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I’m light as a feather (relatively speaking) as the year winds up, and my efforts are focused on a technical issue with my laptops and monitors. While I’m screwing around with this perplexing and vexing issue, here are a couple of miners I shorted:
The macro has moved through a time of moderately rising inflationary concerns when economies were cycling up, many commodities were firm and risk was ‘on’. Contrary to the views of inflation-oriented gold bugs, that was not the time to buy gold stocks.
As I have belabored again and again, the right time is when the inflation view is on the outs, gold is rising vs. stock markets, the economy is in question, risks of a steepening yield curve take center stage (the flattening is so mature now that steepening will be a clear and present risk moving forward) and by extension of all of those conditions, confidence declines.
Well?…
I haven’t shut up about XME for weeks, and with good reason. It’s one of the clean analogs I’ve ever seen, and the pattern we’ve been watching has been unfolding beautifully.
All through the bear market hopeful rationalizations were served up for a bullish case on the gold miners. All through the bear market we warned people not to eat that rotten turkey!
China demand, the China and India “love trade”, cyclical inflation driving up the prices of commodities and resources and the classic… economic growth in the US will create cost-push inflation through wage increases with the smart money seeking inflation protection in gold. All of those and a veritable Turducken of mishmashed ingredients were served to gold bugs as a decidedly not delectable appetizer before the main course.
But with a top in risk ‘on’ global markets now finally including the US (pending any holiday relief bouncing), the planets are aligning per the fundamentals that matter. This will drive up gold’s relational price to cyclical risk ‘on’ assets and improve gold mining bottom line operations (reducing miners’ costs per ounce of gold produced). (more…)
