Before we go any further, let it be known that in the days leading up to
this missive, i have gone from "net long" to "net short"
on gold, silver and the miners. Those receiving my email blasts and those
following me on Twitter (@Miningjunkie) have been put on notice that this
advance, while impressive in its blunt-force trauma, lacks the perfection of
the Q4/2015 advance, which arrived from multiyear polar extremes in sentiment
and COT structure setups.
All last week I was emailing and tweeting how frail this advance looked
and why I was a seller. With Friday's COT, you have the reason:
Now, I could spend the rest of the day explaining where
they got 58,773 new longs representing 5,877,300 ounces of gold bullion—which
they claim to have sold. But I won't. You all know the drill. There is zero
defense nor advanced warning from a Cartel raid with exception of the COT
report, which is, while helpful, nowhere near a perfect indicator. Even when
the number looks favorable, it is still highly subjective. Because of the
incessant flow of intervention and interference, interpreting the COT and
acting upon it is at once both difficult and imperfect, and while it is
relatively easy to short Goldman Sachs, it is painfully difficult to short
precious metals because, for hard money advocates like me, it is like selling
a family member.
Monday morning is going to bring about a violent sell-off in the precious
metals because they are considerably overbought as the chart below was
clearly screaming late last week.
Gold miner ETFs (NUGT/JNUG) were both wildly overbought
by last Friday, and while I was in awe of the impact of the buying, I added
to the DUST and GLD July $125 put positions late week (confirmed by multiple
tweets when action was taken), and now remain comfortably short with gold
down $15 going into the Monday opening.
I will be adding to shorts on Monday, on any type of
bounce in both the GLD and the miner ETFs. The DUST was bought at the $16.47
and $15.90 for an average of $16.18 and will probably open in the low $17s on
Monday.
We have all seen this movie before, and while it is both maddening and
infuriating, it in no way alters my longer-term bullishness on gold and
silver. What this does illustrate is just how corrupt the Comex
("Crimex") has become and how important it is that you turn off
CNBC and ignore the table-pounding gold bugs that would have us leveraging up
at precisely the wrong time (like last Thursday/Friday), with RSI (relative
strength index) readings in the mid-to-high 70s and the investment conference
rock stars all feverishly tweeting out targets of $1,400-plus by July 4. When
the bullion banks are sellers, you do not want to be long. Period.
Originally written on Friday, June 7.
[NLINSERT]
Charts and images provided by the author.
Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of
the data provided. Nothing contained herein is intended or shall be deemed to
be investment advice, implied or otherwise. This letter represents my views
and replicates trades that I am making but nothing more than that. Always
consult your registered advisor to assist you with your investments. I accept
no liability for any loss arising from the use of the data contained on this
letter. Options and junior mining stocks contain a high level of risk that
may result in the loss of part or all invested capital and therefore are
suitable for experienced and professional investors and traders only. One
should be familiar with the risks involved in junior mining and options
trading and we recommend consulting a financial adviser if you feel you do
not understand the risks involved.
