There are occasions in my life where being correct in a trade or a forecast or an event absolutely fails to excite me. Like predicting the death of a pet or the failure of a business, there is absolutely no joy in waking up to the realization that one's analytical abilities were put to the test and prevailed.
In December 2015, I made one of the best calls of my career when I announced the terminus of the 2011-2015 Great Bear Market in Gold at $1,045, but what followed was neither the clinking of champagne flutes nor the beating of puffed-up chests. Instead, I was consumed with a slow, simmering rage not unlike the emotion one feels at returning to a burgled home or boosted auto. I wanted to take a ball-and-chain hammer and inflict revenge on perpetrators regardless of race, creed or color. The 2016 ensuing turn in gold prices and personal financial recovery was overshadowed by the illicit enrichment of the interventionalists that caused the worst downturn in the global gold mining sector since the April 1997 Bre-X Fraud that crippled exploration funding for over half a decade.
Not that it was anything particularly new or different from pre-2011; it was the blatancy of the attacks that stood out. The bullion banks, under order of their central bank/politico masters, proceeded to lean on the prices for gold and silver at every turn and at all instances when price recovery appeared imminent. So when the price began an ascent in 2016, taking the gold mining shares (HUI) up over 260%, there was little in the way of celebratory behaviors because of the magnitude of the losses absorbed in the prior three years.
Despite massive monetary easing across the globe, the usually responsive precious metals sector was pinned to the deck like a frigate's cannon. And therein lies the outrage; to be so correct in forecasting the conditions that had created bull markets in the PMs for hundreds of years while being victimized by the criminality of the central bank price managers was a violation of the basest order.
So one week before the CME (Chicago Mercantile Exchange) launched its Bitcoin futures contracts, I sent out the following warning: "Cryptojunkies: Beware the Ides of December," with the closing argument "The bankers reeled in gold in 2013; they will reel in the Bitcoin as well. What both have in common is the medium of control." That "medium of control" is exactly what took effect last week, and it is exactly what drives normally sanguine partners and trusted canines from rooms and homes and hearts.
That any entity can exert such influence and control over the fortunes of individual investors, retirement funds, pension plans and the like is infuriating beyond all comprehension but, then again, as gold and silver investors have been muttering all week in response to the chorus of opinion being bombarded upon the crypto-world "Welcome to OUR world!" I tweeted out yesterday that "Cryptojunkies are having a 'Comex gold and silver moment' " as the bankers running the Crimex once again showed us how effective they can be in wagging dogs by firmly grasping canine tails. The arrival of the Crimex goons to the crypto-pits of Chicago heralded the long-awaited medium of control where the phony "future" price of an item is not determined by such idiotic principles as demand and supply. The prices of gold and silver have been determined by bureaucratic "fiat" for ages now, and there is no reason whatsoever that the Cryptojunkies should ever believe that their private currency domain will be immune.
Legions of speculators went into Christmas a lot poorer than they anticipated, but there are also a select few that cashed a rather large crypto-lottery ticket, such as Charlie Lee, the founder of Litecoin, which until recently enjoyed a 9,300% advance. You see, holding cryptocurrencies is ultimately preferable to holding those dastardly depreciating dollars and euros and yen until, of course, you are able to take a $2 billion U.S.-dollar PROFIT and switch out of that "ultimate millennial store of value" (Litecoin), and back into the currency units that will allow you to buy a villa in the south of France ("fiat"). I guess high-integrity Charlie Lee read somewhere that "When the ducks are quackin', ya gotta feed 'em." Stated another way, the cryptojunkies were "yellin' " and the founders were "sellin'," proving once again that philosophical loyalties such as those embodied in cryptocurrencies (or anything else that resembles a "bubble") are ephemeral.
The purpose of this missive is not to gloat because my musings over the Crimex "invisible hand" only serve to enrage me even further as to the corruption and self-dealing so odiously present at the CME. Is it any great mystery that BTC moved in a virtual straight line from $1,000 to $20,000 in the past eighteen months without the involvement or "assistance" of the CME? Remember this as long as you are able to breathe: "As the world's largest regulated FX marketplace, CME Group is the natural home for this new vehicle that will provide investors with transparency, price discovery and risk transfer capabilities." R-i-i-g-g-h-h-t-t.
Before moving on to my regular discussion of the COT, I want to once again reiterate my longstanding conviction that, in my extremely humble opinion, the best website on the internet for raw analysis of gold and silver markets is Bill Murphy's "Lemetropolecafe." In the interest of full disclosure, nobody gets a dime from posting on the site, but the collective wisdom of the sharing exercise was why I was eager to join a few years back. And while I might add a bit of jocularity and the odd decent trade from time to time, it is the caliber of the discussion and the people that make it work. If you think that is a plug, then consider your thoughts totally accurate; the site deserves more attention and considerably more sponsorship, especially from the gold mining community and with best efforts from the junior explorers.
Friday's COT was a nonevent for gold, as the Commercials fed back 8,754 contracts, representing a modest uptick in the aggregate position. But not so the case for the Silver COT, where the bullion banks, led by JP Morgan, added a goodly number with the combination of new longs and covered shorts. This bodes well for January, as no rally in Gold and Gold Miners can survive without the participation of the silver market. This is so because the higher the ratio goes (now over 78), the more it invites spreading silver longs against gold shorts, and that shorting becomes a headwind for the gold price. I want the GTSR down under 70 again, like in January 2016, when the behavior of silver provided a tailwind for all things golden and gave the miners (HUI) the adrenalin injection that drove it up 288% of the lows of January 2016.
As nice as it was to see Stakeholder Gold Corp. (SRC:TSX.V) put on a bit of a "show" last week, closing its $600,000 funding and ending the week up 62% from the issue price, it was disconcerting to see Canuc Resources Corp. (CDA:TSX.V) close the week down 31.25% from its late-November $0.40 funding price. The difference between the two lies in market capitalization, and until a junior explorco can provide a NI43-101-compliant resource, markets generally pay around $5-10 million for well-positioned companies. CDA’s $18 million market cap (at $0.40) is now being readjusted to slightly north of $10 million ($10M) (actually $11.8M) until such time as it can demonstrate that the San Javier project is viable, with the newly found breccia zones to the northeast confirming the presence of sufficient scale so as to permit bulk mining methods. Contrasting the CDA valuation is SRC, who closed its financing with a post-raise market cap of only $5.85M (@ $0.25), and closed the week out at a $8.54M market cap (@ $0.365), with an active drill program located strategically in the northern Carlin trend in Elko County, Nevada. Assays for the first 600-meter hole should be available late next month and should be very interesting.
New Year’s resolutions this year will involve attempts to curtail fits of temper; refrain from launching household items into venomous projectiles; stop blaming the greed-infected, criminally delinquent bullion banks for any and all ills of humanity; and a pledge to quit gloating and writing about cryptocurrencies. Instead, I pledge to behave myself and do all in my power to provide an modicum of quiet introspection into the discussion of markets around the world, despite the fact that until government and elitist-sponsored banks have rendered these venues devoid all of the typical characteristics of "markets," the most notable one being the term "free," as in "free markets."
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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All charts and images courtesy of Michael Ballanger.
Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.