Precious Metals

     

 

 

Gold’s Little Brother

Today I want to put a popular precious metal under the magnifying glass for you: silver.

Silver, often referred to as the “little brother” of gold, has a particularly interesting seasonal pattern I would like to share with you.

 

Shiny large good delivery door stops made of silver – about to enter interesting seasonal phase. [PT]

 

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The New In Gold We Trust Report is Here!

The In Gold We Trust 2020 report by our good friends Ronald Stoeferle and Mark Valek was released last week. It is the biggest and most comprehensive gold research report in the world. As always it contains a wealth of new material, as well as the traditional wide-ranging collection of charts and data that makes it such a valuable reference work for everything of interest to gold investors or indeed for anyone interested in precious metals (a download link to the report is provided below).

 

Left: casting gold bars. Right: using gold as a shield against assorted slings and arrows.

 

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Incrementum Advisory Board Discussion of April 8, 2020 with Special Guest Rick Rule

The Incrementum Fund’s Advisory Board held its quarterly meeting on April 8. This time renowned resource stock investor Rick Rule, the President and CEO of Sprott US Holdings Inc., joined the discussion as a special guest. As always, there is a download link to a transcript of the conference call in PDF format at the end of this post.

 

Rick Rule, CEO of Sprott US Holdings Inc., and renowned investor in the commodities sector.

 

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Gold Sector Outperforms Broad Market

The gold sector is in an uptrend since September 2018. The initially rather labored move accelerated after a secondary low was established in May 2019 and the 50-day and 200-day moving averages were breached for the second time. Last week the two moving averages were once again overcome in the course of the post-crash rebound. Here is a chart showing the entire move since 2018:

 

After a rather harrowing decline in sympathy with the February-March stock market crash, the HUI has swiftly moved back to its previous high for the move and is now trading above its 50- and 200-day moving averages again.

 

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Big Moves, Widening Spreads

The big news this week was the drop in the prices of the metals (though we believe that it is the dollar which is going up), $57 and $1.81 respectively.

 

Despair at the Unjustly Injured Gold Bugs Anonymous meeting… [PT]

 

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Bonanza Season

In the 18 December 2019 issue of Seasonal Insights I discussed the strong seasonal advance in precious metals around the turn of the year. In silver it begins in mid December and continues until the end of February. A roughly similar pattern can be observed in platinum and palladium, while seasonal buoyancy is at least to some degree evident in gold as well.

 

Long-term silver and platinum seasonal charts from the late 2019 issue of Seasonal Insights : the seasonally strongest phase lasts from mid December until late February. [PT]

 

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An Unloved Sector

We rarely discuss individual stocks in these pages, but we make an exception now and then when we spot exceptional opportunities. This time the reason is actually more mundane: the vast majority of gold exploration stocks failed to benefit from the rally in precious metals prices last year. As a result many of them came under even greater pressure in the tax loss selling season at the end of the year. We made a list of such stocks late last year – a download link to the PDF document is provided below this post. Here is an example of such a stock:

 

ATAC (ATADF), one of many exploration stocks that came under selling pressure in last year’s tax loss selling period.

 

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GDP – A Poor Measure of “Growth”

Last week the prices of the metals rose $35 and $0.82. But, then, the price of a basket of the 500 biggest stocks rose 62. The price of a barrel of oil rose $1.63. Even the euro went up a smidgen. One thing that did not go up was bitcoin. Another was the much-hated asset in the longest bull market. We refer to the US Treasury.

 

BofA Merrill Lynch high yield master II option-adjusted spread: on Dec. 23 it tightened to the  lowest level of 2019, fairly close to its post-crisis low established in 2018. This seemingly signals that risk is very small –  in reality, risk is probably extremely high. [PT]

 

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Plans and Consequences

You are probably already getting into the holiday spirit, perhaps you are even under a little stress. But the turn of the year will soon be here – an occasion to review the past year and make plans for the new one. Many people are doing just that – and their behavior is creating the strongest seasonal rally in the precious metals markets.

 

Anonymous industrial stackers showing off their freshly purchased silver hoard. [PT]

 

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A Critical Appraisal of a Hero of Central Monetary Planning

We apologize for publishing this Report late. We have been very busy developing the business. Last week the price of gold moved up $16, and that of silver $0.39. Almost two groceries leaked out of that store of value par excellence, bitcoin. But hey, stocks are up!

 

We admit to having a soft spot for the politically incorrect Paul Volcker. He frequently expressed bemusement at the newfangled obsessions of his successors at the Fed (as an example, at a conference in 2006 he remarked on the increasing emphasis on “core” inflation: “A great mantra of central bankers these days is ‘inflation targeting.’ I don’t understand that nomenclature. I didn’t think central bankers were in the business of targeting inflation. I thought we were supposed to be targeting stability.” h/t Grant’s). Nevertheless, we are on board with the criticism voiced below. Volcker was indeed instrumental (along with Milton Friedman, otherwise a champion of free markets, but oddly blind to the insidious nature of a monetary central planning agency) in persuading Nixon to abandon the last remnant of the gold standard, the Bretton Woods “gold exchange standard” that permitted foreign central banks to exchange their US dollar reserves for gold at a fixed exchange rate. Not only did this decision unleash a decade of economic and currency market chaos, it ultimately paved the way for the unbridled expansion in money and credit in train since the early 1980s. In the meantime we have arrived at a juncture where central banks are “forced” to adopt ever more insane policies as they rush from trying to prevent one potential systemic collapse after another. [PT]

 

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Re-Purposing of Tractor Parts in South Dakota

 

The price of gold was all but unchanged, but the price of silver dropped another 46 copper pennies last week.

We came across an article showing pictures of something we have previously described: sculptures made from parts taken from farm tractors.

Here is a picture I took:

 

The good old Predator made of tractor parts – looks almost like the real thing! Here is background information on the artist and more pictures of his work. [PT]

 

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Poland’s Gold and the Conspiracy Theorists

The price of gold was up enough to buy a bottle of Two Buck Chuck wine, and the price of silver was up enough to buy a wooden nickel (well, not enough to buy a real nickel nickel).

 

Poland’s gold bars are packaged by employees of G4S International Logistics to be transported from London to Poland. Poland’s gold was originally transferred to London at the beginning of WW II, when Stalin and Hitler invaded and partitioned the country in the late 1930s. For some reason Poland’s post-war communist government left it there – presumably because it was easier to sell in London. [PT]

Photo credit: G4SI

 

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