Gold Miners: Beautiful Pictures

After a well-deserved correction of nearly 3 months, the gold stock sector is still flashing positive signs beneath the surface, as the correction matures.

The correction that began in August amid the ‘Buffett Buys a Gold Stock!‘ tout has now ground on for nearly 3 months. As noted in the NFTRH 626 Opening Notes segment:

“Thus far the correction in gold, silver and the miners is perfect, where perfection means long, drawn out and maddeningly frustrating to bulls (and bears thus far). That’s what corrections are, remedies to excitement, confidence and of course, greed.”

We are managing the technical details (and associated strategies) of the correction in HUI and individual gold stocks each week in NFTRH, but as a gold stock investor, it has not been a time for making money since August. As a trader, it has been a difficult time for making money as well, because of the lack of a definitive drop that the sector’s corrections are known for. It has been a grind, and in that annoying, time-consuming process, it has been perfect.

Below are some pictures that we have maintained front and center during the correction in order to disqualify or more likely, confirm the macro bull view for gold and the miners. This was so that subscribers could sell, buy or hold as they see fit, but more importantly so that we could know the status of the backdrop all along the way to make better-informed decisions.

Meanwhile, the perfection has been in the cleaning of the investor base, a large portion of which thinks that inflation is good for gold miners. Often it is for the stock prices, but rarely is it good for the bedrock sector fundamentals. One of the best measures of the real price of gold is the Gold/CRB ratio, which is in part of the measure of the gold mining product vs. gold mining costs, especially energy costs. Continue reading "Gold Miners: Beautiful Pictures"

Following The Gold Stocks Leaders As The Fed Prints

Gold stocks have led the market for a year, and with economic deceleration and Fed policy response that leadership looks to continue [edit: today’s ‘in the bag’ bounce-back Jobs report does little to alter the economic deceleration theme]

We have been on a bullish gold mining view for over a year now. Over that time there have been three interruptions, the downward-biased consolidation from August to November 2019, the flash crash (and very constructive gap-filling mission) in March and most recently the pullback that logically began in May as broad stock market relief started to fan out to more and more momentum chasers who’d finally gotten the hint that the Fed means to devalue the US currency (in competition to a degree with its global counterparts seeking to do the same), making cash a non-viable investment position (other than for risk management to the bullish asset market atmosphere).

The daily chart of HUI shows a successful support test, purely up trending moving averages, all gaps filled but the breakaway gap (a ‘breakaway’ does not need to fill any time soon as it changes or reasserts a trend; there is also an old gap from 2016 near 100 that we need not worry at this time), RSI now positive and trending up above its EMA 20, MACD triggered up and positive and neither of them showing overbought readings. Ah, the beauty of a routine correction within an uptrend. All systems on this daily chart are technically ‘go’.

Gold Stocks - HUI

What’s more, the HUI/SPX ratio is now on an uninterrupted 1-year uptrend. With the come-lately players (institutions, hedge funds, black boxes, Ma ‘n Pa and knee-jerking herds of all stripes) having moved on to perceived greener pastures due to the broad stock market’s May-June outperformance the gold miners are again taking leadership. Continue reading "Following The Gold Stocks Leaders As The Fed Prints"

Gold Miners And Inflation

I think the case is closed, or it should be closed. But with firmly ingrained perceptions passed down from one generation of inflationist gold bugs to the next, you never know. Remember the old dismissive “gold is silver is copper is tin is oil is hogs” line from the 2003-2008 time frame? Probably not, but I remember it because it was me saying it against an army of inflationist commodity and resources bulls advising to buy gold, buy silver, buy oil… buy resources of all kinds to protect yourself from the evils of inflation!

As an interlude, here is a pleasant interaction I had with a reader (actually, the interaction was his in a comment to an article of mine, but you get the drift) during the 2016 gold sector launch that ultimately proved to be ill-fated by mid-year because… inflation.

I’m sick of internet d******s and the lying media and govt trying to tell me there’s no inflation! Inflation in the US is VERY HIGH. Its currently 8.3%, and has averaged 9.5% over the past 7 years.

