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The Ultimate Precious Metal Portfolio High-Grading Opportunity

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July 11, 2017 - 10:48am

I have many important things to say in today’s very important, and pragmatic, article; and thus, am starting it early Sunday morning.  After which, I’ll take a break, and resume Monday morning – so you won’t miss a moment of real-time commentary, in an ever-changing, and increasingly “PiMBEEB,” world.

To start, my increasingly strong belief that Precious Metals are set up for a sharp rebound in the not-too-distant future.  Not that I know why the Cartel has been so vicious in recent weeks – starting the day of the Fed’s shockingly unexpected “hawkish hike” last month; when, despite an onslaught of negative economic news, the “data dependent” FOMC’s statement; whilst objectively, being as far from “hawkish” as possible; didn’t offer a single hint that it might slow its (turtle-like, statistically insignificant) “tightening” cycle any time soon.  This, as gold was just about to break above $1,300/oz, with both metals on the verge of decidedly breaching their 200 week moving averages and 5½ year downtrend lines.  Hint, hint.

Irrespective, it all comes down to what drew me to GATA, or the Gold Anti-Trust Action Committee, 15 years ago; i.e, that ultimately, today’s “New York Gold Pool” will be defeated – as all Cartels ultimately are (like OPEC – perhaps, by year-end), by the reality of the physical markets underlying the paper frauds that mask them, no matter how sophisticated the “manipulative technology.”  In OPEC’s case, due to the historic energy glut that may never reverse; and in the gold Cartel’s case, the equally massive shortages coming, given the – perhaps, irreversible as well – damage inflicted on the mining industry by two decades of price suppression, coupled with exploding physical demand (caused by price suppression and unprecedented “money” printing.  And of course, the overt and covert rundown of Central bank inventories – likely, to modern era lows – in the quest to promulgate history’s largest, most destructive fiat Ponzi scheme.  To that end, after reading Jim Rickards’ MUST READ article this weekend – based on his extremely high level of “inside” information regarding the global physical gold market – I believe this more strongly than ever.

In Friday’s “latest Cartel blitzkrieg, and fabricated ‘jobs’ report, setting the stage for significant precious metal shortage,” I discussed silver’s heinous “flash crash” 12 hours before yet another ugly jobs report; which, unlike last month’s NFP horror show, was “dressed up” with a fabricated, “better than expected” headline number.  In fact, a half hour after the report’s dissemination – which by the way, caused the “odds” of a September rate hike to plunge from 18% to 13%, gold was only down $1 for the day; whilst silver, which was smashed by a whopping $1.50/oz in seconds during the aforementioned “flash crash,” came within a dime of turning positive.

That said, clearly Thursday night’s flash crash was done for several reasons.  One, to “signal” what was coming Friday morning; when, following the aforementioned, bullish PM action following the supposedly “strong” jobs report, prices were suddenly smashed into oblivion despite no other market materially budging.  To that end, interest rates and the dollar index were no different at day’s end – with gold down $13/oz, and silver $0.45/oz (this, as oil prices plunged, whilst base metal prices were flat) – than they were when gold was down just $1/oz, and silver $0.10/oz.  Secondly, to (as always) deliver a false message that the “better than expected” jobs report was “bad” for Precious Metals, and “good” for stocks.  This, despite the odds of a September rate hike declining after the report!  But most of all, in my view, it afforded the Cartel – er, the COMEX “commercials” – a chance to cover as many (naked) shorts as possible.

Which I say with such confidence, given that the weekly COT, or Commitment of Traders, report that was published Friday at 3:30 PM EST depicted an acceleration of the massive short covering efforts that commenced four weeks ago…I kid you not, EXACTLY when the Fed’s “hawkish hike” was enacted.  Yes, the COT report only describes “commercial” activities up until Tuesday afternoon’s close.  However, I think it’s safe to assume that amidst the massive Cartel attacks this week; starting with the unfathomably blatant raid during Monday’s paper-thin pre-Holiday trading session; and culminating with Friday’s post “flash crash” blitzkrieg attack; that the odds that next week’s COT report will depict further “commercial” short covering – perhaps, dramatically so, is extremely high.

