Silver and Gold: The Winning Bet – Agnico Eagle Mines (NYSE:AEM)

Source: Michael Ballanger 04/08/2024

Michael Ballanger of GGM Advisory Inc. shares his thoughts on the current state of the gold and silver market, as well as a few junior stocks he believes are worth looking into.

Before I begin with my weekly assessment of market conditions, I have a story that needs to be told because as I glided around the blogosphere and Twitterverse and saturated world of ever-repeating podcasts, there was a distinct mixture of elation, excitement, and greed inundating the precious metals space with a particular pungency for silver and the PM miners.

A few decades ago, I had a brilliant, highly successful client who luxuriated in the practice of correcting me whenever I would offer him investment ideas. Be they my grammatical errors or factual oversights, no conversation went uncritiqued by this self-anointed wonderchild of intellectual superiority as interruption upon interruption became the order of the day whenever I dared make the call.

One particular conversation in February of 2020 involved gold and how I believed that it was a suitable place for investment capital given the ludicrous extremes to which the leaders of the Free World would devolve in order to protect their citizens from certain ruin and “death by microbe” after news of a strange new strain of virus was emerging from central China.

After multiple stops and starts, my esteemed client punctuated the conversation by embarking upon a lecture in which he dismissed the notion of gold being the “asset of choice” and opined that if I was worth the fees he paid me, I would know that the better place to be was silver.

No bull market in gold can ever survive without the company of its little sister, silver.

Now, it wasn’t that I didn’t know about silver. I played silver early in my career when it made the first Hunt brothers-driven assault on a $50 an ounce, only to be soundly and violently repelled by a massive collusion by the government, Wall Street, the CFTC, SEC, and DOJ.

After barely escaping that margin-calling hurricane that befell commodity traders the world over, I decided that despite the fact that nothing is more fun for me than “playing the ponies” at Woodbine on a sunny summer afternoon, silver would be far too “risky” for clients. However, given that this client had an IQ somewhat larger than his considerably inflated ego, it became apparent that by the end of my pitch, he had already mapped out his own strategy for taming the inflationary beast being conjured up by the central-planning pandemic battlers.

A few days later, I was instructed to deposit $100,000 into his futures account and initiate a position in July silver while taking on an equally notional short position in June gold. The idea was that if gold was to move higher, silver would obviously outperform it as it had done in every major bull market in precious metals since the Dawn of Margin Calls. In effect, he was shorting the Gold-to-Silver ratio (the “GSR”) at around 90 because, as he so forcefully insisted, “the historic ratio for gold to silver is 15, and if you had done your homework, you would know that.”

As you can guess, the rest, as they say, is history.

I cautioned my gifted client with the super-enlarged forehead that there was an inherent risk in assuming that silver would immediately scream ahead of gold because even in the 1970s, there was a “lag effect” where silver played catch-up to gold before it actually took the lead.

As I had suggested in February, the central banks and governments around the world hit the panic button when cases of COVID-19 arrived in Europe and North America, delivered handily by busloads of curious tourists from all over China all collectively spewing out infected microbes as they snapped photos of the Louvre, the Washington Monument, and Niagara Falls.

Gold responded with vigor and leaped to the fore, rising sharply of its own volition and, unfortunately for my client, without the merry accompaniment of silver. The first margin call came four days later, to which more funds were transferred, with the second a week later, after which the client demanded a “meeting” to discuss why he was losing his shirt on “my” recommendation.

Well, I turned to the notes I had written in my journal as he was instructing me like a constipated school marm to enter his orders and reminded him that it gold that was “my recommendation” and that being short, the GSR was a brilliant idea, but a very risky one, despite his obvious intellectual advantage over a plebe like me. By the middle of March, after one of the briefest ownership periods in futures trading history, the trade was liquidated with a sizable loss of both equity and self-esteem, once again proving the time-tested truism that says that when one is trading the silver market, expect the unexpected and never let a loss get out of control because silver, it is said, is a very cruel and unforgiving mistress.

The client survived, and after a few months of therapy and extensive rehab, he returned to the markets, preferring to invest in bonds and utility stocks. He called me to report his jubilation every time a coupon or dividend was paid. Pax tibi! (“Peace be with you.”)

Since the very early months of 2023, I have been of the opinion that there would be only two metals that had any chance of dodging the onslaught of a harsh recession brought on in turn by what was then a never-ending series of Fed Funds increases.

As the year 2023 progressed, I had a few brief dalliances in lithium and uranium, but my “serious money” was gathered around the likes of copper-gold titans (like Freeport McMoRan Inc. (NYSE: FCX) ) and a basket of gold and copper-gold developers and explorers. That was a noble cause and an admirable effort, but not only did I completely miss the part about the “harsh recession,” I also chose to ignore silver, which has been second only to gold in performance since the October 2023 lows.

However, this week ended with silver finally closing above the resistance band. For May, silver resided between $26.47 and $27.37, and it went out for the week at $27.49 after trading as high as $27.60.

That marked “Day One” of the required two-day close that I needed in order to avoid a whipsaw, which has happened every single time I have allowed hubris and greed to dictate an investment decision. Sticking to the rule, if I get a close by Tuesday’s pit-session bell above $27.39 and the inevitable smackdown is avoided, I will delicately place my baby toe in.

The roiling waters of the silver market take a small position, assuming that there is going to be the “granddaddy retest” of the February 2022 peak at $30, where the Walls Street Silver gang got pummelled to within inches of their lives when they attempted to force a short squeeze on the bullion bank behemoths that have been working the silver pit since the kiddies were munching on Pablum.

A two-day close above $30 will represent two very important realities for all investors in the metals, including ETF’s, futures, and miners both big and small: 1) silver will be headed significantly higher with $50 as the first major resistance and $80-100 just beyond that, and 2) that silver’s ascent has confirmed the veracity of a powerful new bull market in the entire precious metals sector.

The latter is, for me (and all subscribers to the GGMA), of paramount significance, as silver is the #1 indicator of the health and sustainability of any bull market in gold. With silver leading, one can accumulate positions in the miners of all commodities, including copper, zinc, and nickel, because gold when confirmed by silver’s strength, is the harbinger of higher global commodity prices. It is also why the Fed wants it controlled: rising gold prices fuel a rise in inflationary expectations, and it is the expectation of rising prices that influences labor settlements and product pricing decisions, which are the kindling by which inflationary spirals are ignited.

No bull market in gold can ever survive without the company of its little sister, silver.

I am flat the trading positions in the SPDR Gold Shares ETF (NYSE:GLD) as RSI has advanced to an elongated 81.72, and as can be seen below in the point-and-figure chart, the price objective I identified a few weeks back at $220 is a mere two “X’s” away. The trade I picked off at around $183 three months ago has paid off handsomely, and although I missed the option trade from $202 to $215, GLD owes me nothing, as it has been a thing of absolute beauty.

Not that I am exiting gold here in any way, shape, or form. I own millions of shares of the junior gold developers, and I am a shareholder in the mighty Freeport-McMoRan Inc. that has vaulted from my entry-level around $38 to over $50 in less than three months. I continue to hold the position for its exposure to copper and gold as I do any junior developer with a gold resource over 2,000,000 ounces (such as Getchell Gold Corp. (OTC: GGLDF) because while the metals have moved, it was only late last week that the big money flows began to inhale the senior gold miners with Newmont Corp. (NYSE:NEM) up 5.1%, Agnico Eagle Mines Ltd. (NYSE:AEM) up 2.33%, and Barrick Gold Corp. up 2.7%. The (NYSE:GDX) added 3.23% of its junior miner sibling (NYSE:GDXJ), adding 3.43%.

As I see it, gold can get to the$2,370-$2,380 level before it runs into any type of wall, but as previously stated, RSI readings above 80 are usually cause for temperance. In fact, corrections of the first explosive breakout in gold are actually the best opportunities to add to the mid-tier and junior positions because the trickle-down effect always occurs to the benefit of the little ones after the massive passive funds scramble to get positioned in the relatively thin market caps of the Senior and Intermediate golds.

The P&F shown below shows the price target that I drew last week and just how close we are to that number — and please remember that price targets are not “sell signals” in the sense that if we hit $2,380, gold will roll over and collapse in a steaming pile of heartbreak and outrage. It simply provides me with the discipline of taking a few chips off the table.

