The November to End all Novembers
Mis à jour
The Presidential election between Joe Biden and Donald Trump will officially take place on November 3rd. However, many people are speculating that the results will not be known that day.
This is due to the fact that more people are expected to take part in "mail-in voting” than at any other time in history.
Many believe that this will lead to ungodly amounts of "funny business", and conspiracy theories are raging on both the left and the right, with both sides already claiming that the other is "rigging" the election.
This, in addition to the political divide—which has never been so great since the Civil War—will lead (in my opinion) to neither party accepting the results immediately.
This will lead to countless recounts and possibly even a "hung" election if one side does win overwhelmingly.
If this occurs, hold onto your seats, as an extreme amount of chaos and volatility will be unleashed across the United States—and it will have a rippling effect across the rest of the world.
Even if this does not occur, I believe that violence and anarchy will only increase until the point in which one side is forced to put a "hard boot" on the other—a scenario that has never ended well throughout history.
In Conclusion
The need for personal and financial protection is coming in the near future, now more than ever, due to an ever-unceasing number of threats to the system. Unfortunately, the vast majority of the population (as typically happens in a time of great crisis), will be completely caught off guard.
The fact of the matter is that we have brush fires all across the world, some of which are threatening to become blazing infernos at any moment.
In the meantime, we have a global pandemic, unfathomable fiat money creation, and unaccountable debt creation, all of which would be bad enough in isolation, let alone occurring all at once.
It is only a matter of time before the system as we know it cracks under all of this pressure, causing great financial chaos and destruction.
In this scenario, precious metals will rise higher and higher as people seek the safety that only they can offer in times of extreme volatility.
I believe these reasons are exactly why Central Bankers and now the "smart money" are beginning to move into the metals in a meaningful way.
Sadly, much of the general public will be too late to the "party", missing these artificially depressed prices that cannot and will not last forever.
Prepare accordingly.
Stay safe and as always, keep stacking.
This is due to the fact that more people are expected to take part in "mail-in voting” than at any other time in history.
Many believe that this will lead to ungodly amounts of "funny business", and conspiracy theories are raging on both the left and the right, with both sides already claiming that the other is "rigging" the election.
This, in addition to the political divide—which has never been so great since the Civil War—will lead (in my opinion) to neither party accepting the results immediately.
This will lead to countless recounts and possibly even a "hung" election if one side does win overwhelmingly.
If this occurs, hold onto your seats, as an extreme amount of chaos and volatility will be unleashed across the United States—and it will have a rippling effect across the rest of the world.
Even if this does not occur, I believe that violence and anarchy will only increase until the point in which one side is forced to put a "hard boot" on the other—a scenario that has never ended well throughout history.
In Conclusion
The need for personal and financial protection is coming in the near future, now more than ever, due to an ever-unceasing number of threats to the system. Unfortunately, the vast majority of the population (as typically happens in a time of great crisis), will be completely caught off guard.
The fact of the matter is that we have brush fires all across the world, some of which are threatening to become blazing infernos at any moment.
In the meantime, we have a global pandemic, unfathomable fiat money creation, and unaccountable debt creation, all of which would be bad enough in isolation, let alone occurring all at once.
It is only a matter of time before the system as we know it cracks under all of this pressure, causing great financial chaos and destruction.
In this scenario, precious metals will rise higher and higher as people seek the safety that only they can offer in times of extreme volatility.
I believe these reasons are exactly why Central Bankers and now the "smart money" are beginning to move into the metals in a meaningful way.
Sadly, much of the general public will be too late to the "party", missing these artificially depressed prices that cannot and will not last forever.
Prepare accordingly.
Stay safe and as always, keep stacking.
Note
We are still in no man’s land right now with regard to the precious metals and miners. Powell disappointed the markets Thursday with little detail on the timing and tools to be used in relation to the Fed’s not-so-new policy of allowing inflation and employment to run hot over the coming years. In other words, he provided nothing we didn’t know already and was presumably priced into the markets. Yet, instead of being a ‘buy the rumor, sell the fact’ event, the Fed’s announcement overcame the initial plunge in markets, and stocks and precious metals rebounded higher. The key question is whether these latest rallies have just begun or are more short-term in nature until the Fed provides more concrete details on their plans.Note
Furthermore, the potential headwinds for markets remain a risk, most notably:1. The lack of any increase in monetary or fiscal policy; in fact, quite the opposite on the latter
2. Simmering tensions between the U.S. and China made worse by the apparent intrusion on Chinese territory by the U.S.
3. The risk of a renewed plunge in economic activity in the absence of new stimulus measures, aided by a wave of bankruptcies and rising unemployment
4. A sharp reversal in equity indices
Focusing on the precious metals and miners, despite the recent bounce, they remain in no man’s land. That said, there are two primary scenarios that I’m following. While there is no exact science to the probabilities I assign to these two potential outcomes, I give the first one a 40% probability and the second 60% as of today.
Note
Scenario 1: We have seen the low, and Gold is consolidating in a sideways move before heading higher again.Given that the extreme overbought and bullish situation has been largely corrected and Gold is back to neutral, there is the strong possibility that we have seen the low and it is only a matter of time before we head higher.
Note
Scenario 2: As shared before, we still have another leg down in the C wave to complete all of wave 4 before shooting up to new highs in wave 5.Note
While the overbought and bullish situation has been largely corrected, typically we see a move down to an oversold position before the bottom is in. This is designed to squeeze out as many late and therefore weak longs before the next rally occurs. I give this a higher probability at this time given the size and duration of the rally that preceded it, but we need to see at least a break of 1908 and preferably the low of 1874 to confirm this scenario. If it does play out, the minimum target on the downside is ~1800, then 1750, and worst-case 1670.Note
At the risk of repeating myself given the lack of any significant moves in the past week, if you don’t own any of the metals or miners, I recommend you buy “some” now given the rally I expect to follow this correction. This way you retain ammunition for a deeper pullback should that occur, and if not, still partake in a potentially spectacular rally to higher highs. At the end of the day, it is up to you and your personal risk tolerance, but long-term, I only see far higher prices to come in anticipation of a massive expansion of fiscal and monetary stimulus ahead.Note
In last week’s article, I stated that Powell disappointed the markets “with little detail on the timing and tools to be used in relation to its not-so-new policy of allowing inflation and employment to run hot over the coming years. In other words, he provided nothing we didn’t know already and was presumably priced into the markets. Yet, instead of being a ‘buy the rumor, sell the fact’ event, the Fed’s announcement overcame the initial plunge in markets and stocks and precious metals rebounded higher. The key question is whether these latest rallies have just begun or are more short-term nature until the Fed provides more concrete details on their plans.”Note
Based on the moves down this week, especially in stocks yesterday, those rallies did turn out to be short-term only. It has become the custom that markets respond favorably to FOMC meetings and that we have to wait a day or two later to see the true reaction to the news. This is precisely what happened. The markets are now showing their disappointment. It may also be dawning on the market that despite the talk of reflation policies, and especially given the lack of details or follow-through in terms of action, it is unlikely that the Fed will press down on the pedal of the printing presses again until they have an excuse to do so, such as a sharp reversal in stocks. It looks like that is starting to play out now.At the same time, negotiations between Republicans and Democrats on new fiscal stimulus measures remain deadlocked. This could remain the case until the elections if the Democrats plan to blame the resulting economic hardship on Trump—a plan that may backfire.
Regardless of the political implications, with far less monetary and fiscal stimulus and without a trigger to compel the need for more, it was only a matter of time before markets capitulated. After all, given the underlying economic fundamentals, the only reason markets have been rising since March has been truly massive money printing combined with exploding deficits to provide fiscal support to the masses. Take away the stimulant and eventually withdrawal occurs.
Both stocks and precious metals have benefitted handsomely from the ‘stimulus on steroids’ policies of the Fed and Congress since March, so it should be no surprise that they are heading south now. By contrast, the biggest casualty since March has been the dollar.
Note
The DXY became extremely oversold with both the daily RSI and MACD Line reaching their lowest levels in at least ten years. It hit its lowest price in two years on Tuesday. But the series of positive divergences at lower lows in price since August coupled with record long dollar positions on the part of the smart money commercials last week signaled that things were about to change. The lack of any new action from the Fed was exactly what the dollar needed.Since Tuesday, the DXY has rallied 1.4% from its low of 91.75, a big move for the reserve currency in such a short period of time. Given the size and duration of the decline in the dollar since March—it dropped 11%—I don’t believe the dollar is done on the upside. Although we may see lower lows first, my initial target for the DXY is 94, but my ideal target is the 97-98 region before we head down to even lower lows. Taking baby steps, I’ll reserve my big picture expectations for the dollar going forward if and when we hit those higher levels.
Note
Even though the correlation between the dollar and Gold has been volatile recently, it has been inverse on average, meaning that when the dollar rises, Gold tends to fall, and vice versa. The inverse performance of the dollar relative to precious metals and miners since March says it all. The recent peak and drop in Gold, Silver, and the miners, and the rally in the dollar makes perfect sense with this in mind. The expectation that we see further downside in the former as the dollar rallies is reasonable too.The targets that I shared over the past several weeks for Gold, Silver, and the Miners remain intact. For Gold, at least ~1800, Silver ~23, GDX ~37, and SILJ ~13.
However, as I have shared repeatedly, whatever the lows turn out to be, I believe this to be a fantastic buying opportunity given my strong expectation that the Fed will follow through on its inflationary policy of more massive money printing and that an agreement on additional fiscal stimulus to support Americans is inevitable. In addition, and arguably most importantly, we could see a helicopter drop from the U.S. Treasury ahead of the elections in November of up to $2 trillion dollars. All of this stimulus will be in excess of that in the spring, triggering a deeper dive in the dollar and making a spectacular rally in precious metals and miners not only likely but even more dramatic than what we’ve seen since March
Note
The need for precious metals is great. The need for financial protection remains.Prepare accordingly.
Stay safe and as always, keep stacking.
Note
Why do I believe a spectacular rally will follow this dip in precious metals and miners? Crescat Capital: "there is a tsunami of $8.5 trillion of Treasuries that will be maturing by the end of 2021 ensuring astronomic levels of money printing in the near term." Excl new issues.
Note
Gold trades softer with US-China geopolitical concerns being more than offset by the stronger dollar and rising US real yields after inflation expectations have been scaled back. An accelerated sell-off in stocks may pose a challenge with gold and silver becoming a source of liquidity to cover margin calls and losses elsewhere. Having broken the June uptrend, the focus will now turn to a band of support between 11909/OZ (50-day MA) and at the recent low at 1903/oz.Note
Gold once again managed to bounce higher after finding support ahead of 1900/oz. US-China tensions and a drop in bond yields amid the continued stock market weakness offsetting the negative impact of a stronger dollar. The AstraZeneca vaccine news may potentially add another layer of support given the obstacles companies may have in finding a workable and safe vaccine. Additional weakness likely to be led by dollar strength (short covering) and gold becoming the ATM should the current stock market weakness accelerate further. Having been long since 11765/OZ, breakout model will go neutral on a break below 1902/oz.
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