On the heels of continued weakness in the gold market, one of the greats discusses exactly how he is planning to trade gold and the mining shares.
By Bill Fleckenstein President Of Fleckenstein Capital
January 26 (King World News) – Overnight the post-election form continued, as world bond markets inched lower once again. If only we knew why rates were backing up then we would really know what to do, but oftentimes it is impossible to know the exact reason (especially early on in a move). It is also entirely possible that the current decline is just a reaction to the insane blow-off as various countries began to experiment with NIRP…
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The Beat of a Different Drum
On the other hand, if bond markets start to sense more inflation (or fear more), then central banks will really be trapped and it will be possible to craft lots of winning strategies. Unfortunately, about all I think we can say for sure is that the deflation bid has come out of the bond market, but there is no generalized angst, which is why stock markets continue to ignore bond yields — and they might keep doing that until the bond market beats them over the head and won’t let them anymore.
As for our stock market, it spent the entire day just meandering more or less sideways around unchanged after yesterday’s “momentous” victory over the Dow 20,000 line. Away from stocks, green paper was quite strong today, particularly against the yen and the euro. Oil rallied 2%, fixed income was weaker, and the metals were as well, with gold and silver losing about 1%. Once again, some miners were roughed up while others held their ground.
Waiting To Pounce On the Ounce
Obviously, a correction in gold is underway, while the miners recently seemed to be anticipating some sort of a breakout. Thus, we could see some indigestion, but as I noted yesterday, I will be looking for an opportunity to take advantage of this sometime between now and the middle of next week, but this is just a trading strategy and may not play out as I am guessing. That is one thing about trading: you have to be prepared with a game plan as to what to do if your idea doesn’t pan out.
Included below are three questions and answers from the Q&A’s with Bill Fleckenstein.
Bonus Q&A
Question: Hi William. You have advocated for years to buy physical Gold and Silver before purchasing the miners. Do you still feel this way? I would gladly sell my stocks to purchase more physical anytime. I always felt that no matter what they do with prices they can’t take my physical metal from me. I love looking at my uncirculated 90% Silver coins and my gorgeous $20 dollar Gold double eagle’s! I know the miners are a derivative of the metals and you’ll make a lot more money when prices start rising but to me you can’t replace owning the metal versus a piece of paper. Thanks.
Answer from Fleck: “I totally understand what you mean. Thus, if you feel that way, swap some miners for metal.”
Question: Bill, is it really a market if it never goes down?
Answer from Fleck: “Is it really a market if central banks use QE to buy assets?”
Question: Bill, the Canadian dollar (FXC) has been outperforming the other pieces of confetti over the last few weeks. I have owned a moderate position for years that I “rode up and rode down.” I have a full position in gold and miners. If you owned FXC here, would you sell or hold or buy? Just asking your opinion and any reasoning you might share, my decisions are obviously up to me. Thanks. Enjoy reading your column each workday.
Answer from Fleck: “I’d be inclined to hold it to see if we get some generic dollar weakness. I can see how the CAD would benefit by being close to America, but not actually America, in the eyes of some people.”
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