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Reaction

It was Op/Ex Friday, which market people believe increases the potential for volatile theatrics. For those of us holding what have been consistently winning cards in the precious metals and strategic materials areas, the reaction was swift and brutal.

But it came after a long, and in many cases vertical run up in our (my) favored items. As parroted several times in recent weeks, a reaction was going to come. It was a matter of time. Boom, it’s here. Now, what is its nature? On to some daily charts.

Gold had an “outside day” (OD) with its daily candle traveling both higher and lower than the previous day, showing indecision and volatility. If we are going to take the TA handbook at its word, the fact that this OD came after a long uptrend and took the form of a negative candle, favors a coming corrective situation.

I am not the biggest proponent of candlestick analysis because that is what day traders look at. I try to keep my view longer than hours or 3 days. But in this case it is notable as gold is wildly overbought and well, there are those pictures of the public lining up at gold dealers to get their piece of the action.

The public could not take it anymore and began to FOMO for bullion in Australia and other countries. Not a good sign, contrary-wise, for the current extended price of the monetary metal. Bigger picture, gold is in a sweet spot, as confidence declines within the new macro.

Silver also sports an outside candle after a long drive upward to new all-time highs and an overbought condition. I saw some hopeful analysis in the X Machine implying this is normal for Op/Ex (GLD, SLV, GDX, etc.) and bugs should take heart in that. Maybe so, maybe not. Time was long-since due for a correction. So Op/Ex or not, we are at a caution point until such time as this may prove to be only a short-term reaction.

Gold Stocks

I took a break from using the frothy chart of the BPGDM because we all knew the situation; overdriven momentum and flat out bullish. My personal plan was to “white knuckle” it and ride the bull, despite such signals. So the reminder is that the time was ripe for a reaction, as it has been for months.

We had a 6.7% negative reaction for GDX (7.3% for HUI) in a day. Was that it, or will it end shortly (like, this week)? It is quite possible, because earnings season is here. Newmont reports on October 23. Agnico Eagle and Alamos Gold on the 29th. KGC on November 4, etc. Earnings are imminent, and they are likely to be good. Now the issue will be whether the market priced in good earnings and sold the news.

Either way, quick reaction or extended correction, the gold stock sector has not been this fundamentally sound, in my opinion, since 2001-2003 and for a brief moment in Q4, 2008. Later in the segment is a chart of gold ratios, including ratios vs. crude oil, stock markets and inflation signals. The upward slopes in those charts represent upward slopes in gold mining fundamentals.

Technically, GDX may simply be on a reaction to drop and fill the nearest gap. But that upward spike and drop on volume may have other ideas. RSI and MACD may also have those other ideas. After all, a drop to test the uptrending 50 day moving average would be a healthy thing for an over-driven market.

My put options are dated to Dec. 19 and strike just below the rising 50 day average. That is because if a real correction does come about, the gold sector does not tend to correct easy, even in a bull market. If the weakness persists I may (or may not) consider adding more bear exposure, but the play is very bullish on the big picture. So investors should keep that in mind.

The HUI/Gold ratio daily chart also shows potential for additional downside from an “internals” perspective. There’s the volatile outside day again.

However, let’s remember that this is short-term stuff. It is stuff that simply had to happen, with timing being the open question. If this is a correction beginning, having been prepared (mentally, at least), it is also a time of opportunity to be outside the herd and be ready to buy from those who FOMO’d and will eventually puke because they are FOMOs, not people who know WHY they were buying.

This is why we are bullish on the big picture. The FOMOs were FOMO’ing because the Silver/Gold ratio was rising (attracting less “healthy” speculators to the investor base). But this picture advises us that IF gold is truly going to continue bulling vs. the stock market, oil and copper, THEN the gold mining sector is still a value. Big time.

All too often gold stock promoters railed on about what a value gold stocks were during an adversarial macro as gold declined in SPX terms and more or less flatlined in cyclical commodity terms.

You cannot call gold stocks a value simply because they are declining or depressed in relation to their product. The macro has to be right. Today the macro is right as Gold/Oil (and materials) informs the miners’ bottom line cost structures while Gold/SPX informs mainstream investors urges to take a look at the sector.

