Supply: Michael Ballanger for Streetwise Reviews 06/04/2019

Valuable metals skilled Michael Ballanger discusses geopolitical occasions and actions within the valuable metals markets.


It was solely per week in the past that I used to be opining that there was nothing ominous within the technical image for gold and silver that was altering my bullish stance; RSI and MACD have been trending up and value was stubbornly refusing to yield to the myriad of bullion financial institution assaults mission-driven to pressure a crack of the vital $1,260.90 50-dma degree so extensively mentioned in previous weeks. As I present within the chart posted under, the primary main up-gap in gold pricing occurred within the days again in October after the rankings companies determined to “downgrade” the bonds of GE, an organization that’s now being seen as serially poor in its reporting practices and masterfully adept at avoiding the lengthy arm of SEC “regulation” (that is a joke 😊) whereas utilizing the inventory value efficiency to advance guide offers for the 2 rock star CEOs of the ’90s and early 00s, Jack Welch and Jeff Immelt.

I truly wrote about GE again in 2005 after listening to a promotional video on the “unparalleled brilliance” of GE Monetary whose use of leverage was deemed “second to none.” Immelt was regurgitating the corporate line of “Development with out Remorse” that Welch was spewing all via the mid-to-late-1990s with the target being not an development within the “E” a part of the price-to-earnings-ratio however fairly a easy development within the “R,” which doesn’t (and most actually DID NOT) contain any actual development in anyway. All that Welch and Immelt cared about was the inventory value; Welch was obsessive about advancing it whereas Immelt was obsessive about defending it. Ultimately, they’ve each pale off into the sundown and are not often seen on CNBC anymore whereas long-term GE shareholders are actually severely underwater and trying to find solutions as to why-oh-why their retirement nest eggs went into the tank.

Whereas not terribly easy on the skin, it’s monstrously easy on the within as to why GE is now a walking-wounded member of the S&P 500 and it’s based mostly upon one easy phrase: LEVERAGE. In the event you use LEVERAGE to finance acquisitions and if money stream from acquisitions fails to cowl curiosity expense, you’ve a severe structural flaw in your “mannequin” (Gawd, how I completely HATE that phrase!). Actually ALL GE acquisitions, from the time Jack handed off the reins of management to Prodigal Son Jeff, failed to satisfy that benchmark. The acquisition have to be “accretive”—in that it provides to the profitability of the corporate—and if it fails to satisfy that check, heads ought to roll, which they did as Immelt resigned in 2017. Fairness holders are considerably frightened however one have a look at the bonds tells us that that is something however a easy “setback.,” it’s a full-blown raid on the vault and if the holders of GE debt are demanding restitution, then holders of GE fairness are in want of Valium as a contemporary model of protection.

Nonetheless, I digress.

Gold had its finest week of 2019 as a consequence of a equally disruptive occasion with the POTUS’ declaration of a 5% per thirty days tariff on Mexico for failing to watch (and stop) unlawful immigration into the U.S. In comparison with commerce with China, this can have a a lot larger (unfavourable) influence on the states of Texas, Michigan and Arizona, all Trump states in 2016. Additionally it is fairly presumably a superb political transfer as a result of POTUS campaigned in 2016 on attending to Mexico construct the wall and whereas individuals scoffed at it, the leverage he has over Mexico is immense and if the Mexicans determine that a melancholy led to by these tariffs can be a less-favourable final result than getting Goldman Sachs to debt-finance a wall, then the U.S. wins and Trump is a genius.

To repeat for the fourth time in a month, there’s completely NOTHING unsuitable with both the tape motion nor the technical set-up of gold. On every pullback below $1,270 (three of them), I added to my JNUG (Direxion Each day Junior Gold Miners Index Bull 3x), NUGT (Direxion Each day Gold Miners Index Bull 3X), and GLD (SPDR Gold Belief) name positions, and whereas GLD has been a champion, the leveraged gold miner ETFs and the June calls solely simply moved to marginal profitability late final week and primarily due to the four.34% burst within the HUI (NYSE Arca Gold BUG Index).

I do not elect to debate silver on this missive as a result of, fairly frankly, I’m embarrassed. I’m embarrassed that I’ve had the unmitigated gall (or “cheek” as my U.Okay. pals say) to truly assume that I (or anybody else) may predict the value actions of a substance deemed essential to the nationwide safety of all G20 nations and, led by JP Morgan and the U.S., who’ve it on a digital ball and chain and in complete, absolute lockdown. Silver buying and selling volumes are pitiful, retail curiosity in silver is non-existent, and all the results of blind-eyed regulators. Why ought to I really feel motivated to jot down a few commodity that has pitiful volumes, zero retail curiosity, and abominable upside momentum but respectable DOWNSIDE quantity? Silver bulls in June of 2019 are like the fellows at the highschool promenade with no dates that confirmed up within the parking zone at midnight to choose fights with the fellows that HAD dates.

That being stated, I’m a holder of a ton of silver bars in secure locations as a result of in case you have ever questioned the place the provision is coming from that has scuppered the U.S. greenback value of silver, look no additional than the nation of Venezuela. Within the good instances earlier than “criminals” pretending to be “socialists” took management, the common member of the Venezuelan Center Class had put away three,000–four,000 ounces of silver as a safety towards catastrophe. Now, keep in mind that within the 1980s, huge oil reserves have been found in Venezuela and there was each indication that its residents have been about to be blessed by prosperity. Nonetheless, as appears to be the norm in South America, the important freedoms granted to American entrepreneurs to make obscene quantities of cash in a “free-market” financial system weren’t bestowed upon the great individuals of that oil-rich nation and as soon as the army was suggested of the—ahem—”enterprise alternative,” the weapons and tanks all miraculously fell into line behind first Hugo Chavez and later Nicolás Maduro. As soon as the “thugs” took management and started to thumb their noses at america, issues (reminiscent of inflation) began to have an effect on them and over time, what was as soon as one of the sought-after Canadian and American vacationer locations instantly turned a hell gap.

