The precious metals market may be starting to figure out that price inflation caused by Central Bank money printing in the last year – with the Fed leading the charge – is going to become an uncontrollable problem. It will become even worse once the stock market and the housing market no longer “absorb” most of the money that has been printed since March 2020.
Price inflation is raging in commodities across the board:
The chart above is from Bloomberg by way of @sentimentrader. It shows the Bloomberg Commodities Index going back to 1970 (note: gold and silver are technically not “com-modities” – they are monetary metals; they were lumped in with commodities as part of the Government’s effort move to remove gold and silver from the monetary system after 1971). It shows the percentage of commodities with a 252-day rate of change of 50% or more. This metric has reached the highest percentage since 1974 (gold futures began trading on the Comex in 1974).
While price inflation has been affecting the goods and services that I purchase on a weekly basis, we have yet to experience the full brunt of price inflation reflected in the chart above for agricultural, chemical and base metal commodities. At some point the Central Banks/banks will be unable to prevent the prices of gold and silver from reflecting this realty.
I know it feels like the mining stocks are sluggish, especially the micro-cap juniors, but GDX broke out of a downtrend channel that started in early August 2020. It also popped above the 200 dma (red line, $36) last Friday and is in a nice uptrend that is supported, for now, by the 21 dma (light blue line, $36.10):
China has made a big statement with regard to its view on the importance of gold in the monetary system. The day after the last MSJ issue, China announced that it has given its banks permission to import large amounts of gold into the country. The significance of this is lost on 99% of the public and the markets. Prior to this declaration, the only entity in China allowed to source gold that had not first flowed through the Shanghai Gold Exchange was the PBoC. That of course makes it impossible to know how much the Chinese Central Bank actually holds. But now the banks can import directly.
And it will be impossible know for sure how much more gold is flowing into China. This is because in 2014 the CCP opened up Beijing for gold importation. It also intentionally made it known that the data on gold flowing through Beijing would not be made available to the public. The only data available on gold imports is the data Hong Kong releases on gold exported to China. The implication is that there will be a considerable increase in the stress that has been placed on the physical gold stocks in London and NYC. In my opinion, this will be the catalyst that pushes gold over $1800 and eventually back over $2000 – likely for good this time.
The mining stocks are close to being historically cheap relative to the prices of gold and silver and relative to all over financial assets, especially the micro-cap junior exploration miners. I present ideas primarily in junior mining stocks but I also have started providing shorter term trading ideas in mid/large cap mining stocks, including call option suggestions.
I currently have more than a double in Hecla calls options I presented in the last issue of the Mining Stock Daily (May 13th). I also have come across a couple of very early stage juniors that I think has considerable upside potential and that have not been trampled over yet by the usual promoters. Follow this link to learn more about the Mining Stock Journal. The commentary above is an excerpt from the last issue.
NOTE: I do not accept compensation from any mining stock companies, unlike several other newsletter writers who front-run their subscribers by accepting options and warrants in early-stage financings. Also, all of my research is my own.
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