So while HUI is very extended by the FOMOs, the crazy thing is that in its still bottoming/basing status vs. gold amid positive sector/macro fundamentals, the play is still indicated to be a “value”. This is now per valid reasons, not the invalid ones naively promoted roughly from 2007 to 2022.

Now of course this lovely big picture chart could simply be a fake out, with King Stock Market preparing to be “winning, duh!” again after giving the poor tattered gold bugs their time in the sun.

But that is not what the charts say, and until they say it I will not believe it (or portray it). The indication, according to these charts (and in spite of HUI’s big time spike), is that gold stocks remain a value vs. gold. This time for real, because the macro indicators (Gold/SPX, Gold/Oil, etc.) agree.

This chart, as it currently stands, is a disgusting picture for the stock market relative to gold. I can’t control what it will do from here on. But I can tell you what it says now.

So again, the Silver/Gold ratio led us and then the FOMOs to where we are today. A spike within a longer-term downtrend (weekly chart). The Silver/Gold ratio has proven absolutely nothing other than another spike. This is not to say a new phase will not promptly manifest, validating the silver bugs after all these years (decades). But it is to say that it has not yet happened.

Hence, as we’ve been noting for some time now, the risk is that an extreme would be registered within that downtrend. It’s a new macro with new rules, but one rule from the old macro that still applies (until proven otherwise) is that if/when silver leadership flames out amid peak silver bug volume, it’s time to take cover.

Silver leadership has obviously not flamed out, but the risk is that it very well might. Hence, caution.

Meanwhile, this charts shows that while the silver play (GSR declined) led the precious metals and broader rallies, gold ramped upward vs. cyclical markets, including commodities. A best of all worlds for gold stocks, with the sector’s lead hype item (silver) rising in gold terms (giving positive price signals to a majority) while gold rose in terms of the cyclical macro (giving positive fundamentals to gold stocks).

Bottom Line

The balance of analysis above shows that there is potential for a pullback or even significant correction in the precious metals and other areas. But the play is not broken beyond bad candles on a single Op/Ex day. So let’s be aware that the band could start playing again this week. Let’s stay balanced in our views until either a reversal from Friday’s negative occurs or follow-through from it occurs. Sound good?

Meanwhile, it is amazing to see that with HUI having ticked all-time highs (our target became new highs after Huey sliced through 500) quality gold stock operations are still indicated to be a “value”. If these indications hold true and the HUI/Gold ratio resumes rising – perhaps after correction – the sky could be the limit. I don’t like writing that way, but it’s a potential I see.

Remainder of the Report

We’ve established a sort of free form format to #885, so let’s just rip through some more items and close ‘er out.

CRITICAL MINERALS!!! CRITICAL MINERALS!!! CRITICAL MINERALS!!!

Okay, we got the message. Critical minerals. With Bessent meeting with Chinese officials, it appears it was time for profit-taking in the critical minerals space, which had been pumped by the U.S. government taking positions in select companies. The market may have uttered “Ruh roh! Is Trump just making a ‘play’ to open China back up?” and found an excuse to sell these stocks down.

Rare Earths (daily charts)

MP is the signature item and all things being equal, is presenting a buying opportunity in the 70 to 78 range. Backing out the political noise, I am still holding the MP positions, as the chart looks more like a buy than a sell.

IDR really got clobbered and I was compelled to take another large percentage profit. Oh well, life sucks. 30 to 34 looks like the buy area.

LYSDY, which I sold too soon and had gotten away from me, is tanking as well. Oh how I’d love to get it back at 9.50.

Multi-Metals (daily charts)

Nickel hole driller TLOFF (TLO.TO) looks like a buy/add at the the uptrending 50 day average. Again, all things being equal and assuming one is a Nickel bug who wants a speculative position.

Multi-metallic explorer MMNGF (MMG.V) looks like a buy/add at .18 to .21.