That was the precise second the place the Venezuelan docs and attorneys and accountants seemed beneath the floorboards of their vehicles and SUVs and houses and sought out these silver cash and silver bars and “ware” (forks, knives and spoons) and MOBILIZED that asset right into a modicum of “commerce” the place their “EXIT VISA” from the Zimbabwean hell gap was a silver coin, a silver fork or a metal crowbar unnoticed by the authorities. At present, residents of nations outdoors of North America and in all continents throughout the globe are discovering that bodily possession of silver has allowed them to be liberated from the oppression introduced on by collapsing buying energy of their respective currencies.

By means of the debasement of home currencies, governments have successfully enslaved residents by eradicating the apply of “saving” the place sums of saved revenue present the liberty to exit. Now we’re seeing the utility of silver manifesting itself by the use of liquidations which can be offering the lira and baht and rupee and rubles required to pay for the essential wants reminiscent of meals, lodging, and most significantly, TRAVEL the place a couple of silver cash or a well-crafted silver goblet earns a household a berth in guidance on ships destined for North American or Western European ports. Tales from pre-war Germany and the previous Soviet Union doc silver’s utility and the precise duplicate of that is ongoing immediately wherever human struggling and societal breakdowns are evident, which, in immediately’s geopolitical panorama, are plentiful.

Because of this, I’ve opted to stay with gold and keep away from the shenanigans of the Crimex silver pits the place JP Morgan and its proprietary buying and selling desk dominate value with out the slightest concern of retribution or censure. Casinos like which can be to be prevented and whereas additionally it is current within the gold pits, liquidity and volatility are ample and thus permit me to commerce the swings in a way through which I attempt to align myself with the positioning of the felony bullion banks. Whereas not precisely excellent, it was exactly what received me out of gold in mid-February and again into it in Might such that I now scramble for clues that the behemoths are lurking. They’re undoubtedly ready ever so patiently for the Giant and Small Speculators to cowl the entire shorts they placed on in Might with gold within the $1,270–1,280 vary and change to “web lengthy” right here in June at which era the entire buy-side quantity created by this change may have been provided by the Commercials thus capping the advance and organising the following takedown.

The COT was non-descript this previous week and gave me few clues as to any potential bullion financial institution ambushes looming on the horizon so benefit from the journey on the leveraged ETFs which have gapped even increased Monday morning with JNUG urgent the $eight.20 degree and NUGT north of $18, I’m now seeking to exit the the entire calls I personal (JNUG June $6 from $1.10 – now $2.20/ NUGT June $15 from $2.55 – now $three.40) and the value factors are JNUG $eight.50 and NUGT $19.50. I will even promote half of the ETF share positions in each whereas placing cease losses on the balances at JNUG $eight.05 and NUGT $19.05.

As soon as once more, my dislike for “all issues Goldman” has paid off with the latest buy of the GS July $180 places @ $2.20 reaching a triple this morning at $6.72. With the shares having crammed many of the hole between $178 and $185, I’ll take the triple and see if the squid can shut below $178 over the following few days, at which level I’ll brief it once more on the lookout for a check of the December lows approaching $150.

With shares below strain and gold and the miners now charging, the momentum gamers will likely be seeking to leap on the valuable metals bandwagon however I need to purchase the miners with RSI nearing 30, not within the 60s and definitely not within the 70s the place they’ve been ideally suited shorting candidates. Nowhere is it extra apparent than within the valuable metals enviornment the need of shopping for on weak point and ideally EXTREME weak point. The easiest way to observe that is by the use of the RSI and MACD indicators and so far it has been working. I used to be a tad early this time within the JNUG and NUGT entries as a result of I elected to tug the set off with RSI nearing 30 however unexpected extra liquidation in early May very well noticed a value backside ten days later with RSI within the mid-high 30s. Nonetheless, it has all labored out fantastically and I now have Fido sleeping peacefully at my toes (one eye open, in fact) and that menacing rolling pin is again within the drawer, the odor of baked items wafting via the rooms confirming that every one is nicely on the planet as soon as once more.

For now, anyway. . .

Initially educated throughout the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis College the place he earned a Bachelor of Science in finance and a Bachelor of Artwork in advertising earlier than finishing post-graduate work on the Wharton College of Finance. With greater than 30 years of expertise as a junior mining and exploration specialist, in addition to a strong background in company finance, Ballanger’s adherence to the idea of “Exhausting Belongings” permits him to focus the apply on choosing alternatives within the international useful resource sector with emphasis on the valuable metals exploration and improvement sector. Ballanger takes nice pleasure in visiting mineral properties across the globe within the unending hunt for early-stage alternatives.

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Charts courtesy of Michael Ballanger.

Michael Ballanger Disclaimer:
This letter makes no assure or guarantee on the accuracy or completeness of the info offered. Nothing contained herein is meant or shall be deemed to be funding recommendation, implied or in any other case. This letter represents my views and replicates trades that I’m making however nothing greater than that. At all times seek the advice of your registered advisor to help you along with your investments. I settle for no legal responsibility for any loss arising from the usage of the info contained on this letter. Choices and junior mining shares comprise a excessive degree of danger which will end result within the lack of half or all invested capital and subsequently are appropriate for knowledgeable and professional traders and merchants solely. One needs to be acquainted with the dangers concerned in junior mining and choices buying and selling and we suggest consulting a monetary adviser if you happen to really feel you don’t perceive the dangers concerned.

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