The elements in play are similar. Inflation fears in play, the Fed was tardy in 2022 to begin hawking. This time inflation fears (not really inflation, but that’s semantics) have driven Fed expectations from easing, to holding, to rate hikes. Again, similar dynamics to 2022.
I think it’s pretty much bullshit, given the rising prices due to war and the economy growing through services and government, of all things. But it is what it is and the market is sending signals. I am very time stressed today, so let’s get right to the main signal.
The Gold/Silver Ratio and the USD are both firm on this week’s employment numbers. This is what we have been on guard for. A rising GSR & USD together would impair the precious metals, commodities/resources and eventually, probably various stock markets and sectors.
Since I do not have the luxury of sitting back and watching and evaluating today, I shot first and will ask questions later. I have done a lot of selling in a sort real time ‘mental stop loss’ fashion. Don’t assume I’ve held anything in particular because at a time like this and with the 2022 blueprint in mind, that assumption is probably wrong. I booked a ton of profits and limited some losses.
I want to make clear that I don’t want to panic investors out of positions. I am not an investor, even in gold stocks. I am a macro swing cycle guy. In gold stocks, we’ve been favoring further decline, perhaps with an interim bounce. Well, said bounce appears off the table in the short-term, barring some sort of dramatic turnaround today or next week.
GDX, for example, is breaking down from the SMA 200, trying to cling to support. A tick of a lower low that holds (i.e. not a quick spike) beneath the March 20 low of 78.74 would cook GDX, technically.
Other stock markets are far from broken, but would it not be a good time for a broad market correction as well? It could be. The precious metals tend to lead, after all.
Frankly, I plan to bring my laptop with me today because if I’m getting mentally whipsawed, so be it, several 100%+ profit-bookings have been forced on me. If it looks like a whipsaw, I’ll buy a few key items back. But if it is 2022 redux, it is a market correction that would provide some nice buying opportunities. Not just in gold stocks.
You may recall that the 2022 correction began on the very day I was on a plane to Key West with my wife. I had to get my head together down there and adjust. Today I have commitments. But I’ve made my adjustments in real time. For better or worse. Better would mean cashed up and ready to buy the hell out of some pain to come. Worse would mean the old whipsaw routine.
The GSR spiked during 2020 and 2022 corrections while the USD tended to be firm prior to them before declining as policymakers eventually weakened to dovish (2020) or was projected to do so (2022). *
Today GSR and USD are fairly well in unison in their firmness. If they break upward there should be pain in some, and possibly many, areas. A whipsaw fake out? I’m not going to gamble on that until/unless I see it happen. It’s the reason we have indicators. They won’t always work, but why have them if you’re not going to respect them. I respect the potential of these two to rally from here and have been compelled by that respect to take profits.
It’s been a good 1.5 years and if I end up having to chase a whipsaw, so be it. But as has been the case for months now, risk management is foremost in mind, personally.
* “Too late” Powell was tardy in fighting the inflation created in 2020 as a hawk, and also tardy in realizing that inflation signals were fading in 2023.
