Brien Lundin – Key Macro Factors Driving The General Equities And Precious Metals Markets
Brien Lundin, Editor of The Gold Newsletter, joins us today to outline the key macro factors that he is watching as signal, and what he is tuning out as more market noise. We discuss that the main catalysts for the markets and the precious metals have really been both fiscal policy and monetary policy.
As it relates to gold, there are many subtle factors that play into this complex market like interest rates, inflation, the dollar, geopolitics, the strength of the general markets, and technical trading. However, the Fed monetary tightening policy is still the prime mover, and the reality is that inflation-adjusted real rates are going to remain negative. This will be coupled with continued fiscal government spending, and as the national debt levels only grow larger, it makes the debt servicing more and more difficult the higher rates rise. There is a point coming in roughly the next year where with a slowing economy and more pressure on both consumers and businesses, and ever growing debt levels, that the central bank continuing to raise rates will not be an option.
Are We Entering A Recession? World Bank Chief Can’t See How We Avoid It
Chloe Taylor – Fortune – Thu, May 26, 2022
“The head of the World Bank sounded the alarm over an impending global recession on Wednesday, warning it was difficult to envision a future where a worldwide downturn could be avoided.”
“As we look at global GDP…it’s hard right now to see how we avoid a recession,” he said. “The idea of energy prices doubling is enough to trigger a recession by itself.”
https://finance.yahoo.com/news/entering-recession-world-bank-chief-090320741.html
U.S. Economy Shrank 1.5% Last Quarter In Worst Showing Since Covid Recession, New GDP Estimate Shows
Jonathan Ponciano – Forbes (05/26/2022)
“The U.S. economy shrank at an annual rate of 1.5% in the first quarter of 2022—the first decline since the second quarter of 2020, the Bureau of Economic Analysis estimated Wednesday in a worse-than-expected update to last month’s figure, which showed a decline of 1.4%.”
(SAND) (SSL) Sandstorm Gold, (EQX) Equinox Gold To Form New Metals Royalty Company
May 26, 2022
“Sandstorm (SAND) and Equinox (EQX) each entered into agreements for Rosedale to acquire a portfolio of royalties from Sandstorm for $65M, consisting of $32.1M in Rosedale shares and $32.9M in a promissory note convertible into Rosedale shares, and from Equinox for $28.4M in Rosedale shares. Upon closing, Rosedale will change its corporate name to Sandbox Royalties.”
https://seekingalpha.com/news/3843071-sandstorm-gold-equinox-gold-to-form-new-metals-royalty-company
Ex (May 22nd): “That 50% retracement in the US Dollar down to the 101.40ish area seems like a potential over the next month or so if that keeps rolling over.”
The Dollar Index hit 101.43 this morning!
Core PCE report at 08:30.
Updates after that.
Hi BDC. Yes, I saw the US Dollar go down and tag that 101.43 area this morning, which was in the zone of the 101.40ish area that looked to be a solid 50% retracement of the move. We’ll see if it bounces from here in the short-term or still has further weakness to flush out. Longer term I’m quite a bit more bearish on the US Dollar, but when the greenback was levitating up in the mid 104’s it was pretty overbought, and conversely the other currencies in the DXY basket were extremely oversold, so a reversion towards the mean was overdue.
We’ll see how things go, but as we’ve discussed a number of times, really the Dollar index is just a teeter totter weighted against 6 other equally troubled fiat currencies. Any illusion of strength, is not the same thing as having strong buying power, as clearly that is being eroded down in a big way due to persistently high inflation (and is anything but strong in a real sense). Still, many computer algos key off moves in the USD so in that sense it is worth following the trends, and it often acts as a headwind or tailwind to other sectors, like the commodities.
Howdy Ex,
A non-linear historic break in the Dollar may happen at any time. This would be at odds with the current fact that significant gaps in the primary currency are always filled – all of them, e.g. the large 2002 gap that was finally filled in 2014, as mentioned here at KER back then.
Nascent ‘multipolar’ competition may be evolving from both the Gold backed Ruble and one rarely mentioned – the Gold Dinar. These, along with commodity backing, are known possibilities. And then there’s the unknown!
Interesting points on the gold-backed Ruble and also the Dinar.
/GC 2 hour chart….sideways move has slowed at resistance…..target initially is 1835…dollar should bounce due to TD9 bottom today and then in a few weeks start down again…imho…glta
Doc you posted earlier gold hitting 1700 at some point following any pop up in here if I understand your thinking.
Hate to imagine where the gold sector equities will be at with that scenario. Gold hugging this consoliation around 1850 give or take, and even silver is showing some life but it’s the same past history with gold sector equitiesho. Showing little promise considering how beaten down they’ve become. Together with the apathy toward the sector at a time when fundamentals for their product couldn’t be better.
Giving this thing the benefit of doubt in the immediate term, especially with the broader market having a bounce. Any sudden reversal with conventional market will certainly take down the gold and the sector irresepctive of positive fundamentals.
1700 /GC would be a 1.618 fibonacci expansion on this weekly chart in this cycle down…..Any thing is possible…the last monthly eg seasonal cycle low was march 2021…so this is over 12 months latter and seasonal cycles can stretch to 15 months easily…so very possible the low can occur more around the Fall of 2022…imho…this current low is no slam dunk, right here and now…the weekly chart may need a few more weeks to form a swing low that is meaningful…https://tos.mx/t5mkb08
Perhaps a tentative slam dunk? That’s how I see it. 👊🤠
https://stockcharts.com/h-sc/ui?s=%24GOLD&p=W&yr=5&mn=3&dy=0&id=p86417273336&a=1174324150
ok…no argument here Matthew…that backtest line happens to be my ABC down target on the 2 hour chart…..I will give it a go as they say at that point…so yes…but your chart does allow for some more testing…and the saying is that a low is not in until it has been test….and rejected…i am a bit more cautious in trading than some…early on hard lessons dun teached me that…lmao
The Nasdaq spent almost a year trying to break through a rising speed line resistance and failed. Now it is bouncing from speed line support…
https://stockcharts.com/h-sc/ui?s=%24COMPQ&p=M&yr=25&mn=0&dy=0&id=p05853098911&a=1154968320&r=1653679359689&cmd=print
It wouldn’t surprise me if it rises 10% or more in the weeks ahead…
https://stockcharts.com/h-sc/ui?s=%24COMPQ&p=W&yr=3&mn=11&dy=0&id=p42665834175&a=942652907
The more they pump the juniors / explorers with drill results and happy talk, the more they do nothing or worse. Vzla ceo, a regular here is but one example with his visit couple days ago. When these go down or ignore good news with price action, you have to wonder the reaction with any disappointment. Especially a bought deal in order to stay solvent as has been the case with a number of these.
Jonsyl, that news from Vizsla Silver VZLA was nothing but good news, in a tough market (so most news just becomes a liquidity event), but they didn’t announce any bought deal, so you must have them confused with another company. If you listened to the interview, Mike clearly outlined their cash position at present, and they are good to go, and have been.
Vizsla has over 100 million ounces of silver equivalent resources defined in just 2 years of exploration, is releasing bonanza grade drill intercepts constantly, is continuing to find new veins, has only explored 5% of their land package so far, and has 13 drill rigs turning at present with industry-leading low discovery costs per ounce found.
If investors choose to sell off a company that is continuing to grow their resources, repeatedly execute on exploration strategy, and that has procured a mill for the future move into production, and is well cashed up to continue on with their work program, then those people deserve to be left behind on the next move higher in this sector, because they don’t understand quality when they see it.
I had to sell both Vizsla Copper and Silver to get a zero balance in basis from the spin off. Copper was an excessive loss and silver an excessive gain. I can never get Schwab to adjust basis. They do not understand miners and refuse to adjust their errors. Even when referred to IRS Regulations they stone wall. If I sold both at the same time they zeroed out. Peace of mind was a benefit. I have elected to not reenter Vizsla Silver as the price ran up. If I held, Capital gains would have been false. Waiting the 31 days cost me. Holding would have cost me. I contacted the company and they would not respond. I contacted Eric Coffin and he tried to help.
There are many reasons someone holds or sell.
Edit: They adjusted my Vizsla Silver 50% of correct basis which means I had 100% ST gains without having a gain. They treated the spinout of copper as a stock split.
Hi Lakedweller2. That is an unfotunate experience you had with the Vizsla Copper spinout with Schwab messing up your cost basis in it and Vizsla Silver, and remembered you mentioning that at the time of the spinout, but was hopeful that had been resolved for you. Bummer man… but I’d have done the same thing and just sold both to clear ot out and then rebought after 31 days, once the wash period was over.
