Where are we at?

by JDH on September 26, 2020

I have no idea where we are at.

I know that the price of gold is about where it was back in July, around $1,862 an ounce, which is a lot lower than the $2,000 at ounce we exceeded on August 6.  It’s been all down hill since then.

Why?

I have no idea.

Profit taking?

No inflation?

It’s true, we have been in a deflationary environment for many years (arguably all of human history) because technology is deflationary.  On my phone today, for free, I have a map linked to satellites in the sky, a heart rate monitor, news, music, and everything else.  30 years ago that information would have cost millions; today it costs nothing.

So why haven’t prices collapsed?

Because government have “stimulated” to keep asset prices inflated, and here we are.  If they keep inflating, gold will do well.

Will they?

I don’t see how they can’t.

But, we have the fight over a new Supreme Court judge, and the election, so things will be a bit rocky for the next two months.  May be best to continue to raise cash and stay on the sidelines.

Can’t hurt, at least until we can figure it all out.

Good luck……..

Where are we, exactly?

by JDH on September 19, 2020

As on write this on Saturday September 19, we are 46 days away from the US presidential election.  What happens between now and then?

Historically, markets favor the incumbent, because they like certainty.  The S&P 500 returns, on average 15.44% in the year after the election if the incumbent is re-elected, as compared to 5.71% if there is a change in party.  (Over the 4 year term it doesn’t make much difference, because in a two party system, both parties are basically the same, but I digress).  So, on balance, the markets favor a Trump re-election.

And, it would appear that that is exactly what the markets expect, as evidenced by the strong performance of the DOW since the crash in March (which was caused by the Big Bad Virus, not the president).

This is not to say the market prefers Trump over Harris (yeah, I know Biden is the presidential nominee, but we all know who is really running).  It is simply to say that, after four years, you know what you get with Trump: big spending, and protectionism, so you know what industries will do well (financials, small caps) and what will not do well (green energy, multinationals, anything linked to China).  With Biden you get green energy and less restrictive trade with China.  Clearly, the market prefers Trump.

46 days is a long time.  A lot can happen in 46 days.  RBG is dead; do the Republicans push to appoint a new Supreme Court Justice before the election?  If Trump thinks he will win, the answer is “no”.  He simply waits, and appoints whomever he wants after he wins.  If he thinks he will lose, he pushes for his person now.  We shall see.

I am operating under the assumption that he will win, and he will win by a significant margin.  How big?  I’m guessing he will win 48 states; it will be a landslide.  If you live in the “protest” states, where local authorities want to eliminate the police, do you vote for a Democrat?  If you are a working person, do you vote for the guy who seems cozy with China, or the guy who is picking a fight with them, and is bringing jobs back to the America?  It appears that the choice is easy.

And let me be clear: it doesn’t matter what is actually true.  It doesn’t matter if he actually will build a wall, or bring back jobs.  All that matters is that people think he will, and so they vote for him.

I therefore assume interest rates will remain low, money printing will remain high, and that will ultimately be good for gold.

We are in a seasonally weak time for gold.

NUGT has done well since the crash, and while still in an uptrend it is clearly in a consolidation phase.

As I reported last week, I continued my covered write strategy this week, but I closed it out on Thursday (at a nice profit) and sold half of my holdings in NUGT (at a nice profit), and now I am sitting on some cash.

I suspect I will deploy it shortly.  The RSI on NUGT is 47, a nice buy level, so I may put in some buy orders at around $90 and see if I get filled.

Or not, I’m in no hurry.

For individual stock picks, I’m a fan of EQX.TO – Equinox Gold Corp.

It was a great buy at $15 during the correction earlier this month, and I think as this correction ends the uptrend will continue, and it eventually is a $22 stock.  Equinox completed construction of Phase 1 of it’s Castle Mountain mine in California this week, and the first gold pour will happen before the end of the year.

Some interesting notes: The reason for the “crash” in the stock price down below $15 was the announcement on September 4 that Equinox Gold Announces Temporary Suspension of Mining Activities at Los Filos Mine due to an illegal road blockade at its Los Filos Mine in Mexico.  Obviously that was a temporary setback, and the share price has recovered so with that out of the way the share price should continue to grow.

Also of interest: on Friday there were over 13 million shares traded, the highest volume since March 20 when over 19 million shares were traded (at the peak of the crash).  What does this mean?  I don’t know, but I like to see an up day on high volume, so that’s good news.

Bottom line: I don’t know what will happen over the next 46 days, but I expect the market to continue strong, and I like gold, so while I have some cash, and I’m reasonably invested, and will watch with interest as the world develops (or unravels, depending on your perspective).

Stay tuned, and have a great week.

 

Covered Writes were Right This Week

September 12, 2020

Sorry for the stupid pun, but the covered write call option strategy worked well this week. After the recent correction, I believe gold stocks will trend higher, so I have a position in NUGT – Direxion Daily Gold Miners Bull 2x Shares because I like crazy leverage.  NUGT gives me that.  I expect to hold […]

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Volatility

September 5, 2020

The word of the year is not COVID, it’s volatility.  I’m not going to even bother putting up the charts, because you know what they look like. Apple, Tesla, whatever, they are highly volatile.  I discussed Apple last week, and the trade worked fine, cashed in and went to cash before the long weekend.  My […]

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Stock Split Craziness

August 29, 2020

I said last week that I would get back to a discussion of gold this week, but I won’t, other than to say gold is doing fine, building a solid base above $1,920, which presumably will propel it on its next run well above $2,000.  I have my position, I may add on pullbacks, but […]

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Silly Season for Apple

August 22, 2020

I’ll get back to a discussion of gold next week (which is doing great, thank you very much) but for today, let’s discuss the true “bell weather” stock of this crazy market: APPL – Apple Inc. made yet another new high on Friday.  How high can Apple go?  I have no idea, but if you […]

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Buffett Buys Gold

August 15, 2020

Well, that was an interesting article yesterday: Did Buffett Just Bet Against The US? Berkshire Buys Barrick Gold, Dumps Goldman It appears, according to Berkshire Hathaway’s 13F filing, (and use this link, not the one from the article), bout 20,918,701 shares of ABX.TO – Barrick Gold Corp in the quarter ended June 30, 2020.  On […]

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Sure Looks Like This is Just the Beginning for Gold

August 8, 2020

Gold traded at $869 at the beginning of January, 1980.  It did not touch that level again until December, 2007.  27 years to make a new high. On March 3, 2008 gold topped at $1,033, and didn’t see that level again until August of 2009, a year and a half later.  But then, after that […]

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Quite a week, eh?

August 1, 2020

Gold has done it; reaching a new, all time high.  For someone who is heavily invested in gold stocks, I’m quite pleased with that development.  My portfolio is looking great. So, now what? It would be unusual for gold to make a new all time high, after trying for nine years, and then crash.  That’s […]

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Gold: New High or Double Top

July 25, 2020

For the first time since 2011, the price of an ounce of gold, in U.S. dollars, closed above $1,900. The chart is very clear.  In August and September, 2011, gold traded marginally above $1,900 per ounce, and that was it, as gold entered a correction phase for the next nine years.  The bottom arrived in […]

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