Vince Lanci: Why Gold Silver Miners Are Rallying Again | Arcadia Economics

Woke up this morning and saw the markets were up and I went through the routine that I normally do to determine if this makes sense, right? And three words popped into my head, continuation, elevation, and expectation. So why was gold up? Why were miners up? Welcome to the Morning Markets and Metals with Vince Lancey, where each day he brings you the precious metals in financial news to get you ready for your day. And now, here’s Vince. Good morning, everyone. I’m Vince Lancey. And today’s morning meeting we’ll be discussing, well, we’re going to be discussing gold, gold’s relationship with the miners, what the market is doing right now based on today’s call and yesterday’s market moves.

And we have a little treat for you. We have some insights from, or just cursory insights from Zoltan Posar in the bond market, which has direct relevance to the gold market. And we’ll look at a couple charts as well. So let’s get started on that. We’ll leave you here for now. Gold is up $25. Let’s scroll up here. The dollar first is up 7 at 105.27. 10-year yield is 4.47, up one basis point. Yes, it’s 552.29, up 13 handles. The VIX is 12.79, up slightly. Gold is up $25 and change at 23.71.

Silver, 20.56, up 24 cents. These are off their high. So we had an explosive, very strong move last night coming into US hours. So this is the pullback. We’ll see what happens after, say, 8.30. Copper is the strongest of over 7 cents at 4.64. Interesting. WTI hovering $80 of 20 cents, 22 cents. Crypto mixed, but not especially crazy. 63,000 and change, up 84 in Bitcoin. And Ethereum is 3,032 down 4. Platinum plating continue to do their dance. Both are trading at around 9.90. Platinum plating is 9.88, up 21. Platinum is 9.90, 9.86, 9.88, back and forth, up $12.

So no metal is being left behind in these moves right now. In grains, you have soybeans offered unchanged, corn bid unchanged, 11.97, 4.46, respectively. And wheat is 6.52, continuing to rocket up 12 cents, almost 2%. Okay, so you can see the title there, Zoltan Pozar weighs in on bonds. That’s the bonus. That’s what we’re going to talk about a little bit in context of gold. We’re also going to talk about gold itself. It’s something that I noticed. Here’s the homepage for gold fix. And I think these are relevant stories. China becomes a member of the LBMA.

And the thing that I thought was most important about that is it’ll increase price transmission out of China to the west. And so the next two days, the market’s up. So it’s nice to be right immediately, although we don’t expect that. And that’s where the China price and growth story comes from. Hedge fund chief loses battle for $43 million in summer. Interesting free article for everyone. All right, Zoltan Pozar weighs in on bonds. What are we going to talk about today? Well, in premium, we have a little bit of the Pozar excerpt, and we have an ING report for gold.

Now, that report is very good. It’s very clean. It’s a good explainer. And I would also say it’s something you would show FABBY members who are trying to figure out why gold’s doing what it’s doing. It’s good. We’re going to talk about some gold charts today as well. All right, so here we are. Woke up this morning and saw the markets were up, and I went through the routine that I normally do to determine if this makes sense, right? And three words popped into my head, continuation, elevation, and expectation. So why was gold up? Why were miners up? And yesterday, I had made a comment that miners were taking their turn running down.

Now, gold will follow miners, which is what you want to see in a healthy market. Anyway, that semi-joke aside, here’s where we are. We’re at a continuation of all the secular trends that got this started and discussed in this space for the last two years. They’re all still in place, right? Mercantilism, anti-goldilocks, all those little catchphrases that de-globalization, supply chains broken. It all starts with COVID, and then it blooms with the Ukraine-Russian war, okay? The problems that we have now are not going to heal overnight, all right? So there’s a continuation.

There’s no ground being made the other way. There’s just no trust left. Elevation. Well, elevation on two fronts, right? The last, I’d have to say, two weeks have showed a raised awareness of gold strength, and the reasons for it are spreading to other metals organically. So gold’s up this far, this long, and isn’t getting sold off. You’re not seeing that end of the weekend line, and gold gave back all its gains over the week. You’re not seeing that. People are starting to… You can’t repress something forever. You can do for a very long time, but, you know, return of the repressed, return of the something that’s kept down is usually very violent, and we haven’t even seen violent yet.

