Yesterday's non-decision by the U.S. central banksters came as no surprise to any of us here in the "sound money" camp and was especially uneventful for me as I have been writing for over two years about the deleterious effect of the raging USD on the American (and Canadian) manufacturing sector. Gutted warehouses, poisoned water tables, empty plants with rusted equipment—these are all of the memory cards of the once-great U.S. industrial engine of the world while massive super-freighters lie offshore San Francisco and San Diego and Vancouver waiting patiently to offload ton after ton of "widgets" made from coolie-wages in "over-capacitized"industries. Janet Yellen and Co. not only flinched, but they literally skin-jumped from hawkish-to-dovish in the nod of Steve Leisman's glistening head and the toss of a well-oiled towel.
By reducing the number of expected rate increases from four to two, it had a market effect analogous to a mass intervention or de facto devaluation of the American dollar against virtually EVERYTHING, notwithstanding Brazilian real or Zimbabwe dollars, and the gold and silver (and oil and copper and Big Mac and diaper) markets all responded with a commensurate leap northward as if Janet Nixon had just taken the U.S. off the gold standard. As can be seen from the prices recorded last evening, gold and silver and my beloved miners all screamed ahead raising the question of whether or not the Gold Cartel, the bullion bank behemoths—the “COMMERCIALS”—are now on the ropes, reeling under the piston-like assault of the Large Specs, whose affinity for the GLD has completely swamped any ability to paint the tape lower with fictionalized deliveries of synthetic "gold." The emails I am getting are once again from those assuming (as in ASS-U-ME-ing) that my caution on the precious metals in the near term had rendered me "gold-less" and "gold miner-less," devoid of all reasons for celebration at yesterday’s awesome advance. Of course that is anything but the case (as if I have to even print it) but more importantly, am I lifting any of the hedges or buying back the 1300 GDX I sold last week over $20? Well, GDX is this morning $20.75 so why on earth would I buy it back? I remain "CAUTIOUS" (as opposed to bench-thumping "bearish") and I will stay invested, albeit a tad less so than in December, with the HUI 83% lower than today, while I await the final verdict tomorrow on whether the Commercials will begin to raise white flags and toss sweaty towels into the Crimex ring with a REDUCTION in their historically-impressive 195,000 contract aggregate short position. I am also using the highs of last week at $1,287 as a kind of psychological stop and I am NOT adding any more hedges until I see tomorrow's COT.
The portfolio of miners I own is represented in bulk by the GDXJ (Junior Gold) holding where I used to have an equal percentage of a GDX (Senior Gold) holding. I own a batch of junior explorers all in the pennies (Except KAM which used to be in the pennies) and I have a modest position in NUGT puts and GLD puts now all melting away like a snowball in May much to the detriment of my self-imagined brilliance in timing a near-term correction. And yet, I have to remain cautious in the near term because with the Commercials being this egregiously short, it's like betting against Secretariat; they have won eighty-seven races in a row by more than ten lengths, so how on earth can I bet against a horse with those stats? Well, thanks to my buddy David Skarica (Addicted-to-Profits.com), I have been advised that the main difference today versus the past five years is the physical offtake of bullion via the GLD where volumes have been astronomical. This is what is throwing a wrench into the gearbox of the Commercials as the action in GLD is now leading (as opposed to following) the Crimex; the arbitrage between the GLD and the Crimex is why open interest continues to rise and why the bullion bank thieves are feeling the heat. In other words, Secretariat is a nag headed off to the glue factory because of the entrance of another vintage thoroughbred (Fizzcal D Mand in the pinks with black socks).
Having said that, I will continue to respect the Commercials because in the end, they still have the Central Bank gold holdings to access in the event that Draghi, Yellen, Carney, Abe and the rest of the gang decide to order gold lower. I deem that unlikely but since I can’t read minds (or yet walk on water), I am prepared for anything. For all of you out there who are hedging your holdings, after talking with GATA's Bill Murphy this morning, $16 silver on a closing basis is where I will be opening a position in the SIL and the SLV calls. Because I continue to believe that silver is the Commercials' Achilles Heel, if it surmounts $16, I will lob the towel into the ring while that white flag waiving feverishly from the dart-room here in Toronto will be MJB capitulating in the humiliation of short term "wronged-ness"' in being overly-cautious. And the sound of maniacal laughter will ALSO be MJB computing the value of his gold/gold miner portfolio – Ex-hedges.
Fido is safe – for now.
All images and charts courtesy of Michael Ballanger
Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger's adherence to the concept of "Hard Assets" allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.
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