusted) and “inflation” as measured by the Consumer Price Index.

Gold, What’s Wrong With Gold? Absolutely, Nothing.
At first glance, like with the stock market, it is easy to see the precious metal outperformed inflation over time. However, that is only true if you bought gold before 1980, between 2002 and 2013, or in 2017. If you purchased gold outside those periods, you lost money relative to inflation.


The following chart makes this concept easier to grasp by showing the difference in the annual rate of change and inflation.

Gold, What’s Wrong With Gold? Absolutely, Nothing.
For every investment, there is always an “opportunity cost.” There is nothing wrong with owning gold in your portfolio, except when other assets, in this case, we will use the S&P 500 index, provides a higher rate of return.

Gold, What’s Wrong With Gold? Absolutely, Nothing.
Currently, given the influx of $120 billion a month from the Federal Reserve, the stock market provides a higher rate of return on investment than owning gold. Therefore, market participants choose to own ethereal assets due to the belief in “insurance against loss” rather than hard assets.


Will this “psychology” eventually change? Absolutely.


However, the question is, how much “lost opportunity” was there in the process? That is an evaluation that each investor will have to make for themselves to determine if such aligns with their investment goals and objectives.

Gold’s Correlation to the Fed’s Footprint


As noted, there are certainly valid concerns of the Fed’s ongoing monetary interventions. As Michael Lebowitz previously reported:


Linking real rates to the degree of central bank action form the basis on which we can look at the dollar’s value through the prism of gold. The first graph below shows gold has trended similarly to the monetary base.”

Gold, What’s Wrong With Gold? Absolutely, Nothing.

The next set of scatter plots are more compelling. They tell the story of how the price of the preciious metal became increasingly correlated to real yields as they decline. Said differently, gold is growing more positively correlated to the size of the Fed’s footprint.
The three scatter plots break down the relationship into three-time horizons as shown below.

Gold, What’s Wrong With Gold? Absolutely, Nothing.

  • The Pre QE period, covers 1982-2007. During this period, real yields averaged +3.73%. The R-squared of .0093 shows no correlation.

Gold, What’s Wrong With Gold? Absolutely, Nothing.

  • The second graph covers Financial Crisis-related QE, 2008-2017. During this period, real yields averaged +0.77%. The R-squared of .3174 shows a moderate correlation.

Gold, What’s Wrong With Gold? Absolutely, Nothing.

  • The last graph, the QE2 Era, covers the period after the Fed started reducing their balance sheet and then sharply increasing it in late 2019. During this period, real yields averaged +0.00%, with plenty of instances of negative real yields. The R-squared of .7865 shows a significant correlation.

Gold, What’s Wrong With Gold? Absolutely, Nothing.

As he concludes:


The message is not in the price of gold per se but its strong correlation to destructive fiscal and monetary policies.

The Gold “Fear Trade”


There is one key “takeaway” from this article.


“Fear.”


Investors tend to buy “hard assets” when there is “fear” of increasing debt, inflation, a dollar decline, recession, a market crash.

Gold, What’s Wrong With Gold? Absolutely, Nothing.
So, let’s revisit the “original” question: “What is wrong with gold?”


Absolutely nothing. Except there is presently no “fear” present to drive investors into the psychological “safe haven” of gold. That lack of fear is evident in everything from:


  • Record issuance of money losing IPO’s.
  • Mass issuance of SPAC’s
  • Record margin debt levels.
  • Near record stock valuations.
  • Retail investors taking on personal debt to invest.
  • Bitcoin.
  • Belief by investors of the “Fed Put”

You get the idea.

Two Primary Problems


When it comes to investing, individuals need to determine “why” they own gold? Is it a short-term bet on prices rising or a “psychological” trade based on “fear” and “emotion?”


If it is the former, there is nothing wrong with owning gold. It is a commodity that will rise and fall in price. Given that gold has no fundamentals (earnings or dividends), the “price” of gold is all you need to know to trade the metal successfully.


The latter is more problematic. Given that gold is no longer exchangeable for currency, and vice versa, the broken link as an inflation hedge remains. In today’s “fiat” currency economy, the ability to use gold as a method for transactions on a global scale remains destroyed. Therefore, gold has become a “fear trade” over concerns of the dollar’s demise, inflation, and an economic reset.


While there are valid reasons to be concerned with such disastrous outcomes, those events can take decades to play out. For example, Japan is the poster child of a demographic timebomb combined with the world’s highest debt-to-GDP ratio. Such remains the case since the turn of the century, but the “bug has yet to hit the windshield.” Yes, it eventually will, but how much longer it will take is unknown.

