Rafi Farber: Rare Bullish Signal In Gold Triggered For First Time Since 2015

This is a crime against silver, but since I can only assume that their intent was to get to Chopper Ben, I can only imagine what the command was before the rocket was launched. This is a chopper! Anyway, on with this week’s Silver Report, we’re gonna start with taking a recap as to where we are in the price action of gold versus silver, I believe it is October 1978. And I’ll give you three reasons why, why October 1978? Well, because in October 1978, gold was reaching new highs, and then there was a pullback, a major pullback in gold, and what was silver doing at that point? Pretty much nothing.

I’ll show you the charts, silver basically farted, and then two or three months later, by early 1979, that is when silver took off. And after we do a little bit of historical research in the price action, we’re gonna go to a signal that has just happened this past week in the gold to commodities ratio that has only happened four times since 2002, and it has signaled a major bull run both in dollar terms and commodity terms. Something strange is happening with the IAU gold ETF, I don’t know what it is, but it’s big, and I’m gonna respond to a paper by Nouriel Roubini that accuses the treasury of being activists by issuing too much short-term debt, and thereby printing money, but I retort that the treasury cannot print money, what it can do is pull already printed money out of the Federal Reserve, which is what it is doing with treasury bills.

As always, this week’s Silver Report is brought to you by Fortuna Mining Symbol, FSM. I wanted to go into the historical production of Fortuna since its founding in 2004, 2005 exactly. What is it on the chart? I can’t really tell. Let me see here, that Fortuna’s production, over the long term here, over the life of the company, has pretty much gone off almost every single year with the exception of, I think, two years, 2018 and 2019, maybe three years, 2020. But the trend has been higher since 2007, when production began in Peru, added Mexico in 2009, Argentina in 2016 with the Lindero Mine, added Burkina Faso and Ivory Coast in 2021 with the acquisition of Roxgold, and added Senegal in 2023, and production in Senegal is pending, so we see a long-term trend of Fortuna increasing its production year after year, and that is very difficult to do for a mining company because mines are obviously, they get depleted and you run out of metal to mine.

So what you have to do is you have to keep acquiring more projects, which is exactly what Fortuna has been doing, and they’ve been doing it responsibly, which shows me that the company has a long-term experience and a long-term history of doing the right thing. And when the sector finally does take off, I do believe that Fortuna will be a leader among gold stocks, which is why I own it. Do your own due diligence, and let’s continue with this week’s Silver Report. And so a review of where we are in terms of the price action. We have here a chart from Gold Charts R Us.

We see that from 1970 to 1980, gold hit a new high finally after the 1974-1975 high of just under $200. We hit a new high by October of 1978, and then there was a big pullback back down to $200 from about $250 to $255, something like that. Big pullback by December 1978, and then only after that pullback was the takeoff. So I believe we are somewhere in here. I don’t know exactly where this is October 1978 at the top, the tippy top here. But since we’ve made new highs in gold for a few months now, or weeks, I don’t remember how long, not that long, and so we’re somewhere in here, late 1978, very late 1978, and there’s probably going to be a pullback, and it’s going to be scary, and you’re going to have to hold on, or you don’t have to hold on, but I’m going to hold on.

And then after that, we’re going to enter 1979 and then just pretty much go straight up with some scary pullbacks, but not as scary as this one. I don’t know for sure if this is the story, but I’ll show you why I think that for other reasons in this next chart here. So this is the same scale, right, 1970 to 1980, and we see here when gold was making a new high at $250 to $253 over here, and it looked like it was going parabolic, only to have a little bit of a, or a big bit of a pullback, silver basically was doing almost nothing.

I guess you could, this is like a seismograph, it’s like a little fart, so silver basically farted. What the hell was that? The highs from 1974 were not surpassed as gold was making new highs in late 1978, silver was doing pretty much nothing, being very boring, and then only after that gold pullback did silver finally start to take off in early 1979, and then there was a little bit of a rest, not exactly a rest, it was still trending higher until mid to late 1979, and then all of a sudden, there was the parabola of the monetary panic.

So my point is that gold makes new highs, silver doesn’t necessarily make new highs until there is a full blown monetary panic, silver always advances in the very late stages of a monetary apocalypse. And since this monetary apocalypse is going to be the worst of the last two centuries, at least, and I think ever, yeah, we can expect silver to really take off at the very, very end. So once silver starts taking off this time, you’re probably going to be too late, you got to get it now, you don’t have to, I’m not recommending anything, that’s just what I did.

Now this chart is from Gan Global, I am a subscriber to him, I hope he doesn’t mind me sharing just one chart from his recent video that I just got this morning. This is just a Barron’s gold stock chart from the 1950s, 1960s, and his point here is to say this is a 60-year cycle, he believes in 60-year cycles, I don’t really have an opinion on cycle theory, I’m not a technical trader or a cyclist, but I do like to see what they’re saying because I just want to know what’s out there. So he’s saying here that gold or gold stocks until September 11, 1964 would be 60 years ago today, or 60 years ago, two weeks from now, they started taking off in September 11, 1964, so that would be September 11, 2024, which is in a few weeks.

