Mining Equites / Metals / DX

Has the outlook for the Metals Complex changed?

No, it has not.

The GDX & GDXJ have been contained by resistance overhead – resistance has contained the Silver Mining Equities as well.

The DX has a very large gap above on that should be filled. Look back to October of 2002. There are several others above as well on weekly and daily charts. Ignore them at your own peril. The DX COT has moved to a position of Neutral.

Once we begin to see additional Hedges placed – it will get sporty.

 

 

 

 

 

 

 

I remain 100% negative on the Precious Metals Complex. The most recent retracement met the criteria for Gold, although Silver lags and has not achieved its target for reversal – which should be considered an important negative.

The rapid thrust to the downside I am looking should arrive once this recent adjustment ends. Markets need buyers to create energy, they become sellers when the primary trend re-asserts itself.

The PMC received a reprieve for now. I don’t expect it to last much longer.

The Credit Cycle

When the Fed raised its key rate from a record low back in December 2015 – a change in trend was assured. This trend is not about to change, irregardless of the numerous protests the Federal Reserve is bluffing. They are not – Domestic Policy initiatives favor Capital Inflows to the United States. Inflows have remained robust.

The dollar should rise, but is struggling. How long this period of consolidation for the DX continues is curious. It has the appearance of being extremely weak. 93 remains our target for the DX, this could provide immense support or a spectacular failure – one that, should the DX fail,  returns the Dollar to the 70s on an exchange basis.

The Federal Reserve has kept their word, for them to sit pat – continued asset inflation would be difficult. This appears counter-intuitive, it is not. Continued Zero Interest Rate Policy served its purpose until it was no longer effective. The pendulum is swinging back. Much has been made of calling the Fed on their bluff… 3 increases to the Fed Funds Rate later and there is no sign they are about to halt and reverse direction.

Mario Draghi and the European Central Bank will come under pressure in maintaining negative interest rates that have failed to reinvigorate the European economy. 8 years of economic policy has failed spectacularly and would seem to demand Europe’s pendulum begin to swing back to rate normalization.

The note of caution by Federal Reserve Board members have not deterred 25 basis point rate hikes – economic activity has contracted significantly since they began raising rates.

What is to lead us to believe they are about to reverse course?

The small gang of “Forecasters” who couldn’t shoot straight from the inception of this change in trend?

The Fed’s flip-flop – good cop, bad cop routine?

Economic contraction – did this prevent them from prior increases?

The Dollar will begin to drop when the European Central Bank begins to reverse course – until then it will either tread water above 93 or fail dramatically to the 70s once we have a clearer picture from Euroland.

I remain negative on the PM Complex, this most recent retracement is weak, underwhelming and has the appearance of building stored energy for the next decline. For things to look up would require Gold to remain firmly above 1237 for 5 to 10 trading days. Silver will require a move over 16.50 – one that hold for the same timeframe. Were Purchasing Power Parity truly at risk of a serious decline, Silver would be leading.

It is not – is this a trick, a distraction or a ruse?

We will find out shortly.

Gold and Silver Retracement or New Positive Market?

The reversal targets remain 1237 for Au and 16.50 for Ag. We did not get the thrust downward to test 1200, it fell short at 1205.

Sellers had quietly exhausted themselves.

As the COT clearly demonstrates Net Specs can remain Zero bound for some time while Price declines.

Sentiment remains low, but can indeed head lower and stay there for an extended period.

A great deal of hype is present, the touts are telling anyone who will listen – “This is it!”

It’s not in my humble opinion, I remain decidely negative on the Precious Metals Complex.

Technically the PMC is very weak, please review both weekly and Monthly charts for the past 5 and 10 years. There is a clean divergence over the past six years in RSI/MACD on IT/LT Timeframes.

Demand for Silver has collapsed. India’s recent uptick ahead of the GST is minimal in MT’s. The COT remains underwhelming and sentiment can and will far considerably further. If you look at the former downtrend from June 2015 to October of 2016 – it’s clear we broke from this channel to the upside.

I’ve been a metals investor since 1977 and seen many – a great many false breaks. This one that began in December 2105 appears to be another one.

1237/16.50 are the reversal points for Au & Ag. Watch them carefully – the sector has experienced a number of negative weekly reversals since the high @ 1377 – Caution is warranted. They must remain above these price points on a Monthly Basis to begin to turn the RSI & MACD.

It will take more time, perhaps in July 27th prior to the next leg down, which should be a serious break to the downside.

Complacency remains a key theme across all Markets. Volatility will begin to pick up significantly into August.

I would refer to be wrong about this, but “hope” is not an investment strategy I employ.

The “Surge” in Silver Demand?

Mint Sales have imploded… any uptick in sales is grossly overstated.

See for yourself – http://tinyurl.com/ydfpuyhq

See Sales Year over Year – they are declining significantly – http://tinyurl.com/ydfpuyhq

Don’t believe the hype – it remains a case of those who are losing income from sales of Bullion and Newsletter Subscriptions taunting you to buy – again.

Perform your own Due Diligence – don’t be taken for a ride.

Irrevocable Decline of USA – 1/6

The United States is one of the poorest Nations on Earth.

We project health through our military pretending our Empire is secure. This is a farce, one that will not continue in perpetuity.

Why did we consent to Corporate De-Industrialization since the 1980s and reduce the working class to minimum wage serfs and welfare fixtures?

How has money replaced the citizens voice as K Street authored our laws for Corporate benefit.

Why are those living at the margin of subsistence hidden, secularized and segregated?

Fifty percent of our Nation lives in poverty. We are a First World Banana Republic – a despotic and dystopian shadow of our former selves.

The Glory Days of America are behind us and have been for some time.

LBJ’s “Great Society” became a welfare Queen, dependent on Government subsidies to eek out an existence filled with despair, apathy and rage. Food lines may not be visible only because technology has permitted them to remain in the shadows.

55% of the American population makes less than $30,000 a year.

At $1,021, real average gross rent in the United States was at its highest level in 2015 since this data series began in 2005 – it continues to rise. Real Estate Capital Stock remains in an uptrend – A trend that is displacing Americans and placing them in Section 8 housing and far worse – homeless.

The minimum living wage in the United States is approximately $17.20 per hour using the 2,080 annual hours worked or ~$35,800. This is not per household, but individual and this is simply to afford the basic necessities.

30%+ of single women live below the poverty threshold @ $12,082.

1 out of every 5 American children live in conditions of poverty.

The elderly are one of the fastest growing demographics – the Senior poverty rate will continue to expand for a generation. Many Baby Boomers will be reduced to poverty or required to work until they pass.

Medical expenses are the single largest cause of Bankruptcy across all demographics. There is no free lunch – the cost of Medical Insurance is extraordinary and rising.

Affordable Healthcare? Not on your life, and it often comes to this – lives.

People of Color have far and away this highest poverty rate @ ~25%. Hispanics follow closely behind @ ~22%.

For more than one half of the United States population, making enough money to merely subsist is an immense challenge.

Part 1 of 6

AISC

There are presently a number of suggestions the Price for both Gold & Silver are near All in Sustaining Costs (AISC).

The West’s lowest cost silver producers are:

Silvercorp Metals Inc. @ $2.16

Silver Wheaton Corp. @ $4.12

Mandalay Resources Corp. @ $6.84

Fortuna Silver Mines Inc. @ $7.03

Endeavour Silver Corp @ $7.92

Gold can be produced as low as $500 per ounce AISC in the West.

In the East – China’s largest Silver mines AISC is $9.

Silver demand has increased 1 quarter in India, World demand has decline year over year from 2015.

The largest declines were seen for Investment Demand. Demand in India is ahead of GST’s for both… The fundamentals are Not Bullish. The Silver the Market is incredibly weak.

The Charts (LT) indicate a bearish MACD & RSI for both the Weekly & Monthly.

The lowest cost gold producers are:

Dundee Precious Metals Inc @ $329

New Gold Inc. @ $377

Silver Wheaton Corp. @ $386

Sandstorm Gold Ltd. @ $420

OceanaGold Corporation @ $426

If you are going to purchase Mining Equities – above are the best leveraged to Price.

