The Precious Metals Sector Is Percolating for A Monster Move Higher
The comments below are an edited and abridged synopsis of an article by Dave Kranzler
With the factors in place to support a move higher in precious metals (inflation, geopolitical tensions, recessionary economy), recent market action is frustrating, but a certain percentage of the poor performance in gold, silver and mining stocks is attributable to the ongoing decline in the general stock market.
When capital pulls out of stocks and bonds, it pulls out of everything. March 2008 to October 2008 is a good parallel to the current market. At some point there will be a catalyst that triggers a positive divergence of the precious metals sector from the rest of the stock market. The most likely event will be reversal by the Fed of its monetary policy.
The effort to prevent gold and silver from moving higher has been particularly aggressive since April. Most of the time gold has been rising when the east is trading and gets pushed lower when the west opens, which is primarily paper derivative gold trading. When gold shakes off the latest price control effort, it will shoot over $2,000 and move higher from there. Similarly, silver will move towards $30 quickly.
Unless you believe that the secular bull market in precious metals is ending, analysis suggests there is another substantial bull move coming. Obviously, the timing is unclear.
We’re watching the summer of 2008 repeat, only this time it will be 10x worse. First, the housing market is heading south.
Also, the banks are in trouble. Deutsche Bank is down nearly 50% since February. Many other too-big-to-fail banks are down 25-35%. The Nasdaq, -31% since November 2021, is down less than the stocks of many of the world’s largest banks. Their off-balance-sheet derivatives exposure must be apocalyptic.
Finally, the stock market is in a low-gear crash cycle. In 2008 central banks, led by the Fed, flooded the banking system with printed liquidity. They did the same in 2020. Will the Fed and other central banks quadruple down on their money printing or let everything collapse? Either way, at some point there will be a stampede into physical gold and silver that will translate into a large, sustained move higher in the mining stocks.