Similarly, PGEZF (PGE.V) clings to a higher low, but if that is lost support could be found at the uptrending SMA 50, or more greedily, in the .19 to .22 range. I cannot add any time soon because I used this for a tax loss on my ill-timed reentry after taking taxable profits. I want that tax loss against those and other profits like the ridiculous SLV puts episode. So any near-term buy opp. here is discussed for others to consider. I still hold an IRA position.

Gold Stocks (daily charts)

EQX, NGD, BTG and the like are not discussed here because I held full positions in them and their charts have not reacted as strongly those above or below. You could say the same about WPM, which I added back on the drop to the 50 day average. I may grudgingly trim some of these items if the correction gets worse, but I want stay in balance and not overreact when a sector I am bullish on gets whacked.

So let’s look at some of the non-core items that I sold either in full or in part, because I’ll be looking at them for potential buy-back.

DC is smashing down toward clear support and the 50 day average. 4.40 down to 4.10 looks like a buy opportunity technically, all other things being equal.

AYASF (AYA.TO) could drop to the 50 day average area, which meets support at 10.50 to 11.

ABBRF (ABRA.TO) will want to maintain a higher low to the Sept. 19th low of 3.90 in order to avoid a breakdown from its higher highs/lows trend.

KNTNF (KNT.TO) could provide an opportunity at the 11.80 to 12 range. I held one position and would like to add the other one back.

MAIFF (MAI.V) was rising on declining volume and I took solid profits on both positions. The company is not yet near my “core” designation as it still has much to prove, permit-wise and operationally as it integrates its new mine (acquired from core holding EQX).

Technically, an MAI bull would want to see a drop to support between the moving averages for a clear buy/re-buy at a low risk juncture.

I didn’t sell any RIOFF (RIO.V) because I consider it borderline core and its chart gave no reason to sell. A normal pullback would touch support and the SMA 50 at 1.31. A viable pullback could hit support at 1.20. RIO does not want to see a lower low below 1.14, however.

Wrapping Up

Friday’s update provided more parameters to watch for, including the US dollar, Gold/Silver Ratio and the TSX-V/TSX ratio. If the first two of those items rise and the third one declines, the pressure should remain on the precious metals and commodity/resources areas. Also, global stocks might be weaker than U.S. stocks.

As for the Teflon Don, the U.S. stock market, it does not exactly look inspiring. Its pattern and the looks of RSI and MACD imply a correction in the offing. But as someone who lived the 2001-2008 precious metals bull market, I can tell you there are times that the precious metals take a hit and this pig just keeps on keepin’ on. The first step to a viable bear phase is for SPX to lose the 50 day average.

VIX made a spike and heavy reversal. We’ve got negative regional bank hype, Bessent/China hype and all kinds of emotional stimulants in the news cycle. Frankly, and speaking personally, cash feels better than gambling on shorting this mess right now. Let’s at least see a breakdown by the indexes before getting too beared up.

As you can see, VIX’s running buddy, Junk bond spreads, also spiked and eased with the banking headlines and China trade ruckus. Frankly, it looks to me more like a pre-holiday rally sentiment clean out than something to worry about. I am just going by history. But the headlines feel manufactured to a degree.

I let my Sentimentrader account lapse because since 2008 I’ve been using a small fraction of the service. Basically, the Smart/Dumb money readings and a few other odds and ends. Why was I paying for that, again? I am not interested in their ‘quant’ data or their in-house analysis and opinions (I am strict about keeping other peoples’ analysis out of my head).

There is plenty of publicly available data for our purposes, and the CNN Fear/Greed index checks in showing a lurch toward fear. Again, at face value we’re looking at the elements that could spring a year-end stock rally. I’ll repeat, to me, the headlines feel hokey, cooked up, like bullshit for the public to get worked up over.

Or maybe even [the public] getting shoved into gold over as a final act to the recent precious metals rally phase? The picture in the report above showing the public lining up for bullion should concern any dyed in the wool contrarian gold bug.

Amid the disinflationary phase that we anticipated and which is here, the Treasury bond market is even getting bullish on the long end.

This disinflationary phase has been bullish for gold stocks for the reasons expressed to this point. Gold mining benefits when its product, gold, outperforms inflation signals and inflating cost-driver markets (e.g. oil/energy).

