by Dave Kranzler, Investment Research Dynamics:
The sell-off in the precious metals sector since the election has nothing to do with Trump’s victory. That thesis is based on the price-action in the precious metals sector when Trump was elected in 2016. But the sell-off that year followed a move straight up starting in January 2016 that lasted nearly eight months. The sector began heading south in late August that year. It was going to at least undergo a correction in spite of Trump. There’s some other factors back then that are not present currently.
The current sell-off has more to do with the fact that, after a big move higher since the beginning of August the sector had become extremely overbought technically. The Comex banks were shorting a massive amount of gold and silver contracts to feed the appetite of the momentum-chasing hedge funds and CTAs. The bank short position became extreme as did the managed money long position. It was the perfect set-up for the banks to implement what I call a Commitment of Traders open-interest liquidation operation. Using a technically overbought condition in the sector, along with a torrid rally in the dollar, the banks coerced selling by the hedge funds/CTA. The sell-off was almost exclusively during Comex floor trading hours – almost none of the downside price action occurred during physical market trading in the eastern hemisphere.
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Last Friday the COT report showed that the banks covered 15k+ contracts in an amount that was nearly identical to the decline in the managemed money long postion. Unfortunately the big move lower Wednesday won’t show up in the COT numbers until November 22nd (Tuesday is a cut-off day). But I suspect this Friday’s COT report will show that the banks covered more shorts and the managed money puked more longs.
I discuss the market action and dispel the Trump/gold misinformation in a podcast with Arcadia Economics
The mining stocks are extremely oversold now. As well, the dollar is extremely overbought and may be topping. In response to a flood of emails from my subscribers, I included a shopping list of my favorite mining stocks in today’s new issue of my newsletter to buy in order to take advantage of the sell-off and the next move higher. I also updated five stocks that I cover and recommend that I believe could be anywhere from doubles to 5-baggers over the next six to twelve months. To learn more about my newsletter and get these stock picks, follow this link: Mining Stock Journal
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