Gold, What’s Wrong With Gold? Absolutely, Nothing.

Final “Precious” Thoughts


Therefore, from an investor’s standpoint, the question is not whether you should own gold, but “when?” Too much of your asset allocation in a “fear trade” when there is literally “no fear” in the financial markets could lead to a more significant loss of future purchasing power than inflation. In other words, “opportunity cost” can have as large an outcome on your financial future as inflation or the dollar’s demise.


As is always the case, timing is everything.


Is there anything wrong with Gold? No.


However, as long as the Federal Reserve is engaged in inflating asset prices and forcing investors to take on excess risk, gold will likely continue to underperform.


Will that eventually change? Absolutely.


When? As soon as the market participants realize the error of their ways.
 
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Zed

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Yes, SILJ is trying to make a higher low. AG failed to make a higher low.

AG with % Silver @ the bottom. It has been strengthening against silver since the end of July.

1631580844634.png
 

Zed

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KL with % Gold @ the bottom. It has been strengthening against gold since the middle of August.

1631580990545.png
 

Zed

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HUI similar, might double bottom here.

1631581352298.png
 

Zed

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GDX similar. % Gold looking like it will cross its average soon. Recently this has delivered price pops, could well be a trend break. Watching OBV for same.

1631581821363.png
 

Zed

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SPX with % Gold... not too foul as a trading model.

1631582596347.png
 

Zed

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HUI Monthly with % SPX @ the bottom. Recent lows @ ~5% highs @ ~ 50%. That's ~ HUI 2250 @ SPX ~4500 or if we go with the previous projection of HUI 1200 it implies SPX 2400. There looks to be support @ SPX 2200 to 2500 so that seems to be a reasonable expectation if the stock market falls out of favor for a while.

1631584192592.png
 

jelly

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2024 GDX & GDXJ options are now available, for those who want to play the long game.
 
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Zed

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Martin Armstrong - What is clearly very interesting is how our computer is pointing to October and February which is showing up on so many economies around the world. It appears that the world is being confronted by this COVID issue and it is coming to important events that will impact the entire world.

Something to keep at the back of the mind.
 

Uglytruth

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Something to keep at the back of the mind.
FWIW Cliff High has been saying the same thing. Mid end of October.

Face it we can't take much more pressure without breaking.
 

Jodster

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Something to keep at the back of the mind.
In my local community, on social media and even local news, mid-October always seems to come up. Recently I heard a telecast that stated the US Govt needs to renew it's budget around Sept 30th and officially runs out of money on October 15th.
Budgetary crisis if Trillions more in digits aren't fabricated out of thin air.
Methinks the USD is dead and they're gonna staple the crash on Sleepy Joe's ass.
 
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Lancers32

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Zed

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FWIW Cliff High has been saying the same thing. Mid end of October.

Face it we can't take much more pressure without breaking.

I'm not sure if he is genius or total looney... or genius @ being a looney!
 

Voodoo

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I'd rather own just Pt at the moment and short a little Pd against the position. I think this would be a higher Alpha return with lower risk. But something like SPPP is a decent long-term play but I think it will be under pressure for some time.

Well under pressure was a bit of an understatement. Palladium is really looking like a crash ($3k to $1975 or 34%). It's already getting close to the same numbers it did in Mar 2020 ($2750 to $1500 or 45%). However, that time the DOW moved almost at the same time/rate. This time the DOW has barely budged. Is Palladium or the DOW correct?
 

Zed

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Aspirin is the go, not paracetamol. Apparently there is evidence paracetamol triggers a cytokine storm.
 

Lancers32

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Silver
 

Lancers32

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Shit the bed again. Kiss and no go.

E_aHODBUcAAmmgh.png
 

Voodoo

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That chart Screams retest of $18-19 breakout.
 

Lancers32

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Inflation, global pandemic, threats of war, and... gold down $40/oz.

Inflation doesn't really do it War doesn't do it either. Go back to the mid '00's and see what Gold did on Mid East conflict. Patience is required.
 

Zed

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jelly

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Options expiration tomorrow, Fed meeting next week. I guess it shouldn't be a surprise that gold gets smashed right about now.
 
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savvydon

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Options expiration tomorrow, Fed meeting next week. I guess it shouldn't be a surprise that gold gets smashed right about now.
I'll tell ya, I pulled the trigger kinda early on my miners and will just have to suck some of this up, but it sure doesn't seem like a bad time if someone wanted to pony up for a little physical at the moment. Seems dirt cheap.