Monday , 3 October 2022

Metals & Miners Going Ballistic In September/October! Here’s Why

The risk of lower lows remains in place, but the signals are lining up for a spectacular rally in metals and miners beginning in September or October or sooner, imho. You won’t want to miss that!

This version of the original article by David Brady (sprottmoney.com) has been edited [ ] and abridged (…) to provide you with a faster and easier read. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

I’m expecting  the Fed to put stimulus on steroids by September or October this year or sooner, which will trigger a rally to new record highs in Gold, Silver to around $40, and GDX to circa $60.

The alternative for the Fed is systemic collapse and the beginning of the Greatest Depression. While I believe that’s inevitable, history suggests the Fed will ride to the rescue and we get one more final melt-up in everything but the dollar.

Given:

  • the massive deficits and debt,
  • a recessionary economy,
  • rising unemployment,
  • falling tax receipts,
  • and soaring expenditures,

the U.S. has only two choices:

  1. outright default on the debt
  2. or inflate it away by devaluing the dollar.

Throughout history, politicians have always chosen the latter, printing and devaluing the currency. I don’t expect this time to be any different. In fact, I expect the Fed to print trillions more than they did after the repo crisis in March 2020. When that happens—or before—metals and miners will go ballistic!

Speaking of “when”, my best guess remains the September to October timeframe at the latest, when stocks are typically at their most vulnerable to a sharp drop. The signals I’m watching for are as follows:

  • Inflation falling year-over-year (check)
  • Rising joblessness and unemployment (check)
  • Weak, even recessionary economic data (check)
  • A panic dump in stocks, 1987-style (Q2)
  • A dump in housing prices, soaring foreclosures (pending)
  • Blowout in credit spreads, cost of borrowing (check)
  • Some event as an excuse to reverse policy, e.g., lockdowns, global cyberattack, Chinese invasion of Taiwan

While I don’t expect all of these to play out, you can see that many of them are already under way or pending. The geopolitical events are impossible to time.

That’s the big picture, and at current levels, if you don’t own “some” physical metals, now is a good time to buy given where Gold – especially Silver – are heading, even if we see lower lows first. The risk-reward is heavily skewed to the upside. We’re far closer to the bottom than the next peak.

In the short-term, we have either bottomed out in both the metals and miners or we have one more positively divergent lower low to come. Another sharp drop in stocks could drag metals and miners lower temporarily prior to launch…

Sentiment remains buoyant, more so in Gold than Silver, which suggests that lower lows are still a risk prior to takeoff. What we need from a technical perspective is a change in trend to the upside, which means a higher high followed by a higher low and a close above 1911 in Gold, 23.50 in Silver, 34 in GDX.

For greater confidence that the lows are in place and we’re heading up to new highs, just wait for a change in tone from the Fed. A more dovish tone would signal a change in policy is coming…

The only problem with this strategy is that Gold & Silver may be unobtainable at that point. They have been vacuumed away by the smart money. If you doubt this possibility, it is what happened post March 2020 and the shutdown of mines and refineries worldwide…

In summary, the risk of the lower lows remains in place, but the signals are lining up for a spectacular rally in metals and miners beginning in September or October or sooner, imho. You won’t want to miss that!