We’ll see if it happens, we’ll see if he’s right, I don’t know, but it’s just another signal that we could be in that 60-year cycle if you believe in such a thing, if you think it’s relevant. And now we have a major technical signal here, very rare, that just happened last week, or maybe two weeks ago, maybe this week, something very, in the very, very recent past. And you can zoom in on this chart by looking at the gold to CRB ratio on stock charts, and we have here this signal where the blue line crosses over the red line, that is a golden cross, the 50-week moving average rises above the 200-week moving average that happened in 2002 at the beginning of the gold bull market, signaling a gold bull market, not in commodities terms at that point, but in dollar terms, definitely, and then it happened again in 2006, not again until the beginning of the next stage of the bull market in late 2015, and then I checked, did it happen here? And I’ll show you that it didn’t, there was no cross here, the blue line stayed just above the red line, so the last time this happened was in 2015 at the end of the last bear market, and it should happen now at the end of this bear market, which ended in 2023, at least in gold to commodities terms.

So this is a very, very rare signal, and it usually signals long-term appreciation in gold relative to other commodities, and that will obviously translate to dollar terms one way or another. Now, here’s that zoom in on that question mark box, you see here that the blue line did not quite cross below, so it couldn’t cross back above, it didn’t cross below, so to confirm that this is only the fourth time since 2002 that this has happened. Now, something quick that I just noticed, and I put this on the in-game investor on Substack, there’s something going on with IAU, that’s one of the ETFs, I forgot who, it’s not Spyder, it’s, I think it’s iShares, and I think it’s managed by BlackRock, so something is happening to that ETF, there was a huge drawdown in the amount of gold in that ETF this week, or last week, about 400,000 ounces, something like that, and that’s the second most daily amount ever for the ETF, and the first was in October 2023.

So, yeah, there’s something going on in this ETF, I don’t know what it is, but when big things happen in ETF, there’s something going on, maybe with gold leasing, maybe with speculation, maybe with central banks, we’ll see, but it’s a big movement, and if there’s a big movement, big things are probably happening. And now this is important, there is an article that came out in July 2024 by Nouriel Roubini and others, called ATI, Activist Treasury Issuance and the Tug of War over Monetary Policy. This paper was cited by Daniel Oliver, my favorite gold and silver analyst, and I’m just going to read the first paragraph of the first few sentences, just to get you an idea of what this thing is about.

Usurping core functions of the Federal Reserve, that’s just the first sentence, that’s all you need to know. Basically, his argument here is that by issuing a whole bunch of Treasury bills, the Treasury is printing money, whereas that really is the job of the Federal Reserve, and he thinks it’s not fair. The Treasury is usurping the role of monetary policy when it should be at the Fed, and my response is that the Treasury isn’t printing any money. What they can do, they cannot print money, they don’t have the capacity or the tools for that or the authority.

What they can do is they can draw out money that has already been printed, and what is that? That is, of course, the reverse repose, the reverse repurchase agreements. That is the money that was printed in 2021 but is stuck at the Fed, and because the Treasury is issuing these bills in large quantities, not right now, but they did in the past, which is why the reverse repose fell so much. They are not printing money, but they are drawing out the existing money that couldn’t get out otherwise, and that is why the stock market is at all-time highs, they’re very close to them, but the Treasury cannot just simply issue bills and create more money that way, the dollars have to come from somewhere.

And this actually comes from the Fed itself, or the New York Fed at least, in a paper that was published on August 8th on its website, and confirms that I am right about this, monetary policy implementation in practice today. I don’t think they were responding directly to Nouriel Roubini, but the point here is that it does prove that Nouriel Roubini is not exactly right here, that the Fed isn’t complaining that the Treasury is taking over its mandate, and the key paragraph is over here. It says here, usage of the ONRRP, ONRRP is the overnight reverse repo facility has, as intended, been responsive to interest rates on alternative investments.

Following the post-pandemic expansion of the Fed’s voluntary reverse repo facility, usage was large because it was an economically attractive money market investment option and served as an outlet for the abundant liquidity in the bank system. In other words, it prevented extra money printing from leaking into the system or flowing into the system and causing hyperinflation. More recently, it continues, as alternative money market investments, which is Treasury bills and private repos, started offering slightly higher rates on the overnight reverse repo facility, reverse repo counterparties responded by reallocating money away from the facility and toward other investments. So it’s saying, yeah, the issuance of Treasury bills has taken money out of the RRP facility and put it into the money supply.

Basically, that’s what they’re saying. And here’s the key sentence, what happens when it runs out. At some point, this is the key. When the ONRRP reaches zero or otherwise stabilizes, reserves will start declining roughly one for one with balance sheet runoff all else equal. So in other words, once it runs out, Treasury cannot print more money because there will be no more money to draw out of existing stocks of dollars. And that’s when the money supply will really start to fall, reserves will really start to crash. And we’re going to end up with some kind of a apocalypse that will lead to the final round of money printing sometime within the next few months.

I know I’ve said it before, but it’s still true. In the meantime, this is Rafi with the Endgame Investor with this week’s Silver Report for Arcadia economics. Hang on, we’re in the final stretch here and I’ll see you guys next week. Thank you. [tr:trw].

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