Their AISC includes all of the adjusted operating costs:

  • On-site mining costs
  • On-site general and administrative costs
  • Royalties and production taxes
  • Realized gains/losses on hedges due to operating costs
  • Community costs related to current operations
  • Permitting costs related to current operations
  • Third-party smelting, refining, and transport costs
  • Non-cash remuneration
  • Stockpiles and inventory write down
  • Operational stripping costs
  • Byproduct credits
  • Corporate general and administrative costs (including share-based remuneration)
  • Reclamation and remediation
  • Sustaining exploration and study costs
  • Sustaining capital exploration costs
  • Sustaining capitalized stripping and underground mine development
  • Sustaining capital expenditures

Crypto Currency (Klepto-Currency)

Crypto Currency has no real “value” – it will be assimilated once the herding purpose of Private CCs’ is complete.

Block chain technology is fascinating, but it overpromises and under delivers – as it fractured on several fronts, namely anonymity and scope/scale of the chain itself.

Use it to make a purchase and your anonymity is extinct, it was prior to said purchase FWIW – the Intelligence Community Comprehensive National Cybersecurity Initiative Data Center has it covered.

Suggesting any of this to any CC promoter and watch as their “Game” kicks into high gear.

The elimination of bounds serves a purpose – it allows the Credit Pyramid to expand.

How?

If you are a Central Bank and your Political hidden hand requires additional Credits… Treasury Issuance may not be required as an offset.

More Credit from nothing – this of course applies to Private Crypto Currencies as well. Central Banks can’t have that… and will not in time. The Power to “Coin Money” was abdicated in 1913, Banks around the Globe aren’t about to permit their consumers to Coin their own in perpetuity.

I believe this is called counterfeiting.

The reaction of the cryptomarket to the Federal Reserve announcement provides evidence that cryptocurrencies are seen as a safe-haven investment during times of significant fiat currency dilution.

For now, Private CC’s serve an acclimation purpose – readying the Public by creating a Mind Space that acknowledges their presence.

FedCoin will arrive when needed – likely with Universal Basic Income. Bitcoin is an inflationary currency, FedCoin will supplant BitCoin and extend the infaltionary schema.

Personally, I find it supremely ironic a number of Hard Money Advisors is touting “Coins” for investment.

It’s antithetical to everything they claimed to believe just a few shorts years ago. And yet, it’s all the rage – as long as they are making money and introducing new ICO’s from which they profit.

As the Fed continues to raise rates – demand for cryptocurrency is decreasing. Closing the Credit valve assured there is less newly created Credit that will flow into investments such as real estate, stocks, Gold, Silver and klepto-currencies.

It should be axiomatic investors will have less demand for assets that hedge against inflation. This hasn’t quite sunk in as of yet…

Consent is a given – no one’s going to ask, distractions abound. People prefer outcomes with known probability as opposed to outcomes where the probabilities are unknown. BitCoin and it’s ilk appear certain – they are not – the ability to extend the  credit Ponzi is all they have assured.

It will not be a Public utility – Central Banks will see to it.

The ESF’s Gold

The Federal Reserve began a sustained and important reversal in Policy on December 17, 2015. The Federal Funds Rate was increased 25 Basis Points from 0.25-0.50bps.

Since they began raising rates, 3 subsequent increases have followed.

December 15, 2016 – when the FFR was increased from 0.50-0.75

March 16, 2017 & June 15, 2017 the FFR was increased 25 basis points at each meeting. from 0.50 to 0.75bps and then again to 1.00%.

The FFR’s actual target rate is 4.00%.

For going on 2 years we’ve heard a great many touts “predict” the Fed will stand pat and that it’s all a bluff. Clearly the Federal Reserve was serious and is growing increasingly so.

During the “policy normalization process” that commenced in December 2015, the Federal Reserve informed us it will use overnight reverse repurchase agreements as a supplementary policy tool.

“RRP’s” would be employed to help control the federal funds rate and keep it in the target range set by the FOMC.

Two interesting items of note from their consolidated financials:

Gold Certificates decreased & Repurchases actually declined. In fact so did US Treasury Securities , Mortgage Backed Securities, Enterprise Debt Securities – albeit slowly.

The real eye-open was this – year over year – Net Income after providing for remittances to the United States Treasury…

Well, those flipped by a large amount.

In 2015 a loss was incurred of $5.8 Billion, 2016 showed Net Income of $328 Million.

The reduction in Gold Certificates is interesting, as it seems to correlate to  longer term movements in the Price of Gold and not inversely as many seem to suggest.

