Jordan Roy-Byrne – Precious Metals Are A Counter-Cyclical Investment And Will Benefit From Further Pullbacks In General Equities
Jordan Roy-Byrne, Founder and Editor of The Daily Gold, joins us to discuss why he is still convinced that for a meaningful and sustained real bull market in the precious metals, that we need to see further corrective moves in the us equity markets. We review the potential path for Fed policy, bonds, interest rates, and the eventual point where the central bank will be forced to pivot back to more accommodative policies. It is this point where gold, and later silver and the mining stocks will eventually diverge from the general markets, as a counter-cyclical investment.
While Jordan is very bullish in the medium to longer term fundamental and technical setup in the PMs, we review the more near-term pressure based on a return in gold to the 40 month moving average, or even test the $1675 support level again, based on what he is looking at on the monthly charts. Jordan is looking to $18.75 as strong support for Silver, provides support levels in both GDX and GDXJ where he’d expect a bounce in the very near-term. He’ll also be watching the 10-year and 2-year yields in the bond markets carefully for signals of a turn.
Click here to visit Jordan’s site and keep up to date on what he’s watching on the charts.
Very UGLY conventional market today and it’s only in its’ infancy. With this kind of conventional market the PMs and stocks will only have muted rallies for quite awhile. The odds of a move to the low 1700’s are very high and it would be advantageous to get it over sooner rather then later. The action of the PMs the last few days should not get anyone excited. Gold is trying to hold off a final capitulation. We now have the monthly BBs in a well established trading range for gold and one hopes we don’t take out the lower BB with a monthly low below it—-that would just portend longer lasting ugliness for the precious metal. The conventional market bear should be growling well into 2023. Slowly purchasing some stocks and am in no hurry. The big box retailers are now feeling the pain with cisco after market plunging. Currently in 87% cash. The candy store is now open for business but prices still too high for many stocks so be very selective.
Good thought Doc, and Yes, the continued pressure across the board in almost all markets is rough, but most of the analysts, fund managers, and economic thought leaders we’ve been speaking with this year feel this could be more prolonged than many of the main-stream generalist investors are used to. This is not just a V-shaped flash crash, and is more akin to a real market correction — something we’ve not seen in 2 decades.
The conventional market generalists perpetual “buy the dip” crowd, has finally pivoted over to more of a “sell the rip” mentality. After a 20 years of believing the general markets can only go up, 12 years of Fed intervention and liquidity injections to prevent any real corrections, and with speculation in 2020 and 2021 reaching a crescendo of ridiculous levels of frothiness; this was long overdue to happen. I just posted a great conversation and daily editorial with Mike Larson that gets into many of these topics.
Now that so much money has been evaporated in the general markets, really starting in the middle of last year all the way through to the middle of this year in Meme Stocks, Growth Stocks, Stay-At-Home stocks, Reopening Stocks, SPACs, Cryptos, NFTs, Biotech, Cannabis, Transports… you name it…. there is far less capital left to buy any dips or push things to even higher nosebleed valuations. For so long when questioning the valuations and PE Ratios and lack of earnings potential, we were told that those kind of valuations didn’t matter and that prices going higher was what was primary. Well, now many of those traders, that fashioned themselves investing geniuses, that only knew a 1-way market to higher and higher levels, are finally getting a valuable and character building front seat to what an actual correction (not just a flash crash) actually looks like.
Like the classic Warren Buffet line states…. “When the tide goes out you get to see who was swimming naked.”
Now as for the PM markets, we are quite used to gut-wrenching corrections every few months, and wild volatility to the downside and upside, so this is just more of the same for the resource sector. However, the moves down over the last month in the PM mining stocks (especially the juniors) have been the most extreme pressure we’ve seen since the pandemic crash, and the sentiment is really bad once again. I’d expect at least a relief rally soon to ease some of the selling pressure. Personally, I was active again today doing very small adds to a number of gold and silver stocks, and blew out a few more exploration drill-play dogs, as I feel much more comfortable in the producers, royalty companies, and advanced developers at this stage in the cycle.
