Exactly one week ago, I was sitting here at the keyboard admiring the beautiful short squeeze developing in the gold market while trying desperately to avoid anything vaguely resembling "hubris" "smugness," or "vanity" lest I anger the Gold Gods and jinx the trade when I wrote the following about the "bullion bank behemoths":
It has been said that "History never repeats but it does rhyme." no better illustration of that were the events back in April 2013 when on a Sunday night in the wee hours of the North American morning, an orchestrated raid in the highly-illiquid Electronic Access Market saw gold and silver get crushed down through key support levels, triggering a brutal bear market that lasted until December 2015. It was two years of hell.
Last Sunday evening, we got a repeat of the April 2013 raid when gold was indeed raided by the same entities that crushed it then. Those "bullion bank behemoths," as I alliteravely named them, did indeed work all weekend and most certainly on Sunday night because the action was simply breathtaking as the Feb Gold futures took out the all-time highs and then proceeded to move downward in an incessant, never-ending assault designed not to achieve "best price possible" but to create a technical formation known as a "key reversal day" where on the following Monday, those futures settled below the prior day's lows, constituting that true and much-dreaded pattern. Software programs trained in textbook technical analysis then went to work and trashed the gold market all week long such that today, as I write this on the last day of the trading week, it is exacty $130.65 lower.
The feverish work done by the desk traders known as "Commercials" was so perfectly executed that today the ETF that dominates gold trading on the SPDR Gold Shares ETF (GLD:NYSE) has just broken its uptrend line drawn off the October and November lows; MACD indicator has just completed a bearish crossover; and MoneyFlow indicator is on a well-defined "sell signal" as well, for the first time since early November. Fibonacci retracements for gold bullion are at $2,026.30 (38.2%) (now broken), $1,987.40 (50%), and $1,948.50 (61.8%).
I exited all leveraged gold holdings as well as the GLD:NYSE call positions at a very slight profit after dancing on the City Hall steps in my birthday suit only a week ago.
While under normal circumstances, I would be holding bragging rights for having called for "ATH by New Year's Day" back in mid-October, I feel no joy whatsoever because, once again, the two metals deemed to be "Enemies of the State" are now in downtrends.
From the penthouse to the outhouse in six short days and sentiment once again in the proverbial ashcan going into the Holiday season. Lumps of coal in stockings everywhere.
In this bizarro world of algorithms and artificial intelligence, there are seven stocks controlling the fate of the majority of ETFs, pension funds, 60-40 portfolios, and several continents of wild-eyed day traders. I have been in these markets since 1977 (at first slowly and then all at once), and I can tell you that I have never seen anything quite like this massively rigged casino where the term "due diligence" is considered "too boomer" to be effective.
Every month, pre-programmed tsunamis arrive like dutiful servants to inhale all the available supply of stock with corporate stock purchase programs and dividend reinvestment programs, not to mention corporate buybacks that represent a perennial "bid" that levitates markets seemingly forever. Markets move primarily on momentum, with "growth" constantly outperforming "value" largely because growth portfolio managers have little need for analysis other than "Is it going up?" versus the antiquated, out-of-fashion value portfolio managers forced by training to understand balance sheets and income statements in order to be effective.
The Dow Jones Industrial Index is now in its third consecutive week residing in overbought conditions, with the relative strength index ("RSI") getting into the low '80s while it is a mere 694 points below the all-time high seen on January 5th, 2022 at 36,952, where stocks topped last July when the DJIA stayed for only one week in overbought territory before correcting. As of the close tonight, it has been overbought for three weeks. The cyclically-adjusted price-earnings or "CAPE" ratio is now cruising at 31.16, the fourth-highest reading in CAPE history. (Higher readings were taken in July 1929, November 1999, July 2018, and October 2021.) Today is the last day for stock buybacks, so a great portion of the rocket fuel that has been driving valuation is ending.
Now, seasonal strength can still keep markets levitated for a bit longer, but I believe that much of the horsepower that might have been seen in the Santa Claus Rally after the 22nd of December was expended in the November rally, leaving only the potential for a somewhat anemic showing during the Holidays, a period when there has typically been a sharp rally into light volumes and thin order books.
There is also the chance that after today's better-than-expected NFP report, the Fed under Chairman Jerome Powell may come in rather "hawkish" with an outside possibility that he throws in a rate hike on December 13 (Wednesday) to complete his year-end impersonation of the Grinch.
Stocks and bonds will not like that, so while traders are least expecting not only rate cuts but a "soft landing" in the economy, November's blow-out move might have swung the passengers en masse to the port side of the ship in such numbers that it may be ready to capsize.
If stocks are going to cool off as is normal for this time of year, they will have done so by the end of next week.
Furthermore, if there is one contrarian market call going into the end of the year, it is that a) they keep going down right into January 2024 and fail to find their footing until February and b) that Q1/2024 ushers in evidence of a particularly hard landing with growth evaporating and stocks in full retreat.
They once asked Hall-of-Famer Wayne Gretzky why he had such vision of the ice surface while playing a game that he dominated from 1979 to 1990, winning the MVP for the NHL in nine out of ten years.
His answer was simple: "I always skate to where I think the puck is going, not to where I know it is."
In 2020, retail investors all leaped onto the lithium bandwagon and drove prices to 60,000 CNY/t into a frenzy over EV battery demand. Every junior shell on the TSXV began changing its name to contain the words "lithium," "battery," or critical metals," with every piece of moose pasture that had any proximity to a lithium deposit getting gobbled up.
BNN in Canada was running lithium company ads daily until about two months ago, when they suddenly stopped abruptly.
