I have been looking at the astrology charts lately…sorry – my trading view charts – and you can see on the charts that things are looking particularly overstretched. I had sent out a few tweets about it the last week or so, but I had gotten into a GSX/GDXJ/SIL trade on Jan 4th. Was up 6.5% overall on a rather large trade I took, and I just tightened up some stops. Looks like if I’m stopped out, I still just made 3 months of groceries for the family, so I can bank that and get more yogurt for the 2 year old and fancy Kraft mac and cheese for the 13 year old. I think my wife has been wanting sushi, and miraculously she seems to like gold and silver when there’s a Philly roll in it for her.
That being said, I posted a Tweet yesterday that the monthly MACDs on these look like Godzilla coming to move prices much higher. Most newbie investors just see price going up, or down, and they go goldfish or squirrel and don’t understand how a lot of this works with price action. The best people out there cannot tell you what the price of anything is tomorrow or the next day, but some of these guys are pretty decent at giving you ballpark ranges where things can be. Anyone who is confident about this stuff, you need to run the other way. Many of these people who speak in degrees of probability are the ones I look to the most.
With this – we have seen some deep flagging over the past 2 years, but by all accounts, 2023 looks to be a strong year with metals.
Also – you can have a LOT of momentum with prices in your favor, but short term you could have some pull backs with prices as the professional paper traders take their profits on technically overbought conditions.
On the silver daily chart…
That green line I drew months ago. And somehow, by sheer chance, the line is following. I duplicated the move up from 2008 bottom to top in 2011, and just drew a straight line.
Are we going to have the exact same move as 2008-2011? Not likely, but it is somewhat spooky!
Anyhow, on the daily chart above, you have a few things I’m looking at
- The golden cross recently happened, which can have a bullish effect
- It’s trading pretty high over the 200dma. The 50dma would probably be a first line of support to look for
- Brady points out the divergence between an upward moving price and a downward moving RSI as bearish. However, in the context of a bull run, you could see SIDWAYS action of silver with a lowering RSI as coiling for a much stronger move up.
- Coming off either a triple bottom or IH&S, depending on how you look.
- Daily MACD turning back up, as if it wants to crossover bullish in a few days.
- Metals monthly options go off the board 1/26, and smash downs may start now.
But taking all of the daily stuff into consideration, you might be seeing a lot of the pro traders banking profits from a strong run up, but you also seem to have buying power matching all of that selling. With the monthly, take a look at how the MACD is now crossing. This could be bigger entities now getting in for a nice long trade here. Given the macro back drop of the Silver Institute putting out the 160m oz deficit last year a few weeks ago, and the need for solar/EVs, it’s quite possible silver might be catching a bigger bid here.
For this reason, I can see a pullback in silver for the next 1-2 weeks, but it is also more likely than not, that it’s a shallow pull back or a failed pullback where shorts may have to cover. IF they can’t smash this down to $21 ish, it’s also possible we may have a quick move to $27. All eyes, in my opinion, might be on general equities the next few weeks as weaker economic data might entertain the notion of lack of silver demand would be needed with reduced manufacturing needs. So it might wear that hat for a bit. The miners the last few days have been lagging the big moves – BUT they didn’t sell off. It’s telling me they ran up and front ran some of these moves – but saw some pullbacks in metals coming. So it was a softer move up, but not a sell off.
With gold – it’s actually far more overcooked than silver. Last I looked at, the daily RSI was at like 74.
ALL of these daily numbers suggested we would hit that 2011 high of like 1920 and be pushed back by selling pressure as traders take some serious profits.
However, the MONTHLY MACD on the gold is the true godzilla here. With all of the CB buying and the move to get out of USD and treasuries by many countries now, this could be a lot of dip buying ahead as many might expect a $2300-$2500 gold price this year – $1900 would be cheap AF. This to me shows some long term buying coming in.
I discounted the Ukraine invasion on my monthly chart because I feel it was like saccharin in coffee. It was artificial. It was not “baked into the cake” of the gold structure, and the STRUCTURE is what leads this. That flagging, then monthly breakout is what is telling. Then the bottom with that monthly MACD. It has not crossed, yet, but it is puckering up for the kiss. Look at the last time the monthly MACD crossed. It was the 2019-2020 move up, and with FFR peaking probably in the next 1-2 months, gold could be anticipating a violent move up here. From the bottom in 2018 to 2020, gold went from $1160 to $2075. The last 2 years were a cooling off from that, but it seemed to anticipate that QE bomb. The same could be true here – where the FFR may stay elevated for longer than anyone thinks – which may cause SERIOUS draw downs with stocks. Which then will FORCE rates much lower, much quicker, anticipating a LOT more currency creation for 2024. My BET here is 2023 gold anticipates the money creation, and as this happens, gold sells off for the risk on trade, just like it did from 2020- to Sept 2022. I see the first half of 2023 as fire and brimstone for general equities, but this is presenting another gold setup.
I continue to hear that if gold goes stronger, countries may nationalize. I also want anyone to look at how nationalization has worked in the past, ANYWHERE. You can make an argument that Russian and Chinese co-owned companies are somewhat successful, but you then have the state as part of the company. That kinda thing doesn’t really fly here.
Recently, Ghana passed a law that requires all gold miners to sell them 20% of their gold produced in local currency called cedi. You had many pundits coming out and slamming this as nationalization, but to me, I find this to be a brilliant solution to Ghana and many developing nations. I want to go on record to say that I think this model is going to spread, and cross many industries. First, take a look at a lot of these miners – they are foreign companies exploiting local mineral deposits. Maybe a Canadian company comes in – but perhaps this is billions of dollars in exploration costs, building mines, and operating it – funded by westerners who want a nice return on their investments. The Canadian company has the know-how, the Western countries may have the deep pockets, and the Ghanas of the world have the resources.
What you then tend to see is the Western countries run the exchanges that push the price of these commodities down. This is a continued downward pressure on labor costs – as energy costs, materials, and the like continue to rise, but the ore bodies also continue to have worse grades. This usually means digging out minerals in the far reaches of the earth with local miners who get paid low wages.
This then allows Ghana to accumulate gold, and forces a market for their cedi. The miners probably do not want to hold cedi, and as they sell it into the market to get USD, they may lose value. It stands to reason a miner may then use that cedi and immediately pay miners in it and local supplies bought with it.
Ghana previously might get tax money paid in USD, then turn around and buy oil in USD. No demand for their local currency was needed. Likewise, miners may have also paid in USD, which probably thrilled workers, as it would hold up well against local currency and help with some spending power.
The underlying issue is the gold price, in USD, driven down, forces labor to be the cheapest on earth to extract.
If Ghana essentially forces the miners to pay their miners in cedi, it then has no need for USD. Miners would spend cedi instead of USD. Ghana would then get tax revenue in cedi, perhaps, but the gold they buy can now be exchanged for oil.
If Ghana cuts the USD out of this, it is a sliver of less USD demand. If other countries do this, and use gold to buy oil, that’s less USD needed to buy oil. Then Chile may do this with copper. DNC could do it with copper. Think about how many of these countries with perhaps high inflation rates MIGHT be able to stabilize their currencies?
- Less USD demand worldwide means USD goes down against their currencies. More dollar units are needed to buy their goods, meaning wages could go up locally.
- More gold buying oil, and less USD buying oil can make the gold price, as expressed in USD, go up.
- With more stable currencies, countries might have a better ability to enforce rule of law and have stable governments. This could lead to more Western investment
- Western investor is not affected by this, as the local currency at 20% would most likely just be used for local operating expenses and not affect ROI. In fact, ROI may increase as the price of the underlying commodity may go up in price, in USD. This may lead to higher margins and earnings.
Ghana may have something here that many African nations may start doing, ASAP. I believe the days of Venezuela taking over Western oil companies may be over, as the risk to isolate foreign investments may deem too high. This model allows for currency stabilization and long-term government stability, with a promise of potentially higher wages for the workers – and higher tax bases for these countries in the decades ahead.
While many who slam it may be right – but I think the story needs to be followed very closely.
Silver primary miners gone
This can be a standalone article itself, but a comment on a video I saw had me comment back, and with this, most don’t realize the landscape of silver primary miners has changed the last few years.
For those not taking notes, silver has been squashed like a bug for many years. Recent price moves over $18 have been great, but are nowhere near what the industry needs to survive.
