Last Friday afternoon after I read the COT (Commitment of
Traders report) numbers, I immediately looked over at the quote terminal only
to see that the HUI (NYSE Arca Gold BUGS Index) was going to close out the
week a tad below 200 and nearly exactly double where it was on Jan. 19, and I
shook my head with utter reverence. Here you have gold bullion trading as
high as $1,287.80 on March 11, the same day that the HUI closed at 175.83,
with the Commercials having moved from 2,911 net shorts on Dec. 4 to 195,000
net shorts the prior Tuesday. Gold is now over $50 lower than March 11but the
gold miners continue to defy both logic and gravity, begging the question,
"Are they predicting another major leg northward in physical
bullion?" Whatever the answer, the move in my beloved gold and
silver miners has been simply AWESOME and while I have jettisoned all options
and leveraged ETFs, I continue to hold all of my original GDXJ (Market
Vectors Junior Gold Miners) position from late 2015 [< $19 ACB], as well
as all of the penny explorers.
The Long and Intermediate-term trends for gold and silver continue to
prevent the kinds of waterfall declines associated (in the past five years)
with relatively high aggregate Commercial short interest numbers, such as the
one we got tonight for gold (231,787 contracts) and silver (106,646
contracts). It's understandable that the Commercials have pressed their
shorts in the physical metals, but that they have failed to turn sentiment
for the miners is setting up a very real possibility of a Commercial Signal
Failure that morphs into an epic short squeeze.
The chart shown below is enough to scare even the staunchest of gold bulls
(like me) into treading timidly; the psychological damage of the past five
years of financial trauma has certainly left its mark on behaviors. The
criminality of the bullion bank behemoths is glaring, and their iron grip on
price is undisputable, making it very difficult to foray unhedged into these
oh-so-familiar and treacherous waters. These interventionalist bastards have
added 36,000 new shorts representing 3,600,000 ounces of phony, synthetic,
never-to-be-delivered gold and engineered a $50 drop since March 11, but what
I don't think they were banking on was that the miners would ignore them.
As we head into the weekend and enter the second half of April, it is
important to remember that May is typically strong in terms of seasonality
for the gold miners, but then June and July are completely the reverse.
OK, with Fido pacing nervously outside my door and my partner's overnight
bag sitting at the bottom of the stairs, I suspect that there are two members
of this family that are desperately looking for "direction," as to
not just the gold and silver prices and not just the gold and silver miners,
but also the direction of my emotional stability over the next week or two.
My lovely lady has become quite proficient lately with interpretation of the
COT report and plans her getaways accordingly. Of course, the sound of a
six-iron imbedding itself into a chair or a foot lifting a footstool into a
thirteen-foot trajectory over the center island in the kitchen might also be
a clue to whether or not "Daddy" is about to "LOSE IT"
and bears no correlation to the COT or metal prices or anything else, for
that matter. I think we ALL are in dire need of an educated guess as to the
next $100 move in gold, so that at least Fido will know whether he should
expect kibble and Filet Mignon add-ins or whether he needs to hone his
instinctual food-gathering skills, which I had to re-teach him back in late
2015 with gold at $1,045 (the squirrels on my street will never forgive me).
Do we side with the tape action in the mining shares and go
"ALL-IN"? Do we pay heed to the Commercials and get short? Do I
trust my instincts and stay long the GDXJ and selected junior explorers? I
was taught a great many years ago that when you are in doubt with any
particular portfolio position, do nothing, and that especially applies when
you are sitting on a big, fat profit. Let the market TELL YOU when it is time
to ring the register instead of trying to finesse it. Having said that, I am
going to freely admit that my short-term nervousness is getting worn down by
the hundreds of articles telling me why I'm "Wrong! Wrong! Wrong!,"
which is exactly why I am going to do absolutely nothing except add to my
silver holdings into any and all dips and tell the world to "Chill"
when discussing the miners.
Before I sign off for the weekend, you all know that I like a number of
metals and just as I am a big enthusiast on ZINC by way of my association
with Tinka Resources Ltd. and its Ayawilca deposit, it should be no surprise
that I am currently warming up to another mineral that represents the
cleanest energy fuel on the planet-URANIUM. I haven't bought an energy stock
in many, many years, so this one really has my interest thanks to some great
work by a couple of dear friends that are a great deal smarter than I could
ever pray to be.
Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University
where he earned a Bachelor of Science in finance and a Bachelor of Art in
marketing before completing post-graduate work at the Wharton School of
Finance. With more than 30 years of experience as a junior mining and
exploration specialist, as well as a solid background in corporate finance,
Ballanger's adherence to the concept of "Hard Assets" allows him to
focus the practice on selecting opportunities in the global resource sector
with emphasis on the precious metals exploration and development sector.
Ballanger takes great pleasure in visiting mineral properties around the globe
in the never-ending hunt for early-stage opportunities.
All charts courtesy of Michael Ballanger