Dude, the article was about why gold stocks do not benefit from inflation and why at that time the backdrop was positive (again, it degraded badly later in the year as inflation reared its head). Of course, there is inflation, all along the Continuum of deflationary macro signaling against which they routinely spray the stuff out of fire hoses, like now for example.

Without the secular decline in Treasury bond yields and complete abdication of the mythical Bond market Inflation Vigilantes, the decades-long inflationary regime would not be possible. Jerome Powell was unimaginably hawkish during the market correction of late 2018. The herd could not understand why, but we could. Inflation signals were getting out of hand as the yield spent a couple of months above the Continuum’s limiter (monthly EMA 100).

30 year bond yield

But sure enough, that got fixed as we suspected it would as the Continuum got hammered down since then into today’s deflationary doldrums. The Continuum has reloaded the inflation gun yet again as yields have tanked and bonds have bulled ever since. Continue reading "Gold Miners And Inflation"

Gold Miners Show The Way

[edit] It goes without saying that gold miners and the royalty companies that live off them will be shown to have been impaired like many other companies by the coming Q2 numbers due to shutdowns. An emailer questioned my view on this and it has been one of my personal caution points. Markets should be looking ahead, but during this euphoric sentiment release across broad markets maybe they’re overlooking some things. The other caution point is that a big bullish expression on the heels of the Fed announcement is also a setup for short-term disappointment. So with respect to the daily chart below, maybe Friday’s gap will fill after all. But as noted in the article below “the gold stocks lead and their fundamentals and value proposition will have improved by leaps and bounds as we exit the COVID-19 global lockdown”.

It’s a good Friday because I get to start my weekend work earlier. Many people temporarily have no weekends because they are huddled at home as one day bleeds into the next amid the global pandemic. Monday is Thursday is Saturday. Good Friday is Halloween is Festivus.

But when times are normal I have no weekends, working 7 days and most intensely on the weekends (with more freedom than the average worker on weekdays). When times are abnormal like now, I work hard on weekends but the more intense days are during the week. As one subscriber put it:

“What a wild ride lately… Thanks for busting your ass for us all lately. As always, you’re the only reason I can handle being in this game.”  -Tom A  3.25.20

That was in reference to the massive amount of in-week effort we (I write “we” because it takes effort to be an NFTRH subscriber because they are tasked to work, not just receive instructions from some clown dressed as a guru) put in to manage volatile markets with formal subscriber updates and in particular, more dynamic in-day updates (with charts as needed) at the Trade Log Notes page. I believe you must be at your best and most interactive when most needed, especially during a crisis, not sitting on autopilot hoping no one notices.

When you’ve got a tiger by the tail you may not know exactly how it is going to react but you sure as hell don’t let go! Continue reading "Gold Miners Show The Way"

Gold Stock "Launch" Is In Line With Fundamentals

I make the point in the title because the real fundamentals that matter for the gold stock sector must be in line at the beginning of a real bull phase or bull market for the sector. I make that point with the example of Q1 2016, when a very powerful gold stock “launch” erupted but in Q2 of that year we (NFTRH) were already advising a degrading of those fundamentals. A public article I wrote referenced this on May 30, 2016.

AMAT Chirps, b2b Ramps, Yellen Hawks and Gold’s Fundamentals Erode

What had happened in 2016 was that gold bottomed first, followed by the miners and silver. But then the whole raft of cyclical assets (commodities, stocks, etc.) bottomed and turned up. A cyclical party soon regenerated and the counter-cyclical gold stock sector was sent back to the hell it came from.

So again let’s take a look at our visual that roughly represents the correct macro backdrop for a bullish fundamental view on gold stocks. The larger the planet, the more important the fundamental aspect. Gold/Commodities should be a somewhat larger planet but work with me here. 🙂

Add in the important component of the Fed and its increasing odds of 2019 rate cuts and well, you’ve got the right backdrop for an undervalued sector (as we’ve been noting for months in NFTRH using unique comparisons of the gold/commodities and gold/oil ratios to the HUI index) to finally gain traction in the eyes of the wider investment community.

Hence we noted the launch in this NFTRH subscriber update (now public) on June 3rd. Check out the entire post, but below is an excerpted bit. Continue reading "Gold Stock "Launch" Is In Line With Fundamentals"