That very table, it must be said, is the same table that has reached into my pocket numerous times since the last peak in August 2020 and removed both money and pride with merciless precision.

Listening to CNBC this week, all I could stomach and only very briefly was the constant drone of Sara Eisen’s nasal twang as she repeated time and time and time again that “Bitcoin (CRYPTO: BTC) is approaching the highs for the session” or “Bitcoin is rallying” or “Bitcoin-liness is next to godliness” while not once commenting on the all-time high for gold.

The MSM will provide endless chatter and chirp on the record highs for the S&P and untold riches created by the Mag Seven, but never will they admit anything resembling candor and/or accuracy of reporting that would state that since the rally began on October 29, 2023, the gold price has actually outperformed the S&P by a margin of 3.81%.

Every podcast, newsletter writer, and armchair technician that speaks or writes thousands of words about the financial markets has completely missed the biggest story of the past four years, which is not about the Fed Funds rate or “AI” or geopolitical turmoil; it is about the U.S. dollar price for gold now at all-time highs and the repercussions surrounding that event. That is the story of the week. Pure and simple.

I leave you all with a proposition for ponderance and circumspection as the Monday morning trading session approaches.

You have all read the pronouncements from the Masters of Finance that have earned the privilege of getting all of the air time that reaches millions upon millions of readers and listeners making bombastic statements surrounding the debt monster now threatening to choke the lifeblood out of the U.S. economy and with it, the U.S. war machine that has ruled the waves and clouds since WWII. They would purport that the U.S. Treasury and the Fed are “trapped” and that the only way they can service the debt is to “inflate their way out of it” as if that is a seminal event to be expected at some point in the future that would have a man with a starter pistol firing the warning shot.

I submit to you that the move to “inflate their way out of it” is exactly what began in March 2023 when they set up the Bank Term Lending Facility that would rescue banks whose bond portfolios were upside down with duration risk completely unhinged. Since then, the liquidity that saved those rudderless and reckless banks that have been driving stock prices to all-time highs and keeping food prices and housing and medicines at record levels is precisely what one would classify as “inflating their way out of it.”

I have called the event designed to minimize the impact of insolvent sovereign treasuries as “The Great Reflation,” but where the average citizen is out to lunch is to expect that these rising prices are randomly generated events. They are not. They are an integral cog in the wheel of monetary inflation that would serve to lessen the burden of unserviceable debt. In other words, we are not in the pre-reflation period; we are actually in the very early stages of a monetary exercise seen as the only way for the Western Nations to maintain the status quo. What the move in gold is trying to tell us is that there is a maelstrom of inflation coming over the mountain and while the elites — the 1% — have been given ample warning and now own swaths upon swaths of real estate and stocks and farmland that were the very assets of choice in Weimar Germany that saved citizens from the hyperinflationary shitstorm, the average working class citizen scrambles to survive completely oblivious to this master plan of maintaining order and prolonging the status quo.

That initiative is not some distant action early in the formation stage; it is here now.

I have read perhaps ten books detailing the events that involved Weimar Germany 1921-1923, and I do not exaggerate when I tell you that many of the steps taken by the Reichsbank back then are exactly what is being executed today by the Fed and the U.S. Treasury and is repeated around the globe. Not one of these debt-engorged nations will ever repay their obligations, not to mention the entitlements like Social Security and Medicare and those are liabilities looming on the horizon and never included in the $34 trillion often cited as the level of national debt.

As you go through your financial statements and review portfolios this weekend, remember that if all that happens as you emerge from this reflationary tunnel thrust upon you by our monetary masters is that you keep pace with inflation, you will emerge as an enormous winner, and part of a very, very distinct minority. The only way to do that with purity and ease of execution is with gold.

Pass along the memo to Sara Eisen.

Important Disclosures:

1. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Getchell Gold Corp., Agnico Eagle Mines Ltd., and Barrick Gold Corp.
2. Michael Ballanger: I, or members of my immediate household or family, own securities of: All. [COMPANY]. I determined which companies would be included in this article based on my research and understanding of the sector.
3. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
4. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.
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Michael Ballanger Disclosures

This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.