I just want to keep that in mind. The other elevation is a raised awareness of coming events, specifically the election and the summit. Now, I think that’s on people’s radar. Not everyone is looking at the same things, but everyone’s thinking about it. When you get to about 180 days before an event, then the sharp people start to really think about something. When you get to 90 days, then the mainstream smart people think about it. When you get to 30 days, well, then you get the tourists. And when you get to five days, well, then you get the people that are going to lose money.

Expectation. The market is sniffing out. The Fed cannot do anything without screwing up something. Recession is no longer an option politically or economically. They cannot have a recession. Thus, if the market crashes, he will ease. Powell is in a bad situation. Now, this is going to be very sympathetic to Powell and very unsympathetic to Yellen. So hear me out. Forget about the politics of it. Powell can’t ease. If he eases, stocks will ramp up further. If he eases, inflation will ramp up further. If he eases without having a recession, well, then he looks bad.

But if we do get a recession, he has to ease, because then he will be viewed as politically motivated, even if we don’t have a market crash. So he’s damned if he does, and he’s damned if he doesn’t. I’ve noticed this for some time, but not really knowing why at all. So anyway, he cannot raise because he knows the economy is partially bifurcated now. There’s the haves and the have-nots. It’s getting very, very split. The classes are getting even worse. And if he does, half of the economy will collapse. Further, even if he could, he knows the Yellen treasury will undermine his work and ease another way.

Now, that’s been my thought for about a month now, but I couldn’t understand why it was my thought. Anyway, so that’s where we are. We have a continuation of the secular trends. We have an elevation of awareness. People are talking about it now. It’s not going away. It’s not going to go away overnight. It doesn’t go away overnight. Expectation. The market itself is sniffing out that the Fed can’t do anything without screwing up something. And another expectation is that if he doesn’t ease before the election, he will look politically biased. I really think he’s not thinking about the politics, but I think he’s going to ease.

Let’s put it that way. And we’ll talk about that in a second. All right. So Pozar weighs in. Where is that? Here it is. All right. In February of 22, we have a link to that story we put up. Zoltan Pozar said, there are two ways to slow inflation by hiking short-term interest rates or by forcing long-term rates higher. Good concept, meaning you raise short-term interest rates to stop inflation in its tracks. And then if long-term rates go higher, they act as a deterrence against long-term inflation. So long-term rates going higher.

Let’s say you’re at 10%. Well, you have something to fight inflation with. And so that makes inflation back off. It’s kind of like causes a recession. And that’s all part of the bond market. Now, yesterday or the day before, Zoltan Pozar said, quote, there is a reverse accord between Powell’s Fed and Yellen’s Treasury now. Now, he always talks that way. But what he means is they’re not getting along. Now, that’s part of the nine points he made at the bottom, nine points he made as a preview to his own report, which we don’t get.

That’s at the bottom. But let me try and give you a couple words on what this means, because it’s very relevant for gold. He does talk about gold as well. You cannot kill inflation expectations with a flat yield curve. You must give expectations of future higher rates in order to stifle fears of reigniting inflation in the future. And you cannot do that by raising short-term rates. Therefore, Powell’s done raising rates. Won’t stop inflation in long-term, and it certainly won’t help the economy in the short-term. You must offer people deferred higher rates for long-term commitment to markets.

Otherwise, why would I put my money in something at 5% for 30 years? Why would I loan money to the government for 30 years or 5% when I could put it in a money market for 5% or put it in stocks or put it in gold now? All right, so what does this mean? Well, it means that Yellen and Powell are not working together. It may look like they’re working opposites, and it may look like they’re working opposites intentionally, but I think there’s a little disharmony there. So my point is Yellen is destroying us.

