Craig Hemke – What Macroeconomic Catalysts Could Cause A Sustained Move Higher In Precious Metals?
Craig Hemke, Founder and Editor of TF Metals Report, joins us to review the recent corrective move in the precious metals sector, and what macroeconomic factors could create a scenario that is constructive for more sustained moves higher starting the second half of this year. We reflect on the recent Fed meeting, and stronger-than-expected jobs and manufacturing numbers, but note how those trends could change once the Fed pauses it’s tightening, and the effects of the higher interest rates further contract the economy.
We ask Craig what it will finally take to for more generalist to wake up to the central bank perpetual cycle of hiking only to cut again, and what catalysts may take the PMs on a longer term trajectory higher. This takes the discussion into the Fed pausing, trends in unemployement, the direction of inflation, and interest rates.
Craig points out that regardless of how it plays out, it will be key for investors to ignore some of the short-term micro noise, and instead focus on the longer-term macroeconomic data and trends. He still feels the odds are the first half of the year will remain choppy, but that the latter half of the year may be similar to 2010 or 2019 where the Fed is eventually forced to start cutting again due to weakened economic conditions. His advice is to hold through any volatility in the near-term, expecting a more positive advance in gold, silver, and the PM mining stocks in the second half of the year.
The macro factors have been in place since 2009 when they lit the QE fire in the US.
Look at silver:sugar. Either sugar is about to make a moonshot or silver is getting ready to let go on the downside. The damage done to that chart since January is pretty startling.
In other news:
IMPACT Silver Signs Binding Conditional Agreement to Purchase Plomosas Zinc-Lead-Silver Mine in Mexico
Looks like they got a very good deal on that property.
I like the deal; it’s a perfect fit for Impact.
CZL:ASX went up 32% on that news so think they got a good deal also.
That is an interesting acquisition by Impact Silver from Consolidated Zinc of the Plomosas zinc-lead-silver mine. It makes me think of the Plomosas project that GR Silver also is working on Mexico, and now I’m wondering if they are in the same basic vicinity, but haven’t got out maps and checked areas yet, as the news is still fairly fresh.
IPT is still one of my largest silver stock positions at this time, and I’m still waiting for them to spread their wings and lift off into flight later this year and heading into next year.
Craig is playing it safe by saying precious metals could go up in the second half of this year, that isn’t a call at all, that is a predictable no brainer. DT
Maybe Craig is aligning his outlook with that of his friend’s, Eric Sprott. Of course Sprott’s outlook just might be colored somewhat by Chris Vermeulen’s forecast. I’m just guessing since I don’t follow any of them.
In talking with Craig every week, the general sense I get is that he is looking for 2023 to play out very much like 2010 or 2019, where the year before and leading up to those, the Fed was talking tough about hiking rates, but then they capitulated again in 2010 and 2019, and paused earlier in those years, only to start cutting rates by mid-year, due to economic woes, which then sent PMs rocketing higher after the summer and heading into the spring.
That is why he thinks the first half of the year will be choppy rangebound trading, bucking off many bulls and bears alike, but that it will be obvious later in the year, that the economy is not as rosy as many are expecting now will calls for a “soft landing”. When the reality sets in that we are not at good times again, and that due to economic contraction mid-year, and the affects of sustained higher interest rates, that the forward-looking market will anticipate more easy money from the central banksters later in the year, and that this should be a boon to the PM sector. Jordan is looking at things in a similar way, and thinks that is also where the PMs will really start to diverge, even more than they have been, from the general US equities.
I intervention is the issue. Intervention is corruption. The question then becomes, when will corruption stop or be modified. It won’t be because it is profitable to the corrupt. So it appears to be that corruption doesn’t stop but seeks the opposite side of the trade. Since prices have been suppressed they run the risk of shutting down the mines which could be detrimental to a whole lot more than the JPM trading desks. Another option is nationalization, but the dictator has not been installed as of yet to guide the Fascist state.
So it appears that “circumstances” are going to force the criminals to other side of the trade shortly. It is money that will drive corrupt institutions to support higher metal prices and it will be the same corrupt activity that makes that window brief… unless the economy collapses and restructure is a necessity.
So at what point should we be concerned that Stillwater will have to do another pp instead to fund things going forward????….seems like a no brainer but it never seems to gain enough traction to break through into the .30’s……another pp would create a great final opportunity to load tho
One would think Stillwater would be on its way to .30 now (which was the norm when the size of the resource was NOT known). Soon as it went over .20 it was hit back like most all explorers with little known about the resource.
As intervention and capping has grown in order to protect the (tarnished) reputation of The Fed and (failing) US Dollar, price suppression is universal on explorers. Stillwater may have even been a test case on price suppression to test algos and public reaction, or could actually be shorting by Majors who have a long term buying interest and wish to keep the purchase price unrealistically below market.
In all cases as described above, as well as others that can only be imagined, it requires some degree of investigation by Regulatory Authorities to open Pandora’s Box. That appears to be an impossibility in the growing destruction of. “Free markets” and the unregulated monopolistic drive toward fewer Corporations with absolute Political Control under Citizens United. Wall Streets agenda of eliminating “retail” investors by pushing the lumping all Sectors into indexes and ETFs is the mechanisms by which individual selections of companies for investment are trying to be eliminated, and eventual absolute control of “winners and losers” and all property is within the control of the government and corporate entities ( also selected by the autocratic Fascist State).
Does Stillwater have a resource and location and current market superior to most Junior Explorers. If they do, why isn’t price reflective of their relative quality. Why is there a paper price setting mechanism for commodities that totally ignores cost of production and supply/demand traditional Eco 101 dynamics. Why is there no channel to seek grievances or restitution.
Stillwater is not the only Security that wanders in the Wilderness never to be found or rescued. But it appears to be the result of corruption and criminality and not a glitch of the market place. (Proof is another matter, but lack of investigation is proof in and of itself)
PGE went through the top bolly band so I sold most my position, they will need to go money shopping for sure but shouldn’t have much problem getting it.
Agreed. They will have no problem getting more funds but my cynical side is with Lake. Gets held down so warrants aren’t exercised and a pp gets done at .20.
They are going to need to raise capital again at one point, but I believe Mike still believes they are going to get rerated higher on the value they’ve proved up in the ground with the recent updated resource estimate growth, and some of the deals they are doing with Cornell Engineering and other organizations accessing some of the government funding for critical minerals projects in the US. We’ll see if they can break through the $0.25 and $0.30 walls so that some of those warrants are in the money, as that has the potential of bringing in up to $8 Million, and would stave off the need for an immediate capital raise.
Tower Resources is getting ready to drill at Rabbit North in B.C., this is the year of the rabbit! DT👍✔
FREAKY FRIDAY……………. Again……
321 article and chart on Tower……….. today….
The catalyst for the PM market will be when the last sector available fails and there is nothing else with upwards potential left to invest in. This sector is despised by most of the Wall Street types and will not be respected by them ever. IMHO the PM sector should be treated with little respect because that’s all it can get until it is the “It” sector for a few months, then sell when the price comes out of the upper bolly band.
Silver, just my opinion but this is not bullish…
Silver price moving through the Ichi cloud?
I’d prefer not to see Silver break back down below that $21.41 level that was support so many times last year and in the past, and was more recently resistance until Silver blasted back up through $24 recently.
Yet another sign that this is most certainly NOT the moonshot we have been waiting a decade for.
Again, we could maybe bounce soon (within the next couple of weeks I would guess) but until $24.75 is taken out it is just noise. And that’s all there is to say.
I am a megabull on the metals, but when I saw how steep the decline in silver’s 100 WMA was I knew 2023 was likely to be an absolute slog. I was going to hold no matter what, but Matthew really got me to believe I was wrong about the significance of the declining 100 WMA and that silver would have no problem blowing through it AND sustaining itself above that level. Wrong on all accounts!
Despite the slog I knew 2023 was going to be, I was hopeful that SIL would stay relatively strong relative to SLV, but boy have I been wrong on that one. SIL has been one of the most pathetic sector ETFs I have ever seen. It’s relative performance is embarassing and begs the question whether any of these companies actually mine silver.
Even the worst case is unlikely to be nearly as bad as you think.
For the record, you thought silver would be rejected at the 100 wma but it did in fact go right through it and closed 6 straight weeks well above it. Now the bears and you are being tricked by a normal pullback. It is back under that MA because of other factors which can be seen on the chart.
We’ll see who ends up being correct, although I am not sure what your timeframe for permanently taking out $24.75 is. So far you are already pretty badly wrong, as I believe you thought silver would sustain itself above the 100 WMA and even noted the bullish backtest a few weeks back.
And I did state that silver might close above that MA for a week or two. Yes, I did not anticipate 6 weeks or whatever, but it never used that extra time to put any distance between itself and that MA. It was nothing but a distribution top.
Late 2023 early 2024 in my call for silver to get itself back above the 100 WMA.
And I don’t think a $3 pullback (for now) for silver to what looks like its 100 dma so early in a rally is particularly bullish. Again, I don’t care if silver produces a sucker’s rally here, there is no way it takes out $24.75 for months. the still declining 200 dma is going to act like a magnet. I’m sticking to my guns this time.
Greenspanconscience, I don’t think anyone has stated we’re seeing a moon-shot move in Silver, but it did rally up over $7 from $17.40 to $24.77 in just a few months, so that was an impressive surge (much of it likely was short-covering).
Until something radically changes, I’d submit that $17.40 was the bottom for silver, and it will be on a generally upwards trajectory from here for a couple years. It would really surprise me to see a lower level than that in Silver for a long time, but hey, these are wild times.
In general though, it would seem that the trend will be higher for Silver over the medium to longer-term, so maybe an escalator more so than a rocket ship. 🙂
Silver is currently right at where the 144 day EMA and 233 day EMA are at on the daily chart, and so a bounce from here next week seems reasonable.
A weekly version of your chart is even better…
Maybe you are content with SIL still being about 50% below it 2016 and 2020 peaks. I’m fairly certain the price of tomatoes has crushed SIL and silver over that time.
Anyone who has invested in silver or silver miners has just been wrong. that’s all there is to it. Let’s not even adjust this pathetic performance for inflation. The only thing this sector has been good for is shorting against a long US stock portfolio or even a metals futures position.
And for gods sake don’t come back to me with “it’s just a trading vehicle.”
The bugs have gotten it catastrophically wrong. I’ll hold my hands up.
Matthew – Thanks for the weekly chart using the same Fib EMAs, and it does look even better.
Greenspansconscience – I’ve always stated commodities and especially junior mining stocks are for trades, and not for getting married in longer-term positions for years or decades. My trading account is up 300% over where it was a few years back, and it was up over 400% at one point from the pandemic lows to June of 2021. Granted I’ve given some of that back over the last 2 years, but there have still been plenty of profitable trades to have been had for investors that bought into weakness and sold into strength.
As for gold and silver bugs getting it wrong that is totally subjective based on what one assumes the unifying thesis is (which there isn’t one) or a unified starting point from which to measure (which their isn’t one).
Look at last year where most other asset classes were selling off in a bear market and gold closed flat on the year (which meant it outperformed almost everything), but also closed 2022 with its highest annual average price on record. So is that getting it wrong? I think not.
Silver closed up 3% on the year in 2022, at still a very respectable price around $24, and crushed all other asset classes other than the 10 year yield. So is that getting it wrong. Nope.
The PMs did their job in a chaotic backdrop, and for most of the year while the US dollar and interest rates were surging on the most aggressive interest rate hiking cycle seen in many decades, if ever.
Sure the PM stocks suffered, but people paying attention still had plenty of opportunities to trade and make money, in an admittedly very tough year and bear market in the stocks. There was money to be made in the Q1 run coming out of 2021 tax loss season and into March/April in many names, then buying the oversold silly levels in late summer during July/early Aug for the rally after that, and then again the even more silly levels seen in September (which I was doing and wrote about in real time in all periods of time just mentioned).
We just saw a multi-month run in the mining stocks from late September through January, where most of the stocks I was buying in July/Aug/Sept shot up at least double digits, and some even triple digits. My overall account, with 70 stocks in it was up double digits in just the last few months. That would be a pretty good return for most people, and so yes, there were opportunities for those that took advantage of the setups, and didn’t obsess over ratio charts daily. Just some food for thought and the reality of the situation.
Or this could be a second daily cycle (that began on December 16), which means the intermediate cycle could have easily just topped.
Don’t get me wrong, a big bounce could certainly occur here, but it’s just noise unless $24.57 in silver is taken out.
I’ll believe it when I see it.
Thanks for the chart, I can see SLV dropping to the 50% retracement but mostly just so I don’t buy back some micros into a dead cat bounce, which I think today is. The stocks seem to be pricing in a furthur drop and a dip into the high teens for silver.
Something happened to that chart so here it is again:
SIL has built out a H&S neckline now. I would expect a bounce soon to build out the right shoulder. It’s what this sector does best.
Anyone expecting silver to take out $24.57 within the next 3 months is going to be wrong. That’s the only number that matters and IMO you won’t see it taken out until late 2023 or possibly early 2024.
Too bearish? Maybe. The perfect set up was there for a sustained rally but it is long gone now. Not only does silver have that nasty reversal candle to overcome, it’s also got the declining 100 WMA to contend with.
Nothing more to say. Very disappointing, bordering on depressing. A$3 drop after a two month textbook consolidation–that’s not how a real bull works IMO.
Gold Must Hold This Level
Jordan Roy-Byrne CMT, MFTA – The Daily Gold – Feb 09, 2023
Look at RIO:GDX over the last decade. All the savvy doombugs thought they would be rich buying GDX in 2016. A megasized copper miner paying a 10%+ dividend has absolutely destroyed GDX and is making higher highs against it every day. It’s up over 4x vs GDX in 7 years.
I don’t know whether to laugh or cry.
That ratio chart is arguably in a giant ascending wedge, usually bearish, but with our luck it will soon break out to the upside in favor of RIO.
For 2 years now, every single time the SIL:SLV ratio has touched the upper 20 week bollinger band it sold off. Last week was no different.
I ask again, where is the smart money? They have been shorting miners against the metal–beyond consistently. My cynical guess is that the ratio will eventually touch the 2016 low, probably within the next 10 months.
Next week should be even more vomit inducing, even if silver ultimately reverses itself and proceeds to do what Matthew thinks it will. It’s open season.
Gary Tanashian gets it…
A Healthy Gold Stock Correction
SO tired of hearing about “healthy corrections.” SIL can’t even get off the mat.
And painting a giant “head” on the GDX chart is NOT what I call bullish price action, lol.
In a true bull, overbought stays overbought.
If Impact is a bellweather for the sector, it looks like we are in trouble.
Did you really not expect IPT to face some selling after yesterday’s news??? Not only is it the acquirer in the deal but Fred mentioned the possibility of a financing soon. That’s two reasons for selling in addition to the prevailing sentiment that matches yours. Nevertheless IPT held up well under the circumstances and traded just 54% of its average volume (worth a whopping <$30,000 U.S.).
Agree with Lake, hang in there Green, always darkest before the dawn as they say.
And yes, the pitiful promotion of IPT as the positive bell weather for the gold sector for more than a year continues with its latest news. You only have to look at it’s chart and see the opposite.
I can see why you only lose in the market. I never said it was a “positive” bellwether and it does not “continue with its latest news.” If anything I’d guess that such news might undermine it as a bellwether.
As for “promoting” it I couldn’t care less everyone here dumped it tomorrow and smashed the price to the best of their ability. I never cared if anyone bought it. I’ve simply shared what I’m interested in just like everyone else. I’ve said more than once in the last 6 or so months that there was no reason to own any silver miners unless you’re bullish silver. But IF you are bullish silver then IPT is a bargain and has been for many months. Yet you cry in fear. Would you have a problem with a 6 month sale at the grocery store? Of course not and the reason for the difference in your attitude is that you at least vaguely understand the utility of food and other everyday items but have no confidence in your ability to size up a miner.
Good to see Fred Davidson still in the game. Feel a lot better about IPT after seeing this acquisition.
For months on end you’ve promoted buying successive pullbacks, in particular with all things in the penny arcade which can’t get out of their own way with few exceptions.
With IPT most often cited as the bell weather for what’s to come. Apparently this was never intended as a positive interpretation for IPT as a bell weather. It was the opposite. Apparently this latest IPT news supports that notion.
Well hot dog and congrats Matthew, you may be finally on the right side on things. Because that’s what I’ve been telling you during all this time.
Unless you see outperformance by sector equities vs gold (which is just fine by the way), any jubilation with the pop up rallies should be bailed.
Which I posted here as doing with the January pop up. As I said, holding nothing and loving it.
This site is good in tracking (not believing) the gold bugs and the entertaining insights of the experts how gold will be the last bastion of financial survival.
My grand daddy said that.
You’ve proven yourself unable to grasp much about markets and charts and this subject is no different. First, of course being the confused critic that you are you make much more of IPT as a bellwether than I do. It’s there and has been for years and fractally but I wouldn’t have bothered to point it out had I known that slugs like you might latch onto it for idiotic purposes.
Green, after reading your posts over time it seems to me that you change your thinking with the next wind that blows a different way, to be successful you must have a strategy and stick with it come high or low tide. DT
Maybe. However, my thesis will always change if the information changes.
A $3 drop in silver was NOT necessary, either technically or from a sentiment perspective. I was 100% expecting a break higher and we got the exact opposite. I was expecting a lot out of that consolidation, which to me was textbook perfect.
We are still sitting at $21 13 god damned years after QE 2. We are at $21, 40 years after its 1979-80 peak at $50. Let that sink in.
I’ve been a bull for 23 years, but at this point, you would be a delusional idiot to not call a spade a spade. Silver has been a complete disaster in both absolute and inflation adjusted terms. Name me a single thing on earth that has done as poorly. I’m pretty sure a handful of dirt collected in 1980 would have done better. In fact I know it.
Anyways, you won’t have to hear my blathering any longer. I am out of here, for good this time. I truly wish you the best of luck and that the entire board become multimillionaires if they already aren’t.
As soon as someone challenges Greens thinking, it’s I’m out of here! LOL! DT
Re: “A $3 drop in silver was NOT necessary, either technically or from a sentiment perspective. I was 100% expecting a break higher and we got the exact opposite. I was expecting a lot out of that consolidation, which to me was textbook perfect.”
— — — — —
Lines 2 and 3 make line 1 pretty damn funny. You must think you walk on water if you think you were all alone with your confidence in the setup that failed you. I know for a fact that you were not alone which means that a correction was indeed necessary.
With your aversion to silver’s wild swings you should have either sold or hedged during the 2 months that you’ve identified as a distribution top. I repeatedly posted the following chart and others which clearly show what silver was up against.
Not sure about tomatoes but a can of Brunswick Sardines sure kicked heck out of SIL.
University days those were dietary staple but not now.
I hope you stay as your contributions are appreciated. Sometimes things can get frustrating for all of us. Just want to say thanks and hope to see you continue. No one owns the future no matter how much we think we do. I gave up a long time ago thinking I am right about anything. But, I do like to have an opinion. Sometimes I just like to see how much others think my opinion sucks. Other times I want to stick my head in a bucket. Hope to hear from you soon.
Lake: Don’t worry, you will hear from him soon! LOL! DT
Thanks for keeping the narrative on going and open. That is why this site is a little different.
And DT is always LOL.
Grumble, especially when it concerns you, but you wouldn’t understand that! LOL! Again
We already have all the macroeconomic factors we need for a sustained move higher in precious metals. Don’t worry, it’ll be worth the wait.