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Watch Craig Hemke and Dave Kranzler wrap up the month of July as well as answer the following questions:
- What has been happening in the gold price market recently, including significant fluctuations and reasons behind them?
- How did the recent sell-offs in gold and silver markets occur, and who was behind them?
- How do technical indicators and the Commitment of Traders (COT) report influence the precious metals markets?
- What impact will India's reduction in import taxes on precious metals have on the market, particularly in the context of the upcoming wedding season?
- What are the expectations for the Federal Reserve's upcoming meeting, and how might it affect the gold market?
Find out today! Watch the video below:
Announcer: You're listening to Sprott Money's "Monthly Wrap Up," with Craig Hemke.
Craig: Hello again from Sprott Money and sprottmoney.com. It is time to wrap up the month of July. Boy, that went fast. And we're gonna do so today. Even though we got maybe a few hours left in the month, scheduling makes it that we're gonna wrap it up here, before the actual month is over. I'm your host, Craig Hemke. Joining us, to wrap up the month of July, is my good friend, Dave Kranzler. Dave, you can find his work at the site, investmentresearchdynamics.com. But even, you know, when we were doing the calls with Eric, I'd always point out to people, unless you're an expert, trying to figure out, you know, grams per ton and all this kind of jazz, unless you're an expert in the mining sector, you probably need some help. And one of Dave's newsletters is called "The Mining Stock Journal." And so, I would encourage you to listen to Dave today, and then go to investmentresearchdynamics.com and see if he can help you in your mining portfolio. Dave, thank you so much for your time today.
Dave: Thanks for having me back on, Craig.
Craig: It's always good to see you, my friend...
Dave: Likewise.
Craig: ...and before we get started, it's always good to stop by Sprott Money. I wanna remind everybody, Sprott Money is who pays for all this stuff, and makes it publicly available. Thank them by keeping them in mind every time you're in the market. Right now, you can go to sprottmoney.com. They've got nice bars, 5-ounce bars, 10-ounce bars, kilo bars, direct from our friends at First Majestic. So, you can help out First Majestic, you can help out Sprott Money, all at a good price. Go to sprottmoney.com, or call them at 888-861-0775. And, any order over 500 bucks gets free shipping and free insurance, so, I mean, how can you lose on a deal like that? Again, sprottmoney.com.
Okay, Dave. As we record this, it's Friday the 26th, late in the day. It has been another interesting week. It's been an interesting month. So, I wanna get your thoughts. You just wind the clock back 10 days, to Tuesday the whatever, 16th, and gold's breaking out. Futures, all-time high, spot, all-time high. Everybody's excited. Ten days later, everybody's like, "Oh, man. Here we go again." What the heck changed?
Dave: Well, I guess you could say with confidence there were more sellers than buyers, right?
Craig: I guess that's true.
Dave: [crosstalk 00:02:28] No. You know, you never know for sure. I mean, we usually know, when there's sell-offs like we've just had, who's behind it. And I think that's part of what happened, but in that run-up that we had, I'm just looking at...I'm just using GLD and SLV as proxies, because I just wanna look at the technicals. So, like, in that run-up that we had that went from the beginning of March to mid-May, the sector, if you just use the RSI and the MACD, got very, very overbought. And it's been working off that overbought condition since then. And I think what happened is gold started taking off again. And it was also, the RSI wasn't as high as it was earlier this year, but it was still at overbought. And we're in one of the slowest seasonal periods of the year, right, for the precious metals, and really, all the markets.
Craig: Early and mid-July. Yeah.
Dave: And it, to me, you know, and if you watch the COT report, which I know you watch it religiously every week, you saw that the bullion banks were getting very, very net short, gross short and net short, both gold and silver paper, digital, as you like to call it, which is really, that's what it is now. And the hedge funds and the CTAs, the managed money category, was getting very, very net, gross long and net long paper gold and silver. And so, the market was just kind of set up to have the rug pulled out from under it, and I think that's what happened. And what makes it easier is the fact that a lot of the trading desks are half-staffed at this time of year. And you also had, the stock market was getting ready to head south. And so, the conditions, the technical conditions were there to make it easy for the banks to trigger, I like to call it a Commitment of Traders liquidation operation, where the banks decide to pull the rug out from the market.
And I just wanna be clear. It's not just the banks that are sitting there pounding down the market by shorting paper. They're actually doing the opposite. They're monetizing their short positions. But, so, what happens is...and they know that a big component of the open interest in futures is hedge funds and CTAs are basically mechanically-driven, or robotically-driven, right? They got the computer black boxes, and their moving average and their pivots are all programmed in there. And so, that's what happened, is basically, I would argue, mostly a technically-driven sell-off, engineered by the banks, but made easy by the fact that they know that the hedge funds are gonna disgorge their paper, especially when the market's doing what it did this week, right? When you've got two big sell-offs in the stock market, hedge funds are out there selling. The ones that have short-term trades on. And CTAs, they're just completely momentum-based. So, when the market starts going down, they just start tossing everything out of their portfolios that's not nailed down. And I think that's what happened.
And you also, there's another component there, because you gotta look at the physical side of the market, which, you know, we've been making the case that the enormous physical demand from the Eastern hemisphere, and it's not just India and China anymore, and Russia, the physical demand kind of fell off a bit when we had that big run-up in the prices. And that always happens with India. When you get a big run-up in price, that happens quickly, they get price shock, and they pull back for a while. They stop buying, and then imports... And the same thing happened in China, the import numbers, in June, at least the official ones. We know there's other avenues of gold, of importation, Beijing and Shanghai, that don't get reported, but... So, you had kind of a fall-off in the physical bid in the Eastern hemisphere, that was kind of keeping a floor under the market. And so, it was just, the conditions were ripe for the banks to sit there, pull the rug out, let everyone, let the momentum funds sell, and they monetize their shorts. Now, conversely, I think what's gonna put the brakes on that, you know, I don't know how much lower we go from here. If you notice, silver went below the, I think it's below the 100-day moving average. It's below one of the key moving averages.
Craig: Well, it got below its 50. I know that.
Dave: Yeah. So, silver got pushed below the 20-day moving average, the 50-day moving average. And it's swimming in between the 50 and the 100.
Craig: Yeah.
Dave: And whether or not they'll be able to...I don't know that they'll get it down to the 100-day because that's gonna be around...
Craig: It's down there a ways still.
Dave: Yeah. SLV's different. It's probably around $26.5 or $27, so...
Craig: And to your point, Dave, the sell-off began, this most recent one, on Wednesday, the 24th. And gold broke its 50-day moving average, overnight, during China trading. And so, as soon as COMEX opens on Thursday, all those CTAs you were talking about...
Dave: You get the technical selling.
Craig: It triggered. And you get the lows of the day. But again, for those of us that watch these markets, you can sure see the ebb and flow. I'd invite anybody...I wrote about it again this week at sprottmoney.com, under the Insights tab. Just the last three or four times that the positioning in the Commitment of Traders Report has gotten to these levels that they got to mid-last week, gold fell anywhere from $110 to $135 the next week. And so, here we were again.
Dave, you mentioned, though, the next thing I wanted to ask you about, you mentioned how, you know, that Indian demand in particular, they're notorious for buying gold, and then they think it gets too expensive, so they stop, and then they start buying silver. We got some interesting news this week about India lowering their import taxes on the precious metals, from 15% down to 6%. Again, just in time for the wedding season. Do you think that could have an impact on stabilizing price going forward?
Dave: I think it already is. I mean, if you look at gold, and again, I'm just using GLD. Normally, I would look at the front month gold contract, because that's what traders look at. But using just the moving averages in GLD, I mean, gold traded and closed right on top of the 50-day moving average yesterday. And it's bouncing up and off it, and right now, it's over the 20-day moving average. And there's a nice little trendline that you can take all the way back to early October 2023. And it's holding that trend line. And again, I'm not real big on using lines and geometric shapes to gauge what I think the market's gonna do, and base my trading decisions on it, but a lot of people do, and so, becomes a self-fulfilling prophecy, so you gotta look at it. And, I mean, there's just a nice uptrend channel that really started when the rally started at the beginning of March. So, now, to circle back to the significance of India cutting those, the import duties, I was really stunned that they did that. And interestingly, and I don't know if it was just coincidental, Modi just met with Xi Jinping and Putin recently.
