My last missive was entitled "Gold's Relative Strength Index indicating a bottom is here," and it was dispatched at noon on Thursday but was written that morning after I had tweeted out the following:
With the move in the relative strength to sub-30, I am opening a 25% position in the GLD July $120 calls @ $1.40 looking for $127 by expiry.
6:35 AM - 21 Jun 2018
That morning the gold market plunged to $1,262.40 and it was that drop that enabled me to scoop those calls at $0.05 above the all-time contract low at $1.40. I have since added and expect that the lows are in for the gold and silver markets for 2018. We might have one final attempt in the next three weeks to probe the sub-$1,270 zone but the RSI reading at 125 last Thursday in the latter part of the session spoke volumes but only after we got the reversal back above the $1,270 level and the coincident bounce in RSI back to the mid-40s (on the 10-day chart).
In a nutshell, what we have in place now for the precious metals is a perfect storm of oversold technicals, compelling fundamentals, geopolitical drivers, and absolutely abysmal sentiment going into the month of July, which typically marks the onset of the positive gold-silver seasonality period that extends through to November. There is also one other condition that is overwhelmingly bullish and it is that the precious metals are the unequivocal recipients of a MASSIVE serving of total and abject investor APATHY.
Here is why I say that. I am a member of a marina in Honey Harbour that has a parking lot full of Mercedes, BMW, Audi and high-end trucks all blown out with the maximum of toys, not to mention the million-dollar vessels tied up in their slips. We had a "Member Appreciation Night" a week ago and as I was wandering around saying hello to all of the members ("working the room"), I asked each and every one of them this question: "What importance do you place on gold and silver as a strategic portfolio weighting?" IF I got a look that implied a "WTF are you talking about?" I countered with, "Sorry, Buffy, what I meant to say was "Do you have any gold or silver in any of your accounts?" If the response was "I leave that to my advisor but tell me—SHOULD I?", biting upon the knuckles of my right fist, I immediately avoided the urge to mount the nearest soapbox and sound off with one of my classic rants and simply "took note."
Well, you can imagine the results of my totally biased and unscientific survey—not one of my fellow yachting compadres has any degree of interest in gold and/or silver. No one cares. Not one person. Adding insult to injury, they were, to a soul, absolute EXPERTS on condominiums, rental properties, residential real estate and REITS, all of which have been exceptionally superb investments for them all and especially since they reside in the heart of the largest bubble in global real estate prices EVER. I can't blame them for being focused on "that which has worked" and ignorant of "that which has sucked," which is always the state of investor psychology AT MAJOR INFLECTION POINTS. And that is, in my opinion, precisely where we are—at a major inflection point in global trends. It might be the singular most important inflection point in history.
It is a different ball game this summer versus any other summer since 2008 because the Federal Reserve has made a watermark shift in policy. It is applying the brakes to a steamrolling economy, one which is finally responding to unprecedented monetary stimulus and market interventions. It is rolling back all of the market safeguards that allowed the "Buy the Dip" crowd to puff out their chests and strut their collective "stuff" in an all-encompassing mass confusion of the importance of brains relative to Fed-induced bull markets. I won't bore you all with my anti-bank, anti-government vitriol that you have all heard before because the reality is that blind idiocy has made obscene fortunes in the last ten years since the world all agreed to bail out the thieving bankers as opposed to those of us that have adhered to the principles of sound money and constitutional prudence.
The logic of owning an asset that has survived 5,000 years of parliamentary, dictatorial, oligarchial, and omni-sectarian profligracy seemed brilliant in 2007 for all of the right reasons but let's face it, you can only listen to your car saleman brother-in-law boasting about his FANG profits for so long before your head goes into a serious speed wobble. (I know mine has…) My point is this: One needs the patience of a cheetah, crouching in the sub-African grasslands, slowly awaiting the arrival of the herd of dehydrated elands all moving in a dangerous and desperate course toward the waterhole, ready at first notice to set off on a rip-roaring assault at the unfortunate slowest of the herd. I will NOT submit myself either in investment posturing or psychological capitulation to do anything but await the arrival of the herd. It is coming; the spoils are just beyond the tree line; the feast will be wondrous.
Never doubt it for as much as a breath. If you blink, it will be gone.
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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Charts courtesy of Michael Ballanger.
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