Most don’t realize that most of the silver production you hear about is from base metal miners or gold miners, with silver as a byproduct. Meaning, if they are a lead miner and happen to have silver with it, great, but they don’t have a dial to just turn up the silver production. For example, I had done calculations once a few years ago to see that Newmont had produced 54m oz of silver. The biggest “silver primary” producers most know about are the likes of First Majestic, Fresnillo, Pan American, Hecla, Endeavor, and Fortuna – aren’t as much silver as they thought.
Recently, First Majestic bought Jerritt Canyon in Nevada and with that, are now 50/50 gold to silver, and some peoples’ comments I saw had them now at 45% silver. But these are among the BIG ones – and I had seen their silver production was around 15m oz per year. Not the SEO (silver equivalent ounces), but actual silver. There were 830m oz mined last year, so the big one most of you know about only accounted for 1.8% of global silver production. I read somewhere that Hecla was now at 40% silver. Fortuna will be 19% by the end of the year, and was 29% this past year. PAAS had been down to 27% and is mostly a base metals miner now. You still have Endeavor at 60/40, but from what I read, they aren’t really that profitable until you get over $24 silver. This is why under $24 silver their share prices aren’t great, but why we saw them fly a bit when silver was at $27.
So what happened?
First, with silver prices pushed so low, all of these “primary” companies needed to take on gold or other metals to keep the lights on. Ore grades have gone down, and none of these companies have had any great major high grade discoveries. Hecla talks about high grade, but they also have expensive labor – so this pushes their cost of production higher. Jurisdictions are getting worse, with both AG and FSM harrassed by Mexico. Peruvian and Chilean politics are horrible socialist nightmares that have you fear nationalization. Argentina (named after silver) has super high inflation problems all the times and capital controls that make you fear something worse is always around the corner. Bolivia? Oh god.
So primary miners are pretty much a thing of the past. I would say today the closest thing you might have would be Aya, Endeavor, and perhaps MAG, Silvercrest. Fresnillo trucking along at about a 50-55% silver producer, but they are probably the biggest silver “primary” now by orders of magnitude (maybe 8% global mine production) if you consider a silver primary at greater than 50% silver.
Meaning – you have now Fresnillo and a small handful of others as silver primaries, barely. You have all of these companies now having to take on more gold and base metals to keep the lights on.
You have a lot of silver juniors out there as well, but the likes of Impact silver and the like aren’t profitable until you see higher silver prices, by a lot.
Then there’s the exploration/development stories. While I like Discovery silver because of the billion ounces – which was then changed to 600m for higher grade stuff, their CEO at the time said it was a “home run” at $20 silver. That didn’t bode well for $19 silver prices recently. Then you have Bear Creek, with 500m oz but in Peru and I thought a lot of base metals were with that.
Overall, with the deficits racking up, no real high grade discoveries of size really out there, you are then relying on companies to produce silver, mostly as a byproduct. This means as the demand for solar, EVs, and investment increases – prices will need to almost go vertical to support “primary” silver production again. While you may have size coming online with MAG and silvercrest, along with Discovery and perhaps Bear Creek later, these mines will probably only be built with much higher prices needed. Many years of silver exploration was chopped from companies trying to pay the bills.
Bottom line – if anyone is expected to meet EV/solar goals the second half of this decade, prices may need to be double what they are, today, in order to incentivize the amount of supply needed to come online to meet that demand. If these deficits continue, you could potentially see a lot of industries buying large tranches of SLV and just pulling them out of the vault, daily.
Kinesis virtual card
I was disappointed to see videos recently of Jim and Kevin using this card, but I have not been able to yet, and my answer from Kinesis support were like “it’s not available to you yet”. “Check back later”. “At some future time”. I’m giving you an example. I’m SO FREAKING BULLISH on this company, I just want everything to be rolled out immediately, but that’s not how the world works 🙂
As much as I LOVE the company, I’d also love for them to update this timeline thing that they started previously. I find myself sometimes checking in, see how they are doing with things. I know they are pretty good with quarterly updates, but sometimes the project manager in me comes out and wants to engage on that level. Where’s the Gantt chart? Is there a critical path issue? What are the milestones and dates? What factors can push something to the right? You get the idea.
I think there have been a ton of questions about timelines for things so I’m voicing opinions I’ve read on Twitter. There’s a LOT going on there, and investors like myself are people who want to work WITH the company IN PARALLEL to promote them. They do not pay me, but I love the promise of this so much I just want to write about it all the time 🙂
I’m going to be a lifetime KVT holder, so I don’t care if it’s next month, next year, etc. But the problem I think many have is that perhaps the usage of Kinesis didn’t tick up yet to where they planned for it to be (like 1% of gold transactions I thought), and with this, the fee pool is small, and thus KVT rewards would be minute compared to what the videos talked about. I can live with small payouts of a few cents. But it would be implemented. The switch can be flipped and I’m ok with my $.13 a month paid in KAU. That would potentially reveal a seriously horrible ROI to start, which I’m VERY ok with when considering I am hoping these guys are around for the next 40 years. But they need to flip the switch soon. And if not, they need to be pretty transparent as to why, and what specific conditions will have them switch it on. Currently, it just seems like it’s trying to obfuscate smaller fee pools than anticipated, but anyone can see the fee pool over time and divide that by 20% and then 300k and see it’s really small. I’m VERY OK with a tiny payout.
What would be of interest to me in the next few weeks with KVTs?
- How far along are we with KVTs all being sold? I believe this also might be something that is affecting when they turn these yields on.
- What threshold do you have to turn these yields on, is it after they have all been sold, or after a certain amount hits the fee pool? There is no technical reason this would not be turned on, so there is either a barrier to do this (not all sold yet) or a performance reason (not meeting the usage for fees desired)
- What timelines do we have on virtual/physical cards – as this most definitely will affect a serious amount about to hit the fee pools.
- Updates on the Indonesia project, and what type of velocity would we expect to see with massive usage? Would millions of people be using this daily there? Looking for case study updates, usage metrics, etc. This can be a benchmark to then measure quarterly or yearly which can then be used to understand velocity metrics by investors and future project partners.
I believe once the virtual/physical card hits here in the US mainstream, for ME, it will MASSIVELY increase the amount I use it. I think this might also be a barrier for many others.
How I PLAN to use it…
- Put in like $1,000-$2,000 per month. Probably more if I can pay all kinds of bills with it.
- Spend what I need for groceries, gas, and other expenses like going out to dinner, car repairs, clothing
- All extra is held in gold/silver
- Shop at the places they mention with the 3% discount – which appears to be what the merchant doesn’t have to charge for the card usage then. So you get 3% off the products, and have to pay a .45% transaction fee. You save essentially 2.55% on all purchases.
What I would LOVE to have setup would be like the ACH I could setup with OneGold. Back in the day, I was able to auto-deduct weekly from my checking account to buy silver instantly.
If I’m paid twice a month, would love for the ability to have $1,000 sent to Kinesis and I’d use my card for ALL expenses. I would also see if I could use that card to pay utilities, etc.
The big idea with this is the concept that if I’m buying silver steadily, and over time, metals increase in value, that the spending power I’m putting into there is vaulted, and I’m tapping a portion of spending power at a time. We could wake up 7 years from now at a $100 silver price and all of those oz I’m stacking now I can continue to spend from it and preserve my purchasing power.
I feel 2023 is going to be a killer year for metals, and with that, I think we need the US base here to be highly involved with the virtual/physical cards to drive a lot of velocity of the platform.
I see all of these guys using substack and other things and well, this is a hobby for me. I do this because it is FUN. No monthly subscriptions, as one day I may just turn around and write about something you don’t care about. I write for me. I played trumpet, for me. If someone appreciates the art, I guess it’s cool if someone wants to throw into the tip jar. Instead of a substack or monthly payout or something, I’ll have a Patreon link at the bottom of my writings. I’d be impressed if I made $5 in a year from it. I am considering putting out a book later this Spring to get a LOT of what I do into a book format, and any contributions would probably go towards self-funding that.
So – at the bottom of my stuff now, I’ll probably add this PATREON link. I’ll also send out a newsletter, I haven’t done that in forever because metals were in the shitter and no one wants to hear hopium during a 2 year consolidation.