The bond market must crater. Ironically, the bond market must crater somewhat in order for people to find a value yardstick in stocks. Therefore, an opportunity cost to invest short-term. Until that happens, gold will continue to take market share as an alternative yardstick to bonds, not just globally, domestically. To bring it back to expectations, next week at the street level, there’s a growing consensus that the CPI will be very soft, which will be bullish for all assets that expect Powell to ease. And Powell was very confident in his most recent FOMC saying that he thought inflation will be back at 2%.

So I want you to think that everything is going to rally if CPI is soft next week, and gold is discounting that. So the question is, for me, is gold too high or yields too low? The answer is yields are too low. If the Fed eases, I suspect you’re going to see gold rally and stocks rally, and the dollar sell off and bonds not rally as much as they normally do. I don’t know. Okay. That’s pretty much it. What I do want to go to next, and here’s the ING report. Very, very good for people that are trying to figure this out, right? And we have a little bit of Zoltan’s intro to his notes there.

I want to move now to the stock market GDX versus gold itself. Now, for this part of the conversation, I’ve put up pretty much my metals watch list in the macro. The chart you’re looking at right there is the candle is the gold one-week chart, and the orange line is GDX. Now, if you look at the GDX over a time frame going back to, this is COVID right here, the beginning onset of COVID, you can see that the GDX on this chart tended to overperform right after the stimulus hits, right? Juniors were leading during this.

There was a lot of sort of nonsense. The Fed started tightening in here, and we got hit a lot harder. The miners got to hit a lot harder than the metal itself, right? In here, there’s a little joke. And during this time frame, various funds died and suicided. They were puking. If you look at this chart and you say to yourself, how much higher can the GDX go relative to gold? Well, that much higher. That’s a lot. Okay. Just that’s a chart, right? Or gold could collapse. I don’t think so. But if you start looking at earnings per share and you start looking at revenues that they make based on this price of gold at 2100, 2200, there’s a lot of upside.

Now, I’m going to show you a couple charts to give you the conservative, reasonable, and ludicrous, optimistic will call it. All right. This is the extremely optimistic chart. The optimistic chart shows that headed into COVID, right? Miners were above. It bottoms during COVID parallel, right? Here’s your miners, right? All right. So now, when you look at it this way, with current prices of gold, the GDX, it’s alone. The GDX, right? We’re talking about juniors here, right? The GDX should be at 42, right? Next chart, right? We’re going to call this the more reasonable chart, right? The more reasonable chart shows overbought, oversold.

Look at how ridiculously oversold it is, right? 46. There’s really not much of a change. Okay. Last chart. Now, this is the chart that says that starts with during the COVID response when the miners were overperforming. Well, let’s just say that they weren’t overperforming. Let’s say they were properly performing and they’ve been underneath underwater ever since. If that’s the case, then GDX goes to 48. So between 44 and 48 is the value for GDX on a chart relative to where gold is right now. Now, multiply that by two times in terms of percentage change when you’re looking at things like silver and what have you.

All right. Let’s pull up a couple of gold charts so you can just get an idea. So this is going to be the weekly asset versus the GDX. So there’s gold versus the GDX. I don’t have time to go through all the other ones. Silver versus the GDX. Copper versus the GDX. Platinum versus GDX. Well, that shows you how undervalued platinum is. Or I could just drop this whole chart a little bit lower. Palladium versus GDX. Well, okay. We’re not playing that game. It’s not the same kind of metal. Gold, silver versus GDX.

Something to look at. Why would I look at that? It seems to be an opposite indicator, which makes sense because gold, silver opposite way. GDX versus GDX. Well, it seems to be highly correlated. But going back to the top of this, there’s a continuation of what we know to be baked into the cake. And that cake is starting to come out of the oven. And that would be the expectations or the elevation, I should say, the elevation of awareness that precious metals are the place to be, at least for part of your money.

And the final one is the expectation of bigger problems down the road. Okay. I think the bond market is going to crap out. That’s what I think. Not tomorrow, but I’m not worried about gold’s rally until I see the bond market yield 8%. How’s that? It may get volatile on the way there, but until bonds really crater out. Echoing, I think, what’s something that Zoltan might have been implying. I’m not really scared about the gold market. And so I see the bond market crap out. Thanks for watching this morning’s markets and metals update with Vince Lancey.

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