Best of the Week
Most Popular
1. Trumponomics Stock Market 2018 - The Manchurian President (1/2) - Nadeem_Walayat
2.Yield Curve Inversion a Remarkably Accurate Warning Indicator For Economic & Market Peril - Dan_Amerman
3.China is Now Officially at War With the US and Japan - Graham_Summers
4.Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18 - Plunger
5.Stock Market Longer-Term Charts Show Incredible Potential - Chris_Vermeulen
6.U.S. Stock Market Cycles Update - Jim_Curry
7.Another Stock Market Drop Next Week? - Brad_Gudgeon
8.The Death of the US Real Estate Dream - Harry_Dent
9.Gold Market Signal vs. Noise - Jordan_Roy_Byrne
10.The Fonzie–Ponzi Theory of Government Debt: An Update - F_F_Wiley
Last 7 days
Impulse Moves in the Currencies - 15th Aug 19
Best Merlin UK Theme Park Summer Holiday 2018 - Thorpe, Alton Towers, LegoLand or Chessington? - 15th Aug 19
The Essence of Writing an Essay that Must be Understood - 15th Aug 19
Is Solar Energy Rising From The Ashes Again? - 15th Aug 19
A Bullish Bond Argument That Hides in Plain Sight - 15th Aug 19
Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - 15th Aug 19
A Depressed Economy And A Silver Boom - 15th Aug 19
Moving Averages Help You Define Market Trend – Here’s How - 14th Aug 18
It's Time for A New Economic Strategy in Turkey - 14th Aug 18
Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - 14th Aug 18
Dow Stock Market Trend Forecast 2018 - Video - 13th Aug 18
Stock Market Downtrend to Continue? - 13th Aug 18
More Signs That the Stock Market Will Rally Until 2019 - 13th Aug 18
New Stock Market Correction Underway - 13th Aug 18
Talk Cold Turkey Economic Crisis - 13th Aug 18
Which UK Best Theme Park - Alton Towers vs Thorpe Park vs Lego Land vs Chessington World - 12th Aug 18
USD is Rising. What this Means for Currencies and Stocks - 12th Aug 18
Hardest US Housing Market Places to Live - Look Out Middle Class - 12th Aug 18
America’s Suburbs Are Making a Comeback - 12th Aug 18
Stock Market US Presidential Cycle, Seasonal Analysis and Economy - Video - 12th Aug 18
Yield Curve Inversion and the Stock Market - Video - 11th Aug 18
Land Rover Discovery Sport 1st Dealer Oil Change Service - What to Expect - 11th Aug 18
How to Setup Webinars and Use Them to Overcome the Barriers in E-Learning - 11th Aug 18
Big US Stocks’ Q2’18 Fundamentals - 11th Aug 18
Dow Stock Market Trend Forecast 2018 - 10th Aug 18
SPX Testing Its First Support Level - 10th Aug 18
Dreaming of a "Comfortable Retirement" on a Public Pension? - 10th Aug 18
The Forrest Gump of All Future Democrat Election Losses - 10th Aug 18
More Uncertainty as Stocks Got Closer to January Record High - 10th Aug 18
Gold and Silver Kill Zone - 9th Aug 18
Even More Cracks in the Gold Dam - 9th Aug 18
Ignore the Stock Market “midterm election year”, Which is “supposed” to be Weak - 9th Aug 18
Stock Market Trend and Volatility Analysis - Video - 9th Aug 18
Tips on Maximizing Small Serviced Offices Space - 9th Aug 18
VIX’s Collapse is Bullish for VIX and the Stock Market - 9th Aug 18
Vestles Platform Offers Several Key Trading Tools - 8th Aug 18
US Stock Markets Higher Until November 2018 - Part 2 - 8th Aug 18
US Stock Markets Higher Until November 2018 - Part 1 - 8th Aug 18
Stock Market US Presidential Cycle and Seasonal Analysis - 8th Aug 18
Is the Stock Market Correction Over? - 7th Aug 18
Yield Curve Inversion and the Stock Market - 7th Aug 18
Stock Market Elliott Wave Analysis and Forecast - Video - 7th Aug 18
Trade War! Win the Economic Hostilities Against the Chinese - 7th Aug 18
Technical Analyst Sees Silver as 'Oversold' - 7th Aug 18
Alex Jones Banned! Will Unapproved Opinions Be Censored Off the Internet? - 7th Aug 18
Gold and Silver Stocks On the Verge of the Next Major Decline - 7th Aug 18
First Time Buyers Need to ‘boost the affordability’ of Their Move Alone  - 7th Aug 18
Long Term Care Homes as an Investment are Heating Up! - 7th Aug 18
The Exponential Inflationary Stocks Bull Market - Video - 6th Aug 18
Land Rover Discovery Sport Oil Change Service Dash Warning Message - 6th Aug 18
Restructuring of Western Economic Power - 6th Aug 18
Stock Market Trend and Volatility Analysis - 6th Aug 18
Stock Market and Economy False Narratives That are Just Wrong - 6th Aug 18
VPN – Is It Worth It? - 6th Aug 18
All You Need to Know About Umbrella Companies - 6th Aug 18
Why China Lost the Trade War Before it Even Began - SSEC Stocks Index - Video - 5th Aug 18
Dow Stock Market Elliott Wave Analysis - 5th Aug 18
Iran's Rial Currency Is In A Death Spiral, Again - 5th Aug 18
IMF Produces Another Bogus Venezuela Inflation Forecast - 5th Aug 18
Gold & Silver Precious Metals Monthly Charts - 5th Aug 18
Time to Position for a Decade-Long Bull Market in Natural Resources - 5th Aug 18