Following four weeks of massive short covering (again, excluding what likely occurred in the three trading days since the most recent COT reporting period), the “commercial” short position in both gold and silver has plunged to levels not seen since…drum roll please…the ultimate Precious Metal bottom in December 2015, when gold touched $1,060/oz, and silver $13.75/oz; which ironically, occurred the very week the Fed “raised rates” for the first time.  Which I put in quotes, given how comical it is to believe that raising rates from ZERO to 0.25% – which 19 months later, are still just 1.25%, with essentially no chance of being raised until at least December -can be considered “raising” at all.

In the process, both gold and – particularly, silver – have been driven to extremely technically oversold levels.  Which, while having relatively low importance in my analysis, given that short-term technical analysis is largely ineffective in rigged markets, there is definitely a strong precedent – even in recent years, when Cartel manipulation has been most pronounced – for a material bounce when paper gold and silver prices become so technically oversold.

Will this occur this week?  I guess we’ll know soon – as clearly, there will be no shortage of PiMBEEB events to catalyze it (most notably, Janet Yellen’s semi-annual “Humphrey-Hawkins” Congressional economic testimony on Wednesday).  Not that a “catalyst” is required, with PM prices trading at their most undervalued inflation-adjusted levels ever, amidst the most intense Central bank “inflation creation” ever.

Well, it’s early Monday morning, and I’ve had a full day to consolidate my thoughts.  Particularly after seeing last night’s 192nd “Sunday Night Sentiment” raid of the past 202 weekends – including 25 of 27 this year, with gold up 5%.  And of course, the 870th “2:15 AM” attack of the past 992 trading days – in prototypical format, starting with the same “Cartel Herald” algorithm that has suppressed every Precious Metal rally in memory.  FYI, the only “news” last night was the LOL, “strong economic data” reported by Zero Hedge – that China’s (comically rigged) CPI was in line with “expectations,” of rising 1.5% year-over-year and falling 0.2% month-over-month.  Pardon my stupidity, but exactly how is that “strong economic news?”

How is it that the freefall decline of crude oil – the world’s most important, and debt-infested commodity – not considered as important as a rigged, in-line inflation number?  Nor the fact that second quarter corporate earnings, which will start to be reported this week, are expected to be weak.  Nor the shut-down of the world’s second largest silver mine – Tahoe Resources’ Escobal Mine in Guatemala, due to a bitter environmental conflict that could last all year, at the least?  I mean, wheat surged last month due to dry weather; and oil surges any time a comically discredited OPEC member comments about “potential production cuts.”  Yet, the long-term plunge in Precious Metal production is, for now, not considered relevant; nor short-term fundamentals, per the Guatemala news.

Which, I might add, shouts as loudly as possible why I have warned of the risks of “paper PM investments” for the past six years.  To that end, consider that by far, Tahoe has been one of the mining industry’s best operators, of one of the world’s largest silver mines.  And yet, over the past three years, whilst silver has been smashed 25% by the Cartel, Tahoe’s stock has plunged 80%.

Anyhow, as I watch this Precious Metal carnage – which again, has resulted in gold still being up 5% this year; and silver, down just 3%; the mosaic I started discussing above is taking a more defined shape.  I mean, consider that the massive PM smash – culminating in Thursday night’s silver “flash crash” (mere hours after the Tahoe Resources news); and this morning’s early 2% silver smash – with not a single other market materially moving (including oil, which is down just 1%); commenced on the ultra-thinly traded pre-holiday session last Monday, when the only significant “news” was plunging auto sales and construction spending.  Next, consider that not a thing has changed fundamentally in recent weeks, regarding the world’s all-time high Central Bank money printing (see, the Bank of Japan, on Friday, promising to monetize unlimited 10-year JGB’s, or Japanese Government Bonds, at 0.10%).  Nor has the global economic outlook, particularly now that oil is in freefall mode; and per this must listen interview with Andrew Maguire this weekend, the physical gold market appears to be as strong as ever.

