The image above is a massive granite wall that is part of the Canadian shield, a large area of exposed Precambrian igneous and high-grade metamorphic rocks that forms the ancient core of the North American continent (also known as the North American craton of Laurentia). Very little soil covers this expanse, with only boreal forests able to survive due to the acidic excretions of their root systems, which dissolve the rock creating nutrients and pathways for anchorage.
As impressive as this is, the structure is found everywhere in northern Georgian Bay—and also exists in the world of capital markets and narrative propaganda. Every time I chance upon a piece of the shield rising out of the waters, its formidability is symbolic of the current inflation-deflation diatribe that dominates the investment strategy sessions of the major investment houses around the globe — and it always favors paper assets over hard assets, and stocks and bonds over gold and silver.
Irrespective of the rate of inflation or the absence of disinflation (which has driven valuations for stocks for decades), or the overvaluation of paper and undervaluation of hard, the media-centric stock hustlers always find a way to discourage investors away from the sanctity and safety of sound money and into the frivolous and fleeting sea of central bank intervention and interference.
You have often heard me use the term "banco-politico cartel" to present the duality of conspiracy as one vile and scheming entity. There is a very fine line separating the agendas of banking and government, but it all revolves around money, power and control, and the most effective way of avoiding insurrection and revolt by the citizenry is to erect a "Wall of Containment," shuttering pro-fiat narratives off and away from the integrity and revelation provided by precious metals.
For the past two months, I have hammered home the idea of the month of August being the ideal time point for additions to the precious metals, both physical and the shares. Until last Friday, it looked as if the lows of May and July, around US$1,750/ounce would, in retrospect, be "THE" lows for the year. With the Friday absurdity of a $45 downdraft in gold, brought on by unexpectedly positive numbers on employment, the traders at the New Yord Fed contributed to the Wall of Containment by taking out the 100-dma (daily moving average) at $1,803, thus placing the onus on the bulls to now defend the early summer lows.
I see a market approaching oversold status (relative strength index [RSI] 33.97), while at the same time also nearing a bearish MACD [moving average convergence/divergence] crossover (but not quite there yet). Because we are in a liquidity-starved month, with everyone away at the lake (or the Hamptons), it is a cakewalk to take out all of the stop-loss orders as we saw on Friday and create the illusion that inflation remains "transitory," with common shares as the preferred asset of choice.
Let me be very clear on one point: August has been (at least for me) the singular best month of the year to acquire gold and the miners, and I see no reason the change that strategy. I elected to take a 50% position in the Junior Gold Miner exchange-traded fund (ETF; GDXJ:US) by way of a few November $45 calls. Carrying a 45% cash position into August is now paying off, and it matters now whether it was prescient planning or luck. We have ammo with which to attack (or not) but given my history of past mistakes, failing to step up to the gold and silver miner plate in mid-August has resulted in a lot of lost opportunity (and profits).
Shifting gears to silver for a moment, I was one of the very few scribes who openly criticized the feeble and ill-fated attempts by certain key silver industry CEOs, masquerading as "silver promoters," to attempt a Gamestop-style short squeeze by attempting to use physical demand as method of exerting pressure on the bullion banks led by JP Morgan. When I penned "The Importance of Stealth Investing" back in February, I warned the newcomers to the silver market against trying to take on the bullion banks, not because they did not exactly deserve it, but because it is like taking a penknife to a gunfight.
Furthermore, because silver commands such controversy in the precious metals universe, emotions tend to run very high when it comes to decision-making. If there is one thing I have learned (the hard way) in forty-five years in the trenches, it is that buying silver when you are angry at injustices, or buying as part of a "noble cause" (think #SilverSqueeze and Wall Street Silver), is the absolute dumbest move one can make. You are up against fifty years of U.S. dollar hegemony, and the mightiest military force on the planet knows the importance of maintaining that position of advantage. As I have written about over the years countless times, the point where silver goes parabolic is the exact moment where the USS Nimitz pulls into Gibraltar for a refit, and they refuse the credit card.
Silver look abysmal on a technical basis, with the December 2020 lows under $22 as a distinct possibility. I am hoping otherwise but I need silver to gather itself up and start behaving even mildly similar to all the bullish forecasts that we read about on a daily basis in hundreds of YouTube podcasts and Weekly Wrap-Ups and "Special Reports" designed to rally the troops around a metal that, unfortunately, is not a central bank preferential asset and exists plentifully as a byproduct of base metal mining operations around the world.
I am not demanding that silver "rocket to $100!" for a positive outcome to occur; I just need it to outperform gold and the miners in order to fortify the bullish case for the PM [precious metals] complex. This is why the bullion bank traders target silver; it is the weak underbelly of the golden dragon. No "raging bull" can erupt with silver acting this poorly, and they know it. It is yet another cross-section of the Wall of Containment so crucial to the bullion bank strategy.
The most influential and effective Fed chairman of the past fifty years was the late Paul Volcker, whose opinions (along with Milton Friedman's) contributed greatly to President Nixon jettisoning the backing of U.S. dollars with gold on Aug. 15, 1971. That date marks the birth of the world's first reserve currency not backed by anything other than "fiat" ("let It be"). Volcker was a stringent advocate of fiscal profligacy, and yet he cited it as reasons for his policy decisions in trying to keep inflation in check.
The problem we have today is that, which he has been canonized by every Fed chairman that has succeeded him, none of Volcker's ascendants to the Fed Throne had the intestinal fortitude to take on Wall Street as he did in the 1978–1981 period, in which he shut off the bankers' access to Fed credit lines. As demand for credit expanded in the late '70s, those new curbs on the supply of credit forced the cost of credit northward. With the Fed as the leader of free world central bank policy, all others followed, and rising interest rates crushed the oil cartel and inflationary expectations, ushering in a 20-year bull market in stocks and bonds, a condition that ex-chairpersons Greenspan, Bernanke, and Yellen cherished and one that current chair Jerome Powell uses as his Arc of the Covenant.
These are the legacy issues facing the precious metal investor here in 2021. However, fifty years is a long time for a currency unanchored by anything resembling gold to be allowed to dominate how international payments be made. The Chinese are already setting up their own version of the Swift system, and as their economic dominance continues to expand, focus will shift away from the U.S.-dollar-denominated gold price toward the yuan-denominated gold price.
The next few weeks are going to be critical, in that year-end performance numbers are going to be entirely dependant on Fed actions. For those of you who keep hearing "The Fed is trapped" as a reason for continuing to "Buy the Dip" in the usual names, you might want to rethink that. The Fed is never trapped; it does the trapping at the behest of the banks and the 1% who control the world. If the masters that pull the Fed strings are positioned properly, they will take this market apart in a New York minute.
Would it be that we all could use that as a beacon of sorts.
Originally published Aug. 8, 2021.
Follow Michael Ballanger on Twitter @MiningJunkie. He is the Editor and Publisher of The GGM Advisory Service and can be contacted at [email protected] for subscription information.
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. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger's adherence to the concept of "Hard Assets" allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.
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