Craig: That's true. Yep.
Dave: And I don't know if there's any connection there, but... So, Reuters, as of, it's either as of this morning or yesterday afternoon, someone sent me this. The Indian ex-duty premium is $20 now. And when it gets that high... So, the ex-duty premium is the price... Okay, so, you got the duty, right? So, now it's 6%. So, you take the spot price of gold, multiply it by 6%, add that to the spot price of gold. And that's kind of the breakeven... That's what Indians, that's what they, minimally, what they have to pay in order to buy gold. And the premium now is $20 above that. And when the premium gets up like that, that means right now, Indians, or it may even just be the dealers over there getting ready for the large seasonal period, the holiday and wedding period. And that's usually what it is, is the dealers will load up, and then the public comes in in late August, early September, to start to buy. But the premium's 20 bucks. So, that means someone, some cohort over there is buying gold hand over fist right now. And I guarantee it was triggered by the cut in the duty, the import duty. And that should make it harder for the entities that wanna see the price of gold controlled, or pushed down, it should make it harder for that to happen. Because that, at $20 premium, they're buying a lot of gold.
Craig: Yeah.
Dave: Right now. This week, yeah.
Craig: It's an excellent point, as we head, again, into the latter part of summer, we get these kind of doldrums and dog days. Nevertheless, though, August, over the last 25 years, has been the second-best month of the year, after January. And I would imagine that Indian wedding season has a lot to do with it, because that happens every year, that time in the same year, so you get a pick-up in physical demand. So, we'll see if we can kind of turn the corner, and stabilize, and start moving higher again in August. One of the advantages of recording this before we get to the end of July, and I guess we'll kind of wrap up with this topic, is we got a lot coming next week still. And I wanna get your thoughts on that. We've got, obviously, the next Fed meeting is coming. It begins on Tuesday the 30th, and wraps up on Wednesday the 31st. And you get Powell with his press conference and all the rest. But there's economic data. There's the latest JOLTS job openings data on Tuesday, followed by the next jobs report on Friday. So, by the time August begins, we may not look a whole lot like July. It's gonna be very interesting. What will you be watching next week? And what do you make, kind of, of the market, as we now transition into late summer?
Dave: You mean the market in general, or the [crosstalk 00:13:26]
Craig: The gold market. I'm sorry. The precious metals market.
Dave: Between now and the end of the year, I think we could be considerably higher. Now, the JOLTS report, for me, doesn't really move my needle unless it's really extreme either way.
Craig: Okay.
Dave: But I think the FOMC, and Powell, as their frontman, they have to be really careful how they word their policy statement, and what he says at the post-meeting presser. Because the entire world thinks that the Fed's teeing itself up to start cutting rates in September. And, I mean, that ushers in a lot of other problems for them if they start cutting rates. And if he hints at it, or even telegraphs it, I mean, you're gonna see the market... Well, I think the markets may already be pricing in a dovish policy statement now. I mean, look at, the Dow's up over 700 points. Gold's up 33 bucks today. And it's Friday, which, it's a rarity when it's up like that. So, he's gotta be careful how he words what he says, and how he responds to questions, because he could... I mean, we're already in the biggest stock bubble of all time. I mean, he could make it even worse. He could take a blowtorch to that, and really inflate everything if he's not careful on what he says.
And if he does hint that there's a chance they're gonna cut rates in September, again, I think you'll see the precious metal sector do a moonshot. And who knows? Maybe that was one of the reasons they were trying to get the price down, so that when the moonshot happens, it happens from a lower price level. And then, the jobs report, I mean, you know as well as I do, I mean, what they report isn't really what the real situation is, right? They don't even call it a jobs report. They call it "the employment situation."
Craig: Employment situation.
Dave: So, but they have to be careful, if they're gonna try and massage the numbers to make the economy look good, they gotta be careful how they massage it, and by how much they massage it. Because if you get a strong jobs report, which we know isn't gonna, you know, that's not what the reality is.
Craig: Yeah.
Dave: You know, the economy keeps getting worse, if you look at real numbers, not the government reports. But if they try to engineer a strong jobs report, to help the Democrats ahead of the election, to make it look like "Oh, well, Biden's policies are working now," that may take any, even if the Fed was thinking about cutting rates in September, that may take that off the table.