Market Oracle FREE Newsletter

Trading Any Market

Gold, Silver Reaction Following Brexit, Central Bank Desperation Never More Evident…

Commodities / Gold and Silver 2016 Jul 01, 2016 - 12:02 PM GMT

By: The_Gold_Report


Precious metals expert Michael Ballanger discusses market reactions post-Brexit vote.

To truly appreciate market crashes, you must have an ample serving of grey hair.

Over the weekend, I must have received three dozen "Emergency Email Alert" notifications by newsletter services and financial intermediaries that got absolutely obliterated Friday morning and were expecting more of the same on Monday, which they got in spades. This new generation of "wealth advisors" has, unfortunately, been living off the largess of Central Bank guarantees and the winks and nudges of the "Finance Ministers" and "Treasury Secretaries" and "Chancellors of the Exchequer," where they make investment decisions based not upon analyses of balance sheets or income statements but upon the collective wisdom of Champagne Socialists. I have been writing about this for about thirty-five years and while it has not yet manifested itself in the advance of the prices of precious metals to levels that would correspond to the level of coinciding currency debasement, especially in the United States and Europe, it is going to be the "Talk of the Town" here in 2016.

Yesterday I heard two commentators on CNBC ask two of the stupidest questions in history. The first one was when Bob Pisani asked, "Why is the VIX (Volatility Index) down over 2 points with the S&P off 40?" The answer, which was even more ludicrous than the question, implied that traders had purchased volatility prior to the Brexit vote, and once it spiked after the decision, they were selling "vol," which was telling you that the selloff was going to be short-lived.

No, Bob, that is incorrect. The only "traders" selling "vol" yesterday were those at 33 Liberty St. in New York (home of the NY Fed), after instructions were taken from the "Working Group in Capital Markets" (covert arm of the U.S. Treasury).

They weren't "lightening positions" taken prior to Brexit, either—they were bludgeoning the VIX futures in order to drive the algo-bots into the "long S&P futures" trade, so naturally, since the market rallied off the lows in late trading in response to the sagging VIX, a rather obvious wink/nudge was hand-delivered to the masses. Net effect? A 20-point S&P rally arrives, and another 35-point rally follows.

The second "dumb as a bag of hammers" moment was when Kelly Evans questioned a fund manager about his ownership of gold within his family of funds: "You are a value manager, so how can you like gold in here when it offers no cash flow and no yield?"

Well, Kelly, why don't you ask that question to those British investors who flipped their British pounds into gold last Wednesday? They staved off a 12.5% currency haircut versus the Yankee dollar and they got an 8.5% lift in gold. Ask that question to a depositor in the Cyprus banks a few years back when they got sideswiped by the advent of the "Bail-In." It is called "counter-party risk"—where the guy on the other side of the trade is unable to settle the transaction—and you can bet there has been a lot of that being talked about across the pond these days. So THAT, Kelly, is a tad more important than cash flow or yield—it is called capital preservation. (See chart above.)

I am giving the markets a few days to bounce but I really do think that Europe is unraveling and that the ability of the Central Banks to inject liquidity ("manipulate") is rapidly coming to a close. I therefore will attempt to buy back the UVXY July $10 calls at $1.45, and since these were sold for double what I paid, the new adjusted cost on the 60% position is now $0.725. So when Bob Pisani tells us that the declining VIX is a sure sign that the selloff in stocks is going to be "short-lived," ask yourself what he was telling the viewers back from May 31–June 10, when the VIX traded under 13; it hit 25 on Friday.

As for the miners, they are acting "tired," considering that gold has traded above $1,300 for three days now. And despite all of this safe-haven volume, the HUI (Gold Bugs Index) has barely made a new high. However, the next time Kelly Evans asks a guest what they see in owning gold, show her the chart posted below.

The big news for me is the performance in the silver market, with it being rejected once again as it crossed the $18.50 threshold on multiple occasions. Knowing the cretins as I do, I fully expect them to allow the breakout later this week and suck all of the technical traders into the long side of the trade. I am already long the July 15 calls from the March 31 "Long Silver/Short Gold" options trade, and have about a month left on them since first mentioned in the March 31 Gold Report: "I will buy 100 SLV (iShares Silver Trust) July $15 calls for $0.68 (US$6,800) and also 20 GLD (SPDR Gold Trust) July $115 puts for $2.92 (US$5,840) for a net debit of US$12,640. I will need to see either $108.68 on the GLD or $16.26 on the SLV as breakeven points on this trade by the third Friday in July."

The SLV July $15 calls went out today at $2.40, making this a 90-day return of 89.8%; I haven’t booked the profit but I will offer these calls tomorrow at $2.40, and wait to see if we can get a solid breakout (I hate that term) above $18.50. The chart below looks like we are already breaking out, but the thickness (or lack thereof) of the line can turn you into a bum pretty fast, so I am going to wait for a solid move through $18.50 and pray that this time I'm not being set up for yet another classic "false breakout" in the odious Crimex silver pit.

I'm working on my mid-year review this week, where I provide revisions to the long, intermediate and short-term forecasts for gold and silver. I'll give you a hint: The long and intermediate are unchanged, but the short-term forecast for weakness into the end of July was going to be called into question until these Central Bankers decided to "rescue" the global stock markets with their incessant "interventions."

Lastly, remember what I have been saying since the early '80s about owning stocks when Central Banks are fabricating currency: "NEVER underestimate the replacement power of equities (stocks) within an inflationary spiral." The worst thing one can ever hold is a "fat bank account," because the longer it remains in cash, the less time it takes to depreciate. The reason that politicians created "central banks" was to give them a "foil" upon which to defer every time they elect to trash the purchasing power of the currency unit in which you get paid every month. Why is it that they all commit to an "anti-inflation" policy statement with government pensions PROTECTED from it? All of the politicians and government employees have pensions "indexed to inflation," and you and I do not. Think about it. Think about it very hard and email me if you can think of a plausible solution.  

How about "Fire them all!"?

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger's adherence to the concept of "Hard Assets" allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

Want to read more Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.

1) Statements and opinions expressed are the opinions of Michael Ballanger and not of Streetwise Reports or its officers. Michael Ballanger is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation or editing so the author could speak independently about the sector. Michael Ballanger was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for 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. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.

All charts courtesy of Michael Ballanger.

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules