Added to HL today, while prices remain low. Regarding miners, the low of the year historically is June 13, on average, and I have found that buying a week or so before the July 4th holiday is a good time to take a position. On top of that, James Flanigan has a new promotional video out on his site at Gann Global which is very interesting, as it suggests the miners are either completing a 60 year or 90 year cycle, and ready to make huge gains over the next 4-6 years, on the order of 600% or 700%. I have to give him credit for his last try a couple of years ago, where his charts suggested the miners might be starting this move up, but when it failed he exited quickly and has remained on the sidelines of the metals markets, until now. He mentioned back then that the next time this move might start would be June of 2022, or August of 2023, and has now fine-tuned the call to say between now and the end of the year. The video is well worth watching, and I have subscribed to his service, while I am not affiliated or compensated in any way for mentioning him or the service. I recommend watching it, it will give the investor an idea of what to expect from a multi-year move in this volatile group, the gains can be spectacular! Here is the link, you might have to leave an email address to access it. http://www.gannglobal.com/webinar/2021/08/22-06-23-Webinar-Invitation-MF-321-Promote-2.php

Finally we are seeing the precious metals and their miners decoupling from the stock markets. As I type (11:20 am on Thursday, June 16, 2022), the GDX is up 2% while the QQQ and SPY etfs are down 4% and 3.4% respectively. Even better, the miners were lower on the day along with the stock market, on low volume, but then large buy orders drove the GDX into positive territory. What we want now is to see this behavior continue, so that market participants can easily see the best and only group, while they continue to lose in everything else, including momentum stocks like technology, bonds, even other commodity stocks such as oil and copper are getting hammered.

I added more to FSM and CDE this morning while they were red on the day, and am looking to invest more of the proceeds from the sale of junior explorers the other day. Below is the daily chart for GDX vs. SPY, not only having a nice jump, but also working back up over its 50 day moving average, which is also about to turn higher. With all moving averages sloping higher, this could start a new trend in the ratio, and investors would expect the miners to outperform the stock market for awhile in that case.

This afternoon, the FOMC raised rates by .75%, the largest hike in 28 years. Just a week ago, market participants were factoring in a half-point hike, which might explain the bashing miners metals and miners have experienced recently. Now that we are exactly three months into this hiking cycle, we should start to hear calls for a pause, or even a reversal to lower rates, both of which should start the metals bull running again. We are already getting headlines of weakness in the economy, in fact I think without the higher prices from inflation, the business conditions wouldn’t look nearly as good as they do now. It’s hard to tell if the decoupling of the stock market from the miners will stick, but we have recently been seeing this occur more often. Once the market catches on that there is no other place to hide, even bonds have tuned lower after a 40 year bull market, we will see the metals and miners ignite to the upside. Until then, we have to be patient.

I took advantage of an afternoon pullback to add to FSM, while continuing to sell out of some more junior explorers for the time being. I will try to gauge when their time to fly comes around again, but with liquidity shrinking and things getting clobbered across many asset groups, I prefer to use the proceeds to acquire more mid-cap producers. With that in mind, I sold some more MGMLF and STKXF, fully cashing out of the latter. I have order in to add to the names mentioned over the last few days, and for those that aren’t comfortable with the risk involved holding individual miners, the etfs GDXJ and SILJ are always great options. I will continue adding to both.

We have near full positions in CDE now, and continue to add to FSM into this decline. Will continue add here and there. We also sold some of our more risky positions as we appear to be stuck in a liquidity-driven decline, since metals and miners are getting pulled lower along with stocks, cryptos, bonds, just about everything. We are moving more to the mid-cap producers for future positions.

We sold all or partial positions in MGMLF, OCGSF, MXROF, IRVRF, STKXF, and BKRRF. Nothing changed in these explorers individual fundamentals, but we want to be holding miners already operating and producing metal. If the liquidity continues to dry up in the markets, these explorers will have to issue stock (diluting existing shareholders), which could cap the upside at this point in the cycle. We still have shares in most of the explorers, and will consider buying them back once the group starts higher again, and after we see many juniors get secondary offerings out of the way. As Rick Rule continually says, just owning the best names in a group will capture most of the upside potential if one is correct and miners are in bull mode, with much less risk, as they are already cash flow positive, something the explorers can’t use to fund their projects.

One other important consideration regarding the junior explorers, we have seen buyouts and takeovers in the group lately that have not been at substantial, or even acceptable premiums. One example, yesterday GSV, Gold Standard Ventures was taken over by Orla Mining (one of our holdings), at only a 35% premium, no doubt disappointing for GSV shareholders. So, we see potentially more risk in the junior explorers, along with limited upside if an investor is lucky enough to receive a buyout offer, and this is why we made the decision to weight more heavily in the mid-cap producers.

Markets across the board are getting hammered today, including the general stock market, miners, and even cryptos, so we took advantage about started to nibble on FSM (Fortuna Silver Mines) at $3.34 per share. Just a reminder that the FOMC has their Wednesday announced coming up on interest rates, so I won’t likely get heavy into this miner until after the news.

On today’s decline I took the opportunity to add to CDE, EQX, and ORLA, as. the group is down 4 of the last 5 days, after that huge one-day run last week. Here is a daily chart of the GDXJ to give you an idea of what the group is doing.

The biotechnology etf XBI has flashed a buy signal on the monthly chart, suggesting a possibly 6-10 month bounce. We are playing this using the LEAP call options that expire in Jan 2024. Be sure to note the oversold stochastics now crossing higher, the lowest RSI (9) reading in the history of the etf, and the PPO is about to print its first positive bar in 15 months. These longer term signals can take a little while to get started, but so far so good.

Took advantage of today’s dip to add to LEAP call options in CDE and SILJ. These expire in January 2024, with a strike price for the CDE options at $10, and for SILJ we bought both the $14 and $15 strikes.

Today, lets take a look at some ratio charts, as they show us what something is doing versus another. First we see on the daily GDX:SPY chart that the trend in outperformance of of the stock market over gold miners looks to have changed. The ratio remains above the 200 day MA, which is also gently starting an uptrend.

In the second chart, please note I changed it to a weekly setting, so as to get a longer term view. In this one we see the gold futures vs the CRB index, $GOLD vs. $CRB. I am not a huge fan of the CRB as an overall representation of the commodity sector, with weightings of Energy: 39%, Agriculture: 41%, Precious Metals: 7%, Base/Industrial Metals: 13%, but since precious metals are such a small part of the index at 7%, it makes for a better comparison between gold and the group in general. As you can see, gold has been underperforming the other commodities since around the middle of April 2020. However, the ratio is deeply oversold on many technicals such as stochastics, and since the nature of ratios is to normalize over time, we should expect to see either the energy, agriculture, etc come down in price, or gold to rise, or both. And if things like natural gas and oil continue to smash into new highs, that should bring gold higher as well.

I recently bought or added to positions in the following miners:

I added to HL:

Added to AG

Started a position in EXK

Started a position in ORLA

That would be my guess, the precious metals and especially their miners are about to take off higher, possibly as much as 60% in just a few months. First, we are getting near June 13, historically the day of the year that proves to be the low for miners, before embarking on big rallies in July and August. Second, the group has been thoroughly washed out from mid-April until mid-May, only recently beginning to stabilize. My third observation is that gold has held up well in the face of a rocketing dollar (as measured by other trash fiat currencies), a sign of relative strength. Fourth, as the stock market appears to be rolling over and getting hit hard, the miners are starting to decouple as they usually do, when investor realize the fundamentals are strong and getting better, providing them a place to hide during the storm. This crisis, it appears bonds are no longer a safe place to hide as bonds can’t find a bid, many days lately both stocks and bonds get sold off together. There are other reasons to expect a big rally, at least on an intermediate time frame (3-6 months), like the weekly charts being very oversold and starting to find support, or the massive gains and outperformance of the group yesterday, where even the etfs like SILJ were up 7%! Then there are the “advisors” and newsletter writers out there, with my estimate of 90% of them that are usually bullish, now waiting and watching for the central bank (FOMC) to change course and quit raising rates, or at least stop raising them. Anybody paying attention to the economy can see its weakening at the same time we have rampant inflation, otherwise known as “stagflation”, the best of all worlds for precious metals prices. These are the reasons I think the recent sharp drop in silver and miners will turn out to be a false breakdown.

The news has been fast and furious the last couple years, most recently with the Ukraine war and the sanctions against Russia, which are failing miserably. In fact, the sanctions are blowing up in the west’s face, serving only to force prices of commodities higher for their own citizens, if their services aren’t shut off entirely. Meanwhile, Putin governs a commodity based economy, and as such, Russia is raking in money hand over fist. So far, Russia has doubled its sales of gas and oil, so far for putting a dent in their economy. They probably hope the west comes out with more stupid ideas, as Ukraine is getting annihilated in the war, and won’t be allowed to quit until NATO is satisfied enough Ukrainians have lost their lives. No matter what side one takes on the Ukraine conflict, it cannot be denied Russia is coming on firmly on top and in control so far.

I will try once again to keep up with regular posting to the site, I think it will be easier now that we sense a big move coming, one that investors will not want to miss. It is quite common in the mining group to see a big flush lower, before they let prices make a breathtaking move higher, and as this bull matures, we should expect to see new all time highs in the group, substantially higher than anything we have seen before. Basically, the FOMC is hiking rates into an oncoming recession, and on top of debt already being out of control since they used Covid as an excuse to essentially double the currency in circulation. Gold is making highs in just about all other currencies except the US dollar, and we don’t expect that to last. Soon, we should see gold, silver, and their miners fly because of their safe-haven status (now unchallenged by bonds), increasing cash flow, and their lowest valuations in history, even crypto-tokens are seeing the wheels come off! In short, it looks like everybody is just waiting for the Fed to change course, and while the inflation problem might be reason to keep hiking rates (if the economy were strong), that alone does not damage precious metals or miners. In fact, Volcker jacked rates up near 20%, and gold was screaming higher the whole time.

Let’s look at a couple charts, starting with the weekly SILJ etf, its the silver junior miners etf, which isn’t really “juniors”, but more mid-caps, the sweet spot of the group.

Next, lets look at the monthly chart of $TNX, the rate on the US ten year note, its the one most market participants pay attention to, and we see some interesting observations. To start, interest rates have already had a massive rally, and precious metals have held up relatively well overall. We also note that the $TNX is coming into strong resistance, being this chart goes back 20 years! Its worth pointing out that the stochastics are well-overbought, and while relative strength (RSI) has never been this high which some think suggests more strength is likely, we tend to think the message is that its more likely to normalize and come down. Lower rates should again light a fire under the precious metals and miners, and more so in the current environment with out of control inflation.

$TNX- The rate on the 10 year treasury note might run into resistance soon.

We won’t pretend that we haven’t been battered over the last month, as we wait for the investing world to realize miners and their metals are the best place to be, but we hold firm in our conviction, and if anything, our case has grown much stronger. Commodities across the board have been a great place to be, and gold (and silver) have mostly watched from the sidelines as oil, agriculture, and others have rocketed. That often happens, then as the recent standouts take a breather, gold and silver have their time in the sun. Yesterday’s huge gains might be the first confirmation we have that the turn has arrived. As always, members should check the portfolio link above to see what our accounts hold, with position sizes and current unrealized gains and losses. If you don’t have exposure to precious metals, time is running short to acquire them, in our opinion.