Throw in the massive Cartel – er “commercial” – short covering that commenced last month; and likely, exploded following Monday’s “pre-holiday annihilation” raid and Thursday’s silver “flash crash”; which likely, will increase further as COMEX “spec traders” awaken to another $0.30/oz decline this morning; and it becomes a very valid conclusion that said “commercials” may in fact by making a run at covering most, if not all of their shorts.  Will that be the case, for the first time in the past 15 years for gold, and at least 30 years for silver?  Only time will tell, but it is a fact that the physical supply/demand balance has never been tighter – and will only become more so, as the terminal stage of history’s largest, most destructive fiat Ponzi scheme plays out.

Which brings me to today’s extremely important – and timely – principal topic; i.e., the historic precious metal portfolio “high-grading” opportunity the Cartel has presented us.  That is, the opportunity to capitalize on the “historic valuation anomalies” the recent, historically egregious Cartel attacks have created, by reducing Precious Metal sentiment to its lowest level in at least 15 years – amidst the most PiMBEEB, or “Precious Metal bullish, everything-else-bearish” environment of our lifetimes.

Generally speaking, the best time to “rebalance” one’s portfolio – by asset class, tax optimization considerations, or otherwise – is during times of extreme movements, be they up or down.  As a large Precious Metal investor, I have done this numerous times over the past 15 years – to “high-grade” my portfolio to what I view to be the most optimal asset mix.  In 2011, for instance, I sold all my mining shares to buy physical metal; and since then, have made several metal “swaps” to take tax losses, capitalize on changes in the gold/silver ratio, and/or upgrade to numismatic or semi-numismatic coins when premiums (over generic bullion coins) declined enough to make the trade relatively risk-free.

In this case, we are faced with a scenario in which both gold and silver are trading at their all-time lowest inflation-adjusted prices, at a time when every imaginable fundamental – and technical – indicator suggests that if a bottom hasn’t been reached yet, it will be soon.  Moreover, the platinum/gold ratio is at an all-time low; the silver/gold ratio is nearly at a 25-year low; and numismatic premiums – relative to generic bullion coins, are as low as Miles Franklin has seen in its 28 years in business.  To that end, per last month’s “single easiest way to understand Precious Metals’ value,” I just purchased 1904 MS-62 American Gold Liberty coins for nearly the same price as brand new 2017 American Gold Eagles, given how the historically weak PM sentiment has caused the prices of coins that traded at 50%-100% premiums less than a decade ago to lose, for the time being, essentially all their numismatic premiums.

Regarding the latter, Miles Franklin – which has not received a single registered complaint since opening its doors in 1989 – prides itself on avoiding numismatic recommendations (other than to numismatic experts) unless premiums fall to levels where the customer is, in essence, receiving free optionality potential.  Conversely, we heavily recommend the swapping of numismatics into greater volumes of bullion coins when premiums rise significantly – as was the case a few years back, when Miles Franklin’s President and Co-Founder, Andy Schectman, called every numismatic client he knew, begging them to capitalize on the massive post-Obama election gold numismatic premiums, by swapping into bullion coins.  Clearly, this was the best “trade” we ever recommended to clients – which today, is the exact opposite situation; i.e, the potential to swap newly minted bullion coins into age-old numismatics at essentially zero premiums.

Irrespective of your personal portfolio situation, the historic manipulation that has produced not only “dotcom valuations in a Great Depression Era,” but the most undervalued inflation-adjusted Precious Metal prices of our lifetimes; atop “historical valuation anomalies”; clearly presents the “ultimate Precious Metal portfolio high-grading opportunity.”

To that end, if you have any questions about the pricing and/or logistics of such trades, please call Miles Franklin at 800-822-8080, and give us a chance to earn your business.  Most of our brokers have been doing this since the 1980s; and thus, are as knowledgeable about these topics as anyone in the business, bar none!

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About Andrew Hoffman / Media Director

Andrew C. Hoffman, CFA is the Media Director at Miles Franklin Ltd. Call 877-685-4705 or email ahoffman@milesfranklin.com, visit www.milesfranklin.com

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