One Ugly Potential (presented for entertainment purposes only, at this time)

Again, I refer back to previous gold bull markets and remember that it was never as easy as it’s been so far in 2025. Maybe I am an old veteran now, influenced by the past. But let me tell you, I took it personally when Ben Bernanke rigged yields curves through Operation Twist as he heroically “sanitized” inflation out of the macro. He actually created the macro signaling that would trigger a cyclical bear market in gold (an economic boom as indicated by a flattening yield curve).

Today, inflation is already waning. Gold/RINF sees it. Treasury bonds see it. But the steepening yield curve has logically run with a bull market in gold and has been a ticking time bomb for the bull market in stocks. Please take this with a large chunk of salt. But if any certain someones (political and/or monetary) wanted to paint the macro as all fine and dandy, they might want to control yield curves again and control gold into a correction.

By way of example about what they will do to keep up appearances, last week the Fed ran multi-billion dollar (REPO) bailout operations on the regional banking problem (Zions, etc.). The headlines magically went from OMG, we’re all gonna die in a banking crisis!!! to Wall Street rallies on hopes regional bank crisis not as bad as feared, or some such thing. Gold just happened to get smashed.

And you, dear gold buggers, don’t think these people are worthy adversaries?

So without getting us too paranoid, why don’t we just keep an eye on the still steepening, but consolidating 10yr-2yr curve. Eh?

Nightmare scenarios aside, what could also be happening here (during the consolidation) is a transition from inflationary curve steepening (nominal long-term yields rising) to a deflationary steepening (long-term yields declining, per the bullish nominal T-bond charts above). Indeed, that is and has been the favored scenario.

Treasury bonds are the traditional “safety” and liquidity vehicle, after all. A flight to those bonds, if it kicks in, could also bolster the USD as it receives liquidity from fleeing market speculators. Taking it further, in that scenario gold would resume upward vs. silver (even if/as it declines nominally) and the whole silver buggish cacophony could get a rude awakening. In other words, risk OFF and a broad correction.

That has not yet happened and will not necessarily happen. But if “they” control the yield curve and flatten it, or otherwise channel Ben “Big Brain” (the hero) Bernanke, we could see a phase where gold and the counter-cyclical gold stocks get creamed, commodities continue to under-perform (with certain critical ones getting bid and sold based on trade news) and King Stonk Market prevail.

Again, I am on a thought exercise here. For speculative entertainment purposes only. But not really. I’ve seen this type of thing happen before. I do not want to raise undue alarm, but I do want to be able to speak as I would, not as a nice and comfortable narrative might want me to.

If you have any questions about the admittedly complicated (maybe even outlandish) notions above, don’t hesitate to ask (or deliver your views).

Portfolio

Gold is long-term risk management & monetary value/stability in a balanced portfolio.

Taxable Account

In order of position size. Here’s what’s left.

The taxable account carries high cash levels as long as cash and equivalents are paying out. This is considered a savings account of sorts, rather than a speculation or even investment vehicle. The goal is to speculate around the periphery. In another market phase (e.g. post-crash), the account may get much more in the game.

Trading Account

No positions.

Roth IRA (non-taxable, no contributions)

I take that red arrow seriously because it is trying to take my hard earned profits away from me. In a non-taxable account, that cannot stand. As yet, it’s a normal pullback within trend.

Cash & Equivalents were jacked up to 85%, and here’s what’s left.

Cash & income-generating Equivalents are at levels that are right for me and my real-world situation. Your situation is different. Cash will be adjusted as needed.

Refer to the In-Week Notes under the NFTRH Premium menu at nftrh.com for market talk and occasional trading info, if interested. Also, you can follow on X @NFTRHgt for notice of updates.

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Notes From the Rabbit Hole (NFTRH) is a weekly market report in which we provide analysis on financial markets.  We make every effort to provide accurate and high quality content, but this analysis ultimately represents our opinions and these opinions are provided without warranty or guarantee of any kind.  See full terms & conditions of service under the ‘About’ heading in the main menu.