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Boy, did last week give us something to sink our teeth into. So let’s downplay the macro stuff that got us to this point successfully (okay, we’ll have to include the Gold/Silver ratio), and the stock market stuff, which is basically little changed. Instead we’ll look at what I think is a more pressing situation; interpreting what this precious metals correction is, and is not.

Note: This report focuses on the precious metals and to a degree, industrial/commodity metals. This in light of Friday’s theatrics led by silver. Next week we’ll likely return to a more balanced format.

Meet your new Fed head

Everything you need to know about Kevin Warsh, Trump’s pick to lead the Federal Reserve

This was an excuse to finally pop the excesses in silver, the precious metals, platinum and palladium, and some other metals.

It is obvious that my assertion that the real powers that be would not let Trump install a dupe, as I am sure he wished before the Presidential TACO had his ambitions right-sized by bankers and politicians who know where the financial system’s bread is really buttered, including both political aisles.

The Federal Reserve is and has for decades been an instrument of inflation. But they were not going to stand for some hand puppet that Trump would control at will. I think Warsh is closer to Powell than Hassett. Dollars to donuts though, Warsh will be an agent of inflation when called upon. That is because the Fed is an agent of inflation. Warsh is a hand puppet just like Powell and the long line before him. A hand puppet to the banking system and the broader government, but not to Trump necessarily.

If/as needed, this hand puppet will attempt to do what Powell, Yellen and the father of cynically over the top inflationary mechanisms, Ben “the hero” Bernanke have all reliably done on cue when it looked like the systems was going to try to purge the previous inflationary excesses in a deflationary liquidation.

Except that the inflationary machinery either seized up and broke down in the 2022 bond market rebellion, or it has been rendered less functional, or even dysfunctional.

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But the hype is that Warsh is a relative hawk. Conveniently a perfect recipe for the silver >>>

Flash Crash (or the Silver Bullet Backfires)

From NFTRH 899 on January 29:

Finally, it could just come time. Every bull market takes corrections. Silver is vertical and it has just smashed into and through its big round number, 100. Gold is at 4988, about to ding 5000!

Considering these round numbers, the status of the Fed and the massively extended price of silver, we can call it what I’ve been calling it… “high risk”.

Risk not only was realized in silver, but to varying degrees also gold and gold/silver stocks and the two metals that tend to follow silver, platinum and palladium. Copper/Cu stocks got whacked, “critical”/strategic commodities and their producers got hammered, and stock markets took some pressure.

It is time to beware the gold bugs and their witting or unwitting promotions. One of which I noted discussing whether a flash crash in equities could pull down the precious metals. It’s always the fault of something else in Goldbugville, and the old “equities pull down precious metals” is a classic. To keep the follower bugs enthralled, the promo machine of the leader bugs makes them feel special, like their asset market of choice is ordained and pure.

The precious metals are not pure. Gold is a rock ripped out of the ground and refined into something heavy and beautiful, serving as a monetary anchor in a world (financial and otherwise) gone insane. Silver is a rock ripped out of the ground and refined into something less beautiful, but more widely used for industrial purposes.

The markets for these rocks became dangerous. It’s as simple as that. Price-wise, the value of the gold rock was the same 50% below the price highs as it was at those price highs. Gold’s value was stellar when its insurance was not needed at a price below the “bull gateway” of 1378, and it was stellar at last week’s high, and today’s pullback level of 4895. Gold is not about price. Insurance is not about price. Long-term value is what it is, and it’s not price. It is insurance, safety, an anchor in the storm. That’s about it.

Unsavory and speculative interests got into the markets for the metals. Silver, especially, got played. We all know it. Similar to what happened to nickel a few years ago, and platinum and palladium as well. There is a lot to unpack here, because we are in a new macro, with inflationary and geopolitical signals that could indeed paint this situation as different from the decades prior to 2022’s bond market rebellion.

Make no mistake, if this were the old macro, with the Continuum chart above intact to its gentle disinflationary downtrend, we’d be preparing for years of precious metals bear market to come. That is what happened post 2011, when the promotional machinery kept on chugging blindly bullish into a terrible bear market. The post-2022 macro likely has other more bullish ideas, but first there will likely be more pain pending any coming interim recovery rallies/bounces.

So let’s take a look at previous examples of extreme excess in metals and their aftermath. But let’s do it with open minds about what is ahead in both the short and long-term in the new macro. After that we’ll gauge the correction in the metals and especially favored Au/Ag/Cu/Ni/PGM, etc. miners/royalties/exploration buying opportunities, for both shorter-term trades and later, long-term positioning.

Needless to say, I greedily took profits on the SLV puts and the JDST gold stock hedge on Friday. As this simple chart of the BPGDM implies, Risk/Reward is much better in gold stocks, post-crash in the metals. That was quite a price… shall we say, “adjustment”.

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The 3 Snowmen; The Precious Metals
Update On The Late Stage Silver And Gold Rally
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