Mid-Week Macro
The stock market remains strong, with the S&P closing today at 6481, and near an ATH. I agree with Michael Oliver’s momentum analysis that we are close to a top in the S&P. The question is how much will it correct, and after the correction, how much will it bounce? Stay tuned, but I doubt 6000 holds through September.
The story for August might be the gold/silver miners. GDXJ is up 81% year-to-date. Newmont is up 94%. Many gold/silver miners are up 100% year-to-date. Earlier this year, I said that Fresnillo was the cheapest Mormon. It is up 168% year-to-date. What’s fascinating is that the miners really haven’t broken out yet. Silver hasn’t even touched $40 yet. This has a long way to run.
The HUI closed today at exactly 500, and is up 81% for the year. I thought when we got to 500, that we would be running. In some ways, that is true. However, gold is actually somewhat stuck in a trading range below its ATH at $3500. Gold has not been ripping in August, but the miners have. Silver has also been somewhat stuck, trading at $37 to $38 for the entire month. So, why are the miners doing well? Two reasons. First, the Q2 results for the gold miners were released in August and were very good. The majors have been printing money with their high FCF margins that have averaged around $1200 per oz. Plus, with silver over $37, it has attracted investors. The margins for silver miners have become healthy, and investors have noticed.
While the miners have done exceptionally well in August, gold and silver prices are telling us to be careful. I think the gold/silver bull is going to buck soon. Get ready for a 10% to 20% correction in most of your miners. The good news is that any correction is likely to be short-lived. The banksters will have a very difficult time keeping gold down. My guess is that any correction will only last 4-8 weeks. That will be a nothing burger, as gold roars back. My guess is that gold is heading to $5K over the next 24-36 months, and nothing is stopping that outcome.
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