Posts tagged 'Gold'

Sentiment is one of the best contrarian indicators there is, but it is just one of the tools that I follow as part of my data-driven process. That said, it works extremely well in the precious metals and miners space, because people who invest there—like those who follow Bitcoin—are extremely passionate about their positions for reasons that transcend just potential gains or losses.

For as long as I can remember, I've stated that negative nominal and negative real interest rates are the key, primary driver for higher gold prices. And now we're seeing this play out in real time.

First of all, what is the "real" interest rate? Simply put, it's the nominal or stated rate of a bond minus the inflation rate. Here's a definition from Investopedia:

Gold bullion1 continued to deliver strong performance and was up 17.38% YTD through June 30, 2020, and 26.36% YOY. At the same time, gold mining equities (SGDM)2 have gained 25.88% YTD, and 44.00% YOY as of June 30. This compares to -3.08% YTD and 7.51% YOY returns for the S&P 500 TR Index.6 Silver posted substantial gains in June and is on the move again; silver is up 1.99% YTD and 18.88% YOY as of June 30.

The overall market cap of the silver sector is incredibly small when compared to other segments of the economy, and is thus susceptible to wild swings, manipulation and disruptions. This has always been the case; however, the remainder of 2020 may starkly highlight these problems.

FUNDAMENTAL BACKDROP

Short-Term Risks

• Fed is tapering its liquidity injections and the balance sheet is actually falling.
• Trade war between China and the US is escalating.
• Risk of a Wave 2 of COVID-19 and renewed lockdowns, crashing the economy and stocks too in the short-term.
• Bankruptcies accelerate across all sectors.

Eric Sprott discusses a volatile week in precious metals and looks ahead to an interesting month of July.

Demand for physical delivery through the COMEX futures market continues, and this has significant implications for the future of the current fractional reserve and digital derivative pricing scheme.

Typically, the last bill people stop paying when they are overcome by debt is their mortgage and rent. Well, if that is the case, then Americans just rang the alarm bell, because things are about to get messy.

Eric Sprott discusses the precious metals markets and the mining shares.

Beginning with the fundamental backdrop, we’re seeing an increasing number of headlines and States signaling a resurgence of COVID-19, or “Wave 2”, and talk of renewed lockdowns. This comes on the heels of the Fed’s taper of liquidity, which I discussed last week. This spells disaster for the economy and a double whammy for stocks.

We warned about this move many months ago and just 6 days ago we issued a research post suggesting Gold had cleared major resistance and would start a rally mode to push above $2000 – possibly above $2100. Well, guess what happened right after we made that statement? Yup – Gold started to rally higher and is currently trading near $1790 – about to break $1800 for the first time in 2020.

With COMEX gold getting very near new 2020 highs, concern is growing that COMEX silver is not coming along for the ride. Let's give it a few days and then check back.

The Fed has now tapered liquidity injections to $80 billion per month in U.S. treasury bonds compared to rapidly rising government deficits and debt and the massive increase in the supply of bonds as a result.

Without a doubt, gold and silver bullion have offered protection throughout the course of the COVID-19 crisis. They have helped people weather the storm and have stood their ground, unlike many other sectors of the economy.

With gold prices nearing their all-time highs, legendary investor Eric Sprott discusses the precious metals and some of his investments in the mining sector.