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Default or print toward inflation sounds sick! Defaulting would mean losing reserve currency status AND maybe having to give up land, resources and even our gold reserves to foreign interests that OWN us. Also, how would we begin to trade with other countries knowing our currency is worthless?
What does the USA have that the world needs in a post-default era? Wheat, coal and cattle?
@Tommy lots of whale fat.
We have lots of nukes. Trade or die.
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War has been the standard endgame for that scenario…
I know you like running the ratio of XAU:GOLD to indicate the relative attractiveness of gold stocks.
Today copper companies make up 25% of the index. Freeport is 21.8% of the index. Barrick is @ 19.6% of the index is and 20% of that is now copper raelted. In addition silver companies are now over 7% of this index.
So today the XAU is basically 1/3 copper and silver.
Would you look at HUI or some other index as a better gold stock index to compute your ratio?
Okay… I know this may sound crass, but it is sincerely not intended. I am just interested in understanding the contrarian point of view.
Since you gave me pause with a couple of your posts, I believe you owe this blog an update. What do you think of the current situation? DX is trending up and looks like it will break to recent new highs and GC has broke a trend line and significant resistance point.
Are your thoughts of a 3-year low in DX and a new high in GC still intact or are you considering following a different newsletter?
I must confess that I haven’t kept up with changes in the composition of the XAU. Were copper companies not in the index several years ago?
On the other hand it’s not too hard to discern when the ratio is getting to stupid cheap levels. If at the bottom of the intermediate cycle the ratio is above 9 then I think we have to buy miners.
Usually big money drops an index/ETF below an important stop/pivot to create the liquidity for a big turnover of shares as Gary has shown us, or completes the retest of a T1. On SLV, we have these important levels to look for in conjunction with gold’s cycle low:
30.63 – 200 DMA
30.44 – January top
28.62 – 50 week MA
26.03 – January bottom
22ish-23ish – Second leg of decline if this was midpoint
19.44 – Retest of consolidation
Cory, 30.44 (the Jan top) and 30.63 (the 200 DMA) also match with ~30.5 for the 38.2% Fib retracement of the rally since the early Sep ’10 breakout. Pretty strong support I’d wager…
Err, I think that should read 61.8% not 38.2%…
The silver market is too thin to have much success trying to trade technicals.
We just need to spot the bottom of the gold cycle and odds are high that silver will bottom the same day.
I really don’t think gold will drop too severely as Gary has said, I’m just watching it for timing. Doc has also said we won’t breech a previous intermediate low. I don’t know if gold will bottom this cycle or next, but silver likes to bottom on volume and then bottom slightly lower after a quick false rally. That second bottom is where I would like to pick up miners if possible. I would rather sell my puts early and go Old Turkey long because the math works in your favor on the long side.
It isn’t a matter of default or not default. Printing and devaluing is just another form of defaulting. Either way, our creditors don’t get paid back in full. We could never pay back our debt without a major devaluing of our dollar.
If you need some ideas for the A wave, check out the charts on these names. You can type the company name into the symbol catalog on stockcharts.com, and depending on whether you can trade foreign listed or not, find the current chart, price, volume, and listing exchange that works for you, and make your own mutual fund of miners. I like smaller companies with lower prices that still have decent volume, forming a good T1 pattern or that have run up 1000%-1500% since 08. They are being held by large funds as well so they have been researched. Not a guarantee of anything and not investing advice. Just a place to start your preparation for the A wave.
Silver miners ETF (SIL), then Fund Holdings
Gold explorers ETF (GLDX), then Fund Holdings
Being on day 9 of this daily cycle, we still have 11-19 days left. So I’m holding my July Puts for approximately another 2 weeks. I want to sell into a weak day for silver (strong day for the Puts) the week before OE.
I am actually going to cover a strategy for exiting and rolling any precious metal puts in the weekend report.
Well not exactly. I’m just going to cover what I think is going to happen with the dollar and gold cycle. I’m sure you can figure out how to apply that to your positions.
My subscription expires in September, I am on the old subscription plan. Rather than go through the bother of canceling and resubscribing at this point, will you allow me to take advantage of this in September?
If not, I understand.
I covered how old subscribers can accomplish that in the June 16 report.
Thanks. My enigma is I have some July SLV puts a bit too far out of the money at 30. I would need to see $29 in the SLV on July 15th (or before of course) in order to make holding them that far worth it. Unless silver keeps crashing the decay eats up any slow movement down and any move up destroys them.
3 weeks may seem like a long time given how quickly silver can fall but in reality is not that long especially with the holiday.
I have no choice but to follow gary’s lead here and trust his trading instinct.
Really the major positive for me is dollar strength. Silver is back to oversold and the miners are already on firesale.
This hasn’t been easy and I’m sure won’t get any easier. We’re bound to get more monkey wrenches.
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