The Secretary of the Treasury is authorized to issue gold certificates to the Reserve Banks. Upon authorization, the Reserve Banks acquire gold certificates by crediting equivalent amounts in dollars to the account established for the Treasury.

The gold certificates held by the Reserve Banks are required to be backed by the gold owned by the Treasury. The Treasury may re-acquire the gold certificates at any time, and the Reserve Banks must deliver them to the Treasury. At such time, the Treasury’s account is charged, and the Reserve Banks’ gold certificate accounts are reduced. The value of gold for purposes of backing the gold certificates is set by law at $42.22 per fine troy ounce.

Gold certificates are recorded by the Reserve Banks at original cost. The Board of Governors allocates the gold certificates among the Reserve Banks once a year based on each Reserve Bank’s average Federal Reserve notes outstanding during the preceding 12 months.

This may appear insignificant – it is not.

The Gold held by the United States Treasury at $42.22 is valued at $11.04 Billion. Whether or not these official reserves actually exist is irrelevant.

They do exist, it is the real ownership which is of concern. Who holds title to the Gold.

Given the Federal Reserve reports $3.588 Billion in Gold Certificates held by the Federal Reserve, back by United States Treasury Gold. Gold remains a Tier 1 Asset on their Balance Sheet.

The Federal Reserve holds close to 30% of the Treasuries Gold Reserves in Certificate Claim.

It is important to note:

“All of the Department of the Treasury’s certificates issued are payable to the Federal Reserve banks.”

Being gold certificates issued by the Treasury, the word “payable” means payable in gold.

If the Federal Reserve had ever redeemed the Gold Certificates issued and took possession of the gold – the Treasury would not have had the ability to profit off the Gold Certificate Swaps.

The US Treasury would no longer have the gold in their possession to do so – leaving the US Treasury without a Tier 1 Asset.

Gold is an Asset Eastern Nations have been adding to their Treasuries over the past decade at a precipitous pace.

The Dollar’s demise will be closely linked to these Certificates held by the Federal Reserve. The Federal Reserve Bank of New York is the custodian of the United States Treasury Gold.

Possession is 10/10ths.

Seismic shifts are ahead for Treasury Gold & Certificates, the US dollar will provide all the intelligence needed, should it begin to break down and breach the 93 level… we could witness a repricing of Gold by the Treasury, but only after redemption by the Fed.

Source:

Federal Reserve Consolidated Annual Report – KPMG

*Of Note – The New York Federal Reserve is the Face of the Exchange Stabilization Fund (Fund) and acts on the behalf of the ESF & US Treasury.

In the Future I will refer to the real lever Puller that controls the IMF, World Bank and Federal Reserve System.

 

 

 

Gold & Silver COT – Not Bullish

Much is made of the Commitment of Traders Report when needed.

The stark reality is this for the Precious Metals Complex.

  1. Gold must close over 1237 on a Weekly Basis for a Reversal to be considered valid.
  2. Silver must close over 16.50 on the same Weekly Basis for a Reversal to be considered valid.

In order to build constructive downside – the market requires buyers. These new buyers then become sellers are buying exhausts and support for any Price level completes. This is a fundamental concept in investing and trading.

Take a look at the Gold COT below:

GOLD COT
Gold Commitment of Traders – AuAgB.com

Small Specs closely reflect overall sentiment – which has approached zero on a net basis. This is often a time for Price reversal and promoted as the “This is it moment” time immemorial.

The fact is that Gold – as you can see in the above Chart – has fallen as much as $200 as the Small Specs remained sidelined.

Price declines from January 2015 to December 2015 illustrates this perfectly.

The same Price decline can be seen again from June 2016 to December 2016. All the while Small Specs were reducing their Net Long exposure.

Looking at Zero Net positions – from April 2015 to December 2015 you will observe the Small Specs were near Net Zero. According to the COT Theory promoted by many within the Precious Metals Complex – this is bullish.

The chart clearly illustrates it is not.

Silver demonstrates an entirely congruent chart for Small Speculators Net below.

Silver COT
Silver Commitment of Traders Report – AuAgB.com

 

More often than not sentiment is improperly correlated to the COT.

Why?

In order for selling to occur, the market requires buyers to change their minds and sell. The Market must accumulate the Potential to become Kinetic.

I believe further downside is ahead and the recent increase in Price will be short lived. The advance is extremely weak and has a decidedly Bearish tone.

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