Gold And Gold Miners

"Gold is the money of kings. Silver is the money of gentlemen. Barter is the money of peasants. And debt is the money of slaves."

Silver is acting horribly…

On March 6th, I put out a “less-than-ideal” BUY SIGNAL on the precious metals but made the comment that silver needed to get “in gear” lest the rally fail and true to form, the rally failed two days ago when silver couldn’t even surmount its 50-dma while gold did exactly that, remaining above it for the better part of a week before buckling over. The dreadful action in silver has now seen the ratio move from 85.05 to 86.20 since March 7th and while we are still ahead on our gold positions ($1,285 on March 7th), silver’s underperformance has forced me to throw my positions overboard before we lose any more of the gains we had three days ago. As I have preached for nigh on thirty year, “No precious metals rally can sustain itself with silver underperforming.” In fact, you need the gold and silver mining shares outperforming the metals and you need silver outperforming gold to have optimum conditions for a riproaring rally. Dollar and stock market weaknesses are also big helpers so this environment has been a struggle with the S&P overcoming the 200-dma mid-month and staying there.

What is causing this horrifically poor performance is beyond me but the fact remains that it is acting SO bad that I fear it is going to derail that beautiful breakout in Barrick (GOLD:US) above the $14.10 resistance which I highlighted on Monday. The May $12 calls bought for $2.15 traded up through $2.60 by late-morning Wednesday before the intraday reversal caused by snivelling silver brought about profit-taking in GOLD. Even the calls, while still closing ahead at $2.32, are at risk now with the insipid behaviour of the silver market casting a pall on the entire complex. I will wait until 10:30 a.m. to see if the bargain hunters can keep spot gold above $1,300 and spot silver above $15.05 but with the dollar index futures screaming higher by .39 to 96.71, that could be a challenge. The dollar index has been on a tear since March 20th at 95.17 with every day since then with the only exception being the FOMC day, when Powell & Co. told the world that “the reflation engine is back in town”.

Flash Update: I went to fire up the brewmaster machine and when I returned, they had just taken gold through $1,300 like a hot knife through butter with spot now gasping for air at $1,297.70. Percentage-wise, gold is off 0.87% but silver is once again underperforming down 1.02% once again. The danger in this type of action is that it is NOT “event driven” and reeks off a large liquidation order by a sovereign holder. The line in the sand is $1,280 for gold so we “SHOULD” find adequate support in that range but for me, any violation of that level will have me seriously sidelined and reaching for Wild Turkey relief as well as generous chemical sedation.

I will be using the Twitter function to update the intraday action. ( @Miningjunkie is the Twitter handle.)

Fingers crossed and seatbelts buckled; the raid is upon us….

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