Personally, I sold my Vizsla Copper right after the spinout, which is what I typically do once they list, figuring there would be other selling and that it would take them a while to get a plan together for the new company. I did the same thing with Tier One Silver when it was spun out Auryn/Fury, and with QC Copper when it was spun out of Orefinders. There are others I did the same for but just can’t recall them at present.
The only time I got burnt selling a spinco too soon was with the modern incarnation of Silvercrest when it was spun out of the old Silvercrest when First Majestic bought them. I left some money on the table initially as it ratcheted higher, but once it became clear Las Chispas had the goods, and was actually even better than Santa Elena, yhen I got back in at a higher level and rode it up from there, and have swing traded it dozens of times since then. Silvercrest was and is best-in-class though, and there trajectory and discovery was the exception, and not the standard experience for spincos.
One that I varied from was when Marlin spun out Sailfish, as in that case I elected to phase out my Marlin, and rotate those funds into Sailfish instead, which worked out well, and then I eventually got back in Marlin towards the end before the merger with Golden Reign to form Mako Mining. We actually just interviewed Paolo at Sailfish today and posted that interview with their update. What an interesting journey that has been from Marlin to Sailfish & Mako, and now the new spinco Swordfish Silver. That Gavilanes project that will be in Swordfish has been in their porfolio since Marlin picked it off of Santacruz Silver years ago when they were in more duress. Nice to finally see it get value daylighted.
Good advice Ex.
Added: VZLA was over $2 US when I was trying to straighten all this out and the dive hadn’t happened. Now would also be a good time to buy.
Yes, for me personally, VZLA is a solid buy-the-dip candidate, where pullbacks to lower levels will offer good places for accumulation. I’ve started to build back a pretty healthy position in Vizsla, and have been following it since much lower levels a few years back, waiting for another opportunity to reload.
Last year I mentioned trimming back my VZLA at much higher levels, when things seemed to be getting a bit frothy, but now they’ve actually made more progress as a company, have a more aggressive drill program, and have been executing on both discovery drilling and resource expansion drilling. For these reasons, in concert with a more attractive pricing level, my strategy is adding more on pullbacks to beef up the current position even a bit more as time goes by.
Ex, I’m aware vzla didn’t announce bought deal just a host of good news, as is the case with any number of juniors on a repeated basis having little or no effect with their price performance.
Point was if they can’t have positive effect with good news, what will the reaction be with disappointng news as with bought deal announcement to stay solvent. Most notable is pgm which was a touted going concern but going nowhere and then comes the disappointment for the need of cash infusion to stay solvent.
Vzla may be an eventual exception, and I’d be there when/if all the touted positives get a bid. Better still when disappointments are ignored. We all have our approach, I don’t worry about missing out,
Yeah, unfortunately the. sentiment is still lousy in the junior mining stocks, especially the silvers, and good news is being ignored or sold into. Again that is the time to be in accumulation mode though, and I added a little more to my Vizsla position last week.
To your point, eventually we’ll see the opposite trend in a raging bull market, where even bad news is bought and/or shrugged off, and that will be the time to be in distribution mode and selling into the frothy top. We’re a long way from there at present though, so for now it’s still time to accumulate quality companies into the weakness.
The bears had their chance but might be allowed the perception of another chance in the form of a retest of the low. For now, being long makes sense based on this megaphone reversal, among other things…
https://stockcharts.com/h-sc/ui?s=SILJ&p=W&yr=3&mn=0&dy=0&id=p37532387078&a=1174343623
Silver’s false bearish breakout goes well with the USD’s false bullish breakout…
https://stockcharts.com/h-sc/ui?s=%24SILVER&p=M&yr=11&mn=7&dy=0&id=t6103956844c&a=1163584321&r=1653683142379&cmd=print
Added to Max Resource, Nobel, Southern Silver and Theralase today. +4.97% for the day. Two days in a row positive. I don’t know what to make of all that.
The US will enter a recession as soon as this year and the Fed can’t stop food and energy inflation, hedge fund manager Kyle Bass says
Phil Rosen – May 26, 2022
https://markets.businessinsider.com/news/commodities/economy-outlook-us-recession-fed-policy-cant-stop-food-inflation-2022-5