In the face of the FED raising interest rates by 75 basis points and dropping forward guidance, the US entering into a recession after negative Q2 growth, new home sales (as well as pending home sales) taking a massive haircut, more jobless claims than predicted, higher-than-expected inflation in the EU, no Q2 GDP growth in Germany, higher-than-expected PCE in the US, weaker-than-expected economic activity in China, and other grim economic data; the stock market and commodities closed the week heavily in the green.
How are commodities and stocks up in the face of all that bad economic data? Lobo Tiggre says it might be hopium, copium, or another type of -pium, but the market sentiment is strengthening, which has made him a buyer as he is no longer concerned that a stock market crash might be coming over the short term.
What are experts saying about commodities?
- Lobo Tiggre told me that he expects the market to rally from here through September, as that’s when we get the next FED day, as well as Q3 GDP numbers – which may be worse than expected – and that, he says, might kill off market sentiment. Before that, though, he expects commodities to rally, so he is now looking to deploy his available capital into uranium, gold, and silver, but not yet copper stocks.
- Chapman Scarborough told me that Cameco’s Q2 earnings call contained some very important information, and confirmed the start of the bull market, which he expects to be different than the 2007 one. Chapman says this bull run will be longer, with sustained higher prices, as we are lacking enrichment capcity and overfeeding will be the name of the game for the foreseable future, before enrichment capacity in the OECD countries comes online. This might take up until 2028, he says. Meaning, plenty of time for uranium to run to what Cameco said are incentive prices for new productuon (roughly $90/lbs).
- Dr. Quinton Hennigh told me that, when looking to build an edge as a natural resource speculator, investors need to get informed about understanding drill results. We talked about how to read drill results, what are good and what are bad drill results. He is a big believer in the gram-meter metric. Dr. Hennigh likes holes that are over 100 gram-meters (g/t * lenght of intercept) gold. Meaning, it’s either 1 g/t AU over 100 meter, or 10 g/t AU over 10 meters, or 100 g/t AU over 1m, etc.
- Bruce Counts, CEO of Lithoquest Resources, who is a paying customer of Resource Talks, told me that although the recent drill results weren’t the “aha moment” for the company and they were not as good as expected, he still has a lot of ground to cover at Miminiska, as well as between Miminiska & Frond, so he is still confident in the story.
What happened in commodities this week?
Commodities had a great week, despite the economy being a dumpster fire, to put it mildly.
- Copper +6.69%
- Gold +3.15%
- Silver +8.49%
- Uranium +10.78%
- DXY -0.67%
What moved commodities this week?
Gold & Silver
- GDX +3.38%
- GDXJ +9.23%
- SIL +9.32%
- SILJ +11.16%
Gold started the week off with three flat days, until gapping open on Thursday and closing the day 3% higher, in the face of the FED raising interest rates by 75 basis points.
The sentiment in gold stocks, as measured by the BPGDM index, is now flattening, though still at the extremely low levels of around 10, on the weekly chart. This tells me that while sentiment has maybe started turning, there is a long, long way to go before as many people are bullish on gold as we’re normally used to.
Did gold run because the market realized that real interest rates are still negative and the FED wouldn’t be able to catch up to them? Could be. It also could have been lifted by an improved overall investment sentiment across all asset classes. It’s anybody’s guess really. The DXY did close the week lower, so the fact that gold ran as much is not surprising, given that its a monetary metal.
However, it is interesting that silver ran as much as it did. This makes Lobo think that silver is running on the back of its industrial applications. Maybe it’s because the market now trusts the FED to get inflation under control without crashing the economy (soft landing). That is weird given that we’ve now had two consecutive quarter of negative GDP growth which is defined in economics books as a “recession”.
In any way, given that the federal interest rates are now at 2.50%, the FED only needs to go through either two double rate hikes, or four normal rate hikes to get it to their desired 3.50%. Tiggre told me that the market participants see that as “dovish” and are not afraid of stocks anymore. However, let’s not forget that the stock market is not the economy. If, later in September, the Q3 numbers come in even worse than the Q1 & Q2 numbers, in combination with bad labour data over the summer, that would mean the FED has failed their soft landing, even if the stock market is up by then. This could end up dragging stocks – including gold & silver stocks – lower, towards the end quarter of the year.
Of course, many things “could” happen in between now and the next FED day, which is why Lobo believes the market is running on hopium as opposed to fundamentals.
That notwithstanding, Tiggre told me that he thinks the fact that the market ran on bad news means that the hopium is strong enough for a sustained rally and that the intermediate term bottom is in, which is why he will be a buyer of gold & silver stocks next week.
If you want to know what Lobo is buying, check his track record and consider buying his newsletter. I have been a subscriber for a while now and have already benefited from his research.
- COPX +9.13%
Where will all the copper come from? That the question that bugs me when I think about the 2030s decade.
In this week’s Resource Heads, I took the liberty of going over an interesting article that talked about two interesting charts that show why the future is all about mining