NFTRH; Animal Spirits and a Strategy

The TSX-V index made a new recovery high yesterday, yet the Copper/Gold ratio is breaking down. Here’s the view as of this morning’s pre-market.

While the Silver/Gold ratio goes on to try to turn what I had viewed as a significant caution area to support, from former resistance.

Here is the clearer view, per the weekly chart.

And yet more perspective per the monthly. We had resolved to pay attention here at this gateway, and so we shall. So far, silver’s leadership is hanging in there with a chance to eventually change the macro to inflationary and possibly, reflationary. To review, in my interpretation “inflation” is what policymakers (Fed monetary, Government fiscal) are employing to try to create a “reflation”, which is the desired economic result.

What does the sum of the above mean? Well, the rising TSX-V and Silver/Gold ratio (SGR) are each friendly to the precious metals, especially with cyclical copper starting to resume its under performance to counter-cyclical gold. But let’s recall that a hysterical rise in silver and the SGR immediately preceded the big blow out in the inflation trade bubbles in early 2011.

Could Copper/Gold be sneaking out the door right now in anticipation of another blowout (this time, of the post-March inflationary bounce)? Yes. Am I going to set that in stone? Nope. Open minds. Inflation is a thing, after all. There may eventually come a lasting new phase of it because policymakers are powerful and trying their damnedest.

Regardless of whether the reflation trades are failing as would be indicated by Copper/Gold, silver’s out-performance is (says Captain Obvious) very positive for gold and silver stocks and the precious metals complex as a whole. It’s just the way it is; silver bugs lead the charge during the most exciting times.

With that comes danger. But there was danger in 2011 as well. There was danger with silver at 30, danger at 40 and finally and terminally, $50/oz. We as speculators live for this time. It has a life of its own. I have seen a lot of top calling over the last few weeks and yet animal spirits are in play. There is no reasoning with it. There is only riding it, trading it or sitting it out. I choose the first two options. I choose to balance my greed for more gains with my impulse to protect gains.

Another caution is that gold is all over the financial media now. My mother even asked me about it yesterday. When my father, rest his soul, used to ask me about it in the last bull market I used to get uneasy because I knew he was not watching the tape, but instead the news or worse, he was hearing people at the golf club talk about it. So too my mother now.

But the job of the 2011-2016 bear market was to clear the tracks for something like this. Animal spirits are in play, we noted what seemed like ridiculous targets for some junior gold and silver stocks last week, and now it does not seem ridiculous: Upside Targets for These Junior Miner Chart Patterns.

Indeed, targets like those still hanging out there along with HUI 375 (which again, does not need to be a stop sign) are what have kept me in, despite the over-bullish theatrics engaging in gold and silver. But I do plan to respect the targets and when I see the juniors arrive at or near targets I’ll be taking some profits. That is assuming the momentum continues, obviously.

The media are all over gold 2000+ (a gold forum was witnessed cheering and glad handing each other yesterday) and the silver bugs are rampaging. It is likely we are in the final stage of the first act of the bull market.

But I keep the lesson of silver 30→40→50 in mind. Momentum is in play until it isn’t. I only ask that we be rational about it, because every day now there will be more irrational people chasing this thing until it tops.