Precious metals are in alignment for a major ascent

March 30, 2017 02:40 PM

The continued survival of these financial behemoths was clearly prioritized during the 2008 crisis and continues to this day with monetary inflation doing all in its power to increase the marked-to-market valuations for all of the collateral which underpins the balance sheets of the banks in the form of mortgages on property, plant and equipment. Sadly but most critically, this relentless policy of currency debasement is designed to underpin the collateral of the global central banks, upon whose balance sheets rests the future of capitalism and democracy. Karl Marx saw capitalism as a progressive historical stage that would eventually self-destruct due to its boom/bust tendencies and disregard for the working classes and be replaced with socialism, where a more equal distribution of society's wealth is achieved.

That the global interest rate structure has been suppressed to the detriment of savers the world over is a clear case of policy being implemented for the benefit of the elite classes that own the vast majority of the assets (and all of its attendant debt) at the expense of those that save, the vast majority of whom constitute the middle classes around the globe and whose protesting presence in the streets of Paris and London and Tokyo and Buenos Aires is becoming increasingly common.

With the S&P 500 now in a modest retreat, the financial media is up in arms over what is rapidly becoming a "global sell-off" but in reality, the S&P is off a mere 3% from its all-time, Trumpladyte-driven highs. As the Jim Cramers and Larry Kudlows of the world quietly lament the demise of the failed Trump healthcare bill, they secretly celebrate the burgeoning cash position they are now in having dumped a pile of stock into the Trump rally, the bulk of which was driven by retail investors, which rhymed perfectly with the acceleration in insider selling. While it is a tad too early to reflect upon the results of the Summer Barbecue Indicator, thanks to the wonderment of email and Twitter and Facebook, to call this latest post-election ramp job anything other than a drunken myopia would be folly. Stocks are expensive and due for a cattle prod of reality immersion.

On a less aggravating and more optimistic note, silver prices have begun to perform in line with my expectations from late-2015 when I went "ALL-IN" on the GDXJ (VanEck Vectors Junior Gold Miners ETF) under $17 with silver trading under $14. (See chart at top.) I use the Gold-to-Silver Ratio (GTSR) as my barometer for the precious metals and that along with the Gold-to-Gold-Miners Ratio provides an extremely clear snapshot of whether or not gold is being helped along by its baby brother silver and its cousins, the gold and silver stocks.

As I have written about for more than a few years, when silver outperforms gold and gold and silver shares outperform both gold and silver, all of the precious metals planets are in alignment for a major ascent. As this is being written, silver is advancing 1.81% versus gold's 0.54% and the miners are up sharply with the HUI (NYSE Arca Gold BUGS Index) ahead 2.7%. These confirmations are significant in that I am able to get somewhat more aggressive in my approach to the mid-April seasonality low that I expect to arrive here shortly. Mind you, I have yet to replace my cherished GDXJ position that I vacated a few weeks back over $37 so at the current price of $36.50, I am simply treading water in search of a break in the market. I am not so sure that I will get that break exactly as I am expecting but I do believe that the odds favor a late-spring/summer rally in the precious metals and particularly the miners.

Page 2 of 3
About the Author

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance.