I wish I can remember who said it the last few days, I think it may have been David Erffle (The Junior Miner Junky) on miningstockeducation on YouTube when he discussed this. I wish I can remember – but the concept is that ‘this may be different because unlike March 2020 where gold was rising and everything was going up, we are at a point where everything has already sold off’. So this is NOT my original thought here, but I wanted to do some due diligence on a commentary I heard to test it myself.

And you might concur.

We (collectively in the metals) have just assumed now that on every March 2020 type of correction (as if this will be the new norma every so many months), that we would just sell off with the general equities, but perhaps rebound faster. I’ve more recently converted to Michael Oliver’s “arm wrestling” where these equities may fight over a year to go down – meanwhile, gold may move up while all of that is going on.

When the guy who said this, said it – I recalled a few charts I had cooking that supported this that I had already drawn some lines on. Here’s one. Check out Newmont.

Now, had you bought and held Newmont from Feb 2020, right now you’d be pretty much about a wash. To me, this made a lot of sense starting about 8-9 months ago to trade within the chop until we started to run like a thoroughbred up the charts.

This isn’t a precise science here, but what you can see is the pre-March 2020 rise of gold and gold equities. Right before the crash, you saw a high, then liquidation into cash for everyone. What we have seen since was a reflation into outer space last summer, and then the 15 month or so consolidation since. This is what the gold chart looks like.

What you see here is the resistance, the beat down to 1450 or so, then the screaming move higher. Several times we can back and touched 1675 for support, and we are over $100 above that now. What you are seeing are most miners are sold off to that 1675 or so level where gold is $100 higher. Meaning, all of these miners are perhaps undervalued to gold right now by a lot. At times they may have outperformed gold, but almost all of them in my lineup right now look similar to Newmont.

First Majestic

Yamana

GR Silver

Defiance

Eloro

Perhaps the most telling – GDX

I can go on and on with about 40 items I’m watching. What these all are telling me…

  1. Most of the selling has been done
  2. If a liquidation event happens, it may happen more in paper gold and silver than the gold and silver miners
  3. Tax loss selling is either done or close to done as a lot of these juniors are AT the resistance levels of pre-March 2020
  4. Equities are far, far, far overstretched and the correction to them MAY be isolated to them, this time
  5. IF there’s a push down in the miners, it will be sharp and brief as this line appears to be very strong support

What I also can tell you is with that whole crystal ball thing, no one knows. But in March 2020, you were just getting people into the sector and they pulled the plug when March 2020 happened. Now, it seems we got buy in of a lot of people and they are at their Rubicon. Their Maginot line – they are not selling.

Many of these also have a descending triangle to them. Almost all of them in some way, shape, or form. This could be a sign of a down move coming, statistically, but you have to zoom out 50,000 feet and understand what this actually seems to be. It looks like an overshoot of the July 2020, followed by bullish consolidation coiling for a strong move up.

If you look at the GDXJ, you can see the triangle, but you can also see we are almost exactly at the .50 fib retracement level from the March 2020 lows.

You can see how a flush down hit the .618 and corrected back up over the Rubicon.

What I have learned was that with all of these triangles, the moves happen about 80% through. I’d say we are pretty much overdue. One might think the smash down the other day at Powell’s re-nomination could have been the item to flush gold down, but it caught a bid. Yesterday, gold and silver started running and they had to march out the troops to jawbone some more. The dollar went up $1.06, then came back down $.58 a few hours later.

Gold and silver are once again rising and it will take even more ammo to jawbone them down. We have a Friday non-farm payrolls and next Friday the CPI.

No one know what direction these are going, but I think even with a strong sell off with the markets over the next few weeks, it seems to have shown gold was not budging, and the miners have held relatively strong.

Conclusion

Go over your charts, verify what I’m saying. IF there’s downside, it appears it may be minimal and short lived. Some like Mergott have called for a possibility of gold in the 1400 or 1500s yet. These guys are the pros, but it just seems to me like the reality of inflation is here and with this, gold will at least hold steady. Any rate hikes would be the result of inflation and thus be good for gold. We had rate hikes all through the 1970s, and gold continued higher.

Be careful, be cautious – but to me, it seems fireworks may be happening soon. If we hit a CPI print in the 6s or 7s, we could have another launch of gold/silver. That could take us through the end of the year positive.

Lastly, I did a lot of tax selling over the summer, as did a lot of the newsletter writers I follow did as well. While there may be a small percent to the downside of some juniors left, I’m not sure there’s a ton of sales at the moment. IF NFP hits a home run, sure, we could have some more selling and more tax loss selling, but take a look at the charts. There cannot be a lot of meat left on these bones.

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