I am trying to follow your thoughts Doc, but I am throwing a few in with lose change going to the more speculative as my high risk beer money stocks. The other thing I have attempted to do is not be totally in gold/silver stocks as they have such emotional reactions by politicians, Central Banks and governments because of the massive debt and corruption. Therefore with the growing belief that the next leg of history in world development will be EV and other carbon free developments, I have a high concentration of base metals and a few petroleum stocks to transition. Algos love the “next best thing” so I am hoping that is where our handlers go in the near future. In the meantime I will just wait to see if the SEC or Justice Department wants to make the game more user friendly. I now accept that they are only waiting for Wall Street to act on their resumes. So it goes …. Again….
Good thoughts Lakedweller2, and on being diversified in not just the PMs, but also in Energy Metals, Oil & Gas stocks, etc… It’s not smart to put all one’s eggs in one basket, and opens one up to far too much portfolio risk.
Over the last 2 years, it was actually the Uranium stocks, Lithium stocks, Copper stocks, PGM stocks, Nickel Stocks, and Oil/Nat Gas stocks rallying at different times, that allowed me to limit losses in the Gold, Silver, Renewables, and Cannabis stocks.
Now, having said that, after such big moves in most of the commodities over the last 2 years, and with some of them rolling over, I do believe the Precious Metals represent one of the best value propositions at this point in the cycle. I’ve rotated a great deal of profits out of those other sectors over time, to focus more on the PMs for second half of 2022 and moving into 2023. That is increasing my risk and exposure to these sectors, but it’s more like a 80/20 spread at this point in my trading account – 80% PMs, and then 20% Uranium, Base Metals, Energy, Soft Commodities.
As mentioned above to Doc, my strategy lately has also been to beef up my positions in Gold/Silver Producers, Royalty companies, and advanced Developers, and minimize down my exposure to Explorers. As we know, and have seen time and time again, when the worm turns in the sector it is the producers and royalty companies that get the bid first, and then the developers, and finally in a more bullish sentiment the explorers can explode to the upside. When everything has been uniformly sold off and the good babies thrown out with the proverbial bathwater, it makes more sense to buy quality on sale and minimize down some of the riskier drill plays that have just been destroyed over the last year+.
Good drill news is being shrugged off anyway, and worse only OK to sub-par drill news is being sold without impunity. Heck, even stellar drill news is only moving the markets for a day or two and then being reversed back a few days later. In this kind of environment, I’d rather stick with known ounces in the ground, infrastructure in place, or royalties on existing projects and lower G&A. Companies burning through money like drunken pirates in a marketplace that is now allowing them to build value, makes much less sense until we see the sentiment improve. Also, once the drill plays blow their wad drilling this year, if they don’t get some market love, then they are going to have to raise capital again at a much lower share price and that reeks of further dilution.
It will be nice when we see the tables turn and the exact opposite environment. Until then… Ever Upward!
Thanks for taking the time to respond and giving your expectations. Very sound advice. As you say, day to day trends are less important than where we are headed in a macro sense. Coming from the old days (pre computers), I was familiar with how stocks performed on their own merits. A sector could be warmer than others, but the individual stocks within a sector still were rated individually.
Brokerage houses were just that ….trading companies with a seat on the exchange, with fiduciary responsibility, that traded in their clients best interests except pumping IPO’s etc. Of course Glass Steagall was in effect which did not permit trading and investing within the same firm. Also, the SEC actually monitored trading and actually prosecuted (or turned over to Justice) violations of fiduciary standards..
Company performance was rated on earnings. What drove a stock’s price was if the company beat last quarter’s earnings or if more cyclical, how they performed compared to the prior year’s same quarter or how they performed compared to prior years. There was none of this “met or did not meet expectations”. There were accounting principles that were validated as representing the performance and condition of companies. If companies did something inappropriate the CEO (President – CEO is new term) and board most likely fired. Now things are off balance sheets, redefined or misrepresented probably because the CEOs of Enron and Health South ended up in jail. Wall Street got bailouts, Glass Steagall and other regulations removed, civil fines levied on corporations so criminals had their thefts covered by Stock Holders.
When computers were introduced to Wall Street back in the 80s or whenever, there were many discussions as to whether this was going to introduce more fraud into the system. There were strong concerns that it would. Wall Street countered with a bunch of mumbo-jumbo how they could be trusted and could self-regulate. This was going to revolutionize things for Retail. How did that work out. With computers came the ability of retail to be able to dig into corporate performance. With things being more visible, came Wall Street push for deregulation. With deregulation came the ability to hide fraud and expand it. With Nixon closing the gold window in 1971, came an additional push to deregulate from politicians, which came together with the Wall Street push to get rid of fiduciary responsibility, conflict or interest and derivatives of all forms.
MY Point: This is not your father’s world. Yes, they had their fraud and corruption, but it wasn’t usually associated with Regulatory sponsorship of bogus rules, regulations and investigations and/or prosecutions. The difference today is that un-leveling the playing field is in the interest of those in authority. Prior to computers and elimination Glass Stegall, retail could compete somewhat on an equal footing as brokerage firms relied on Retail to pay their salaries.
It is the same thing as voting: in the old days, tax payers were the predominant group that Politicians relied on to finance their campaigns. However, with the introduction of Citizens United, Corporations became people and now Politicians were only interested in serving Corporate interests. One of the biggest Power Group became Wall Street itself. With computerization, deregulation and the buying of Politicians by corporations, markets of any form were taken out of the hands of retail. Why do bubbles happen: because there are winners and losers in bubbles. The winners are those that control the outcome. The losers are those that tend the crops for their masters.
I do not trust the system and believe a chart is only as good as the data that made it. We know the government data is mostly false. We know accounting data can be false. We know that information from media can be false. We know that what is put up on the internet can be false. We know that this combination of misdirection makes people in conflict and allows the tax payer to misinterpret their world or that of their fellow citizen, no matter beliefs.
Therefore, I have a strong belief myself that what I see in the market can be totally false or designed for the benefit of a few. I can only assume that at some point in the future, the powers that be will want to profit on the upside as they have on the downside and they will be forced by world wide situations to recognize value rather than a forever market of FAANG stocks. I may not live long enough to see it. But, it is very apparent that metals are only suppressed because they offer a legitimate option to a fiat system of fraud and deception and it will fail.
Hi Lakedweller2 for that response taking a look back historically at how the process for retail investors has changed over time, as have the regulations and laws around enforcing fair trading conditions, and how the advent of computers both helped and hurt as far as access to information and conversely the means to cover up some information. Yes, as far as the growth of lobbyist groups pressuring politicians to their will, that has gone on since politics was instituted, and there are always powerful groups influencing the masses for their own accord.
May your trading be prosperous, despite the many challenges the markets and global power brokers present. Cheers!
UVXY including aftermarket had a 25% move today. Wish I was more familiar with how it trades. Bought the dip & took partial profits too soon. Now what?
After midnight EDT, thank God futures are up. UVXY might nosedive Thursday, as in too far too fast—
But John Q Public might freak over the weekend
Great Bear started from a low price like every other miner. It is the resource that will matter. Emerita was no fluke. What Emerita lacked was the involvement of managed money. In order to get managed money involvement, it had to be taken back to a price level that was advantageous to managed money so they could profit like retail. Now that all have been neutralized except the Barricks of the world that are owned by the Chosen Few, it may not matter what you own in a “true” bull market, which first requires a legitimate market which will not happen. Therefore, if managed money wants to milk it like they did the General Markets, most miners will be taken up by indiscriminate algos that seek profits and not quality differentiation. The miners that fail will be the ones that fail because they are life style miners, or debt ridden without access to funds or lacking a legitimate resource or some other criminal reason. Miners went down irrespective of quality… they can go up for the same reason.
Winners and losers are determined in back rooms and bars.
(Just a theory of possibility)
Added: Regulation could change all that but no one is going to step up and do that.