Craig: Yeah. [crosstalk 00:16:16]
Dave: So, they need to somehow put a jobs report out there that's not too hot and not too cold, right?
Craig: Right. Right. Well, and, again, for some folks who might make it sound like we're conspiracy theorists or something, what was it, 95% of the people that live in Northern Virginia and D.C. that work for the government are registered Democrats. And when you get that jobs report that now, what, 12 out of the last 14 or something have been then revised lower the next month by substantial amounts, I mean, it just makes you wonder if they're not playing games with it.
Dave: Of course they are. And it's not just the jobs report they do that with.
Craig: Well, yeah.
Dave: Yeah. I mean, there's several economic reports that the government puts together and releases. And most of them have, they not only revise lower the previous month, they revise a couple months back lower.
Craig: Right.
Dave: I mean, it's...
Craig: Right.
Dave: Really, the CPI, the GDP, and the employment reports, those are more propaganda tools than anything, right?
Craig: Yeah. Yeah. It's like the jobs report for May that came out on the first Friday of June was stated at, like, 280,000 jobs or whatever it was, and gold went down $60 that day. Then, at the next jobs report, that was revised back down by 20% or something to 210,000. Did we get to...
Dave: They took 60,000 jobs off that, or something like that.
Craig: Yeah. Do we get to revise gold back higher then? Is that how that works?
Dave: Look, if you're watching live gold futures trade, which I know you do, just watch it, like... Well, first of all, I watch it because you always see the market react, like, say, 10 or 15 seconds before the reports hit the tape. So, that means the trading desks are getting it first. And they always, it's just a gut reaction, they just bash gold, no matter if the report's gold-friendly or adverse to gold. It just goes down. And then if it's a benign report, then you start to see the spike higher. So, that's probably what'll happen. I mean, I don't know what's gonna happen after the FOMC meeting, but that's probably how it'll play out next Friday.
Craig: Yeah. It'll be fun for folks that are watching this to watch that, because the narrative could shift one way on Wednesday, and then right back the other way on Friday, so it'll be a real volatile week. So, I'm glad we're doing this here on Friday the 26th, just to kind of help people get ahead of that.
Dave, before we go, I thought I'd start something that I used to on my side. I thought I'd start doing this for Sprott Money. We'll see if I can always remember to do it, because I'll, you know, getting older. But I always used to like to call this the final four. Just four quick questions. You can usually answer them with a word or two. But just on the way out, just for fun. Are you ready? Can I hit you with number one?
Dave: Sure.
Craig: How many rate cuts will there be before the end of the year?
Dave: One.
Craig: Okay. Who is gonna be the next president of the United States?
Dave: Trump.
Craig: Number three, what is the year-end, New Year's Eve, price of gold?
Dave: Twenty-six fifty, $2,650.
Craig: All right. And finally, how many regular season games are the Broncos gonna win this year?
Dave: Seven.
Craig: Seventeen-game schedule, Dave.
Dave: Seven.
Craig: Okay.
Dave: That's a game and a half over the over-under that Vegas has set, and I put a lot of money on the over.
Craig: There you go. Good old optimistic Dave. All right, brother. Sounds good. Again, I wanna thank Dave. Check out his site, investmentresearchdynamics.com. Again, "The Mining Stock Journal" can help you navigate the mining sector. That's for sure. And again, please be sure to thank Sprott Money on your way out. Stop by the site whenever you're in the market for metal. Again, great deal right now on some First Majestic bars. Help out Keith's company too. [crosstalk 00:20:17] But even if you just hit like or subscribe, it's really hard to understate how those algos, you know, on YouTube and Apple Podcasts and everything else, they look at that stuff. So, if you just simply hit like or subscribe, at a minimum, can really help Sprott Money cast a wider net, and that helps all of us in the precious metals community get the word out. So, please hit that button on your way out. Dave, thank you so much for your time. It's always so fun and insightful to visit with you, and I look forward to seeing where we go in August.
Dave: Likewise. Thanks for having me on, Craig.
Craig: All right. Thank you, my friend. And from all of us here at Sprott Money, sprottmoney.com, thanks for watching. And we'll have another one of these for you next month.
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