Why? Look at the price.
The same thing has been happening in the uranium market, where the narrative has been much the same — no supply, soon-to-be insatiable demand, and any project or property within a province away from a uranium deposit snapped up by the TSXV crowd.
Being a laggard to the lithium move and formerly a "hated asset" amongst the kiddies, uranium juniors caught a major bid in 2023 and have grabbed the mantle from the lithium crowd and are now running high and hard with the Twitterverse abuzz with talk of "$300 U3O8!!!!" and "Shortage coming," and while I am still a stalwart bull on uranium, sentiment has moved to Fantasyland as it always does, leaving copper as the orphaned nephew standing unloved in the corner with all of the playing fields in front of him.
Usually, there is a strong correlation between copper and silver, and today, after the jobs number kneecapped silver, copper put on a respectable showing, up 1.03% versus a 3.05% plunge in silver. I do not know what it is, but I have a strong dislike for silver despite the fact that I own a ton of it (figuratively, of course). I am sorry to all the very good people who own it and love it and worship it and promote it, but compared to gold, it is a truly poor, barefoot cousin.
I love our silver bars that we keep in a small safe somewhere within the boundaries of the property. I love the way they look; I love the way they feel; I even love the way they smell, as disturbed as that may sound.
However, I freaking hate the way silver trades, and I hate the morons that promote it, and I hate the cretins on the internet and on Twitter that hold out their "analysis" as Gospel. Bill Murphy and Chris Powell have been longstanding proponents of an investigation of the shenanigans in the silver market for as long as I have known them — which is going on two decades.
They are the founders of the superb "Gold Anti-Trust Action Committee" (GATA) and have had an enormous amount of support from the likes of Eric Sprott and James Turk, as well as a flotilla of ardent fans, of which I am one.
Silver is a totally controlled market, as is gold. GATA has proven that in spades. It represents one of two metals that are generationally important to cultures around the world that were never raised in a U.S. dollar-centric setting. In terms of the Argentinian peso, silver has done its job; in terms of the Turkish lira, silver has been spectacular; in terms of the Venezuelan bolivar, silver holders are now in the top 5%-ile of society. Anywhere the government has trashed the purchasing power of their currency, silver has done great — unless it is "managed" by the State, which it is in the U.S.A.
Copper, by contrast, is one metal used universally around the world and traded in all currencies. It is needed in every aspect of the human condition and will never be considered an "Enemy of the State." It represents the working man, the plumber's metal, the builders' metal, and in this new world of electrification and carbon control, it will be the metal that silently and wonderfully expands humanity's need for transmission of electricity provided by the new, vibrant and clean energy source — nuclear.
When these 57 new nuclear reactors are commissioned worldwide and start generating electricity, there is going to be a collective CRY for more wires and for more storage, but without copper, nothing happens. The reactors are on "hold," the lithium-ion batteries are empty, the houses are frigid, and the cars are powerless until the transmission grid has been expanded.
My first move as an investor is to own the Global X Copper Miners ETF (COPX:NYSE), a fine collection of senior U.S.-based and international copper producers of the highest quality. The next move is to own the basket of juniors provided by the Sprott Junior Copper Miners ETF (COPJ:NASDAQ), the junior copper version.
The move I always make (sometimes to a fault) is to seek out the leverage in a junior copper explorer/developer who is underpriced. That junior iswhich is actually transitioning to copper, and while you have all been hearing about it since the summer, the market cap of the company is a paltry CA$7.1 million.
The junior copper players are all under-owned and undervalued and the junior TSXV and CSE deals are completely off the radar screens of the Millennials and GenXers that dominate markets these days.
They are still mesmerized with uranium and crypto, whose performances have been both dominant and impressive in 2023. Both are "where the puck is," to coin a Gretzky phrase, while copper is where the "Great One" is headed, full speed and with a wide-open net in front of him.
As 2023 grinds down to a painful conclusion for the precious metals crowd and for a generation of investors that continue to wait for the return of the 80's and 90's-style junior exploration frenzy, I vow to concentrate on the metals that are critical to the Electrification Movement yet unloved and underappreciated. Valuation for copper juniors is a fraction of that for uranium and lithium juniors unless there are new discoveries, such as Hercules Silver Corp. (BIG:TSXV) whose market cap has exploded from CA$22.7mm to over CA$270mm since they announced a massive copper intercept at their Hercules Property in Western Idaho. (185 m of 0.84% Cu, 111 ppm Mo, and 2.6 g/t Ag).
The stock was previously languishing in the sub-CAD $.30 range until the discovery hole was announced along with a major investment by Barrick Gold Corp. (ABX:TSX; GOLD:NYSE), whereby they own up to 15.2% of the issued capital of BIG:TSXV.
This little junior was propelled not by a big silver intercept but by a big copper intercept and that is precisely what I anticipate will dominate the junior mining space in 2024.
The year is rapidly drawing to a close, and many of us are licking our wounds from ill-treatment by the junior precious metals deals. 2024 is going to be a year where execution dominates the field and where failure to deliver on promises and disregard for minority shareholders will result in punishment by the investor base, at least for this publication, and I suspect the majority of shareholders feel like discarded doormats.
Copper in 2024. . .
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- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of [Norseman Silver Inc. and Volt Lithium Corp.]
- [Michael Ballanger]: I, or members of my immediate household or family, own securities of: [All]. My company has a financial relationship with [Norseman Silver Inc.]. I determined which companies would be included in this article based on my research and understanding of the sector.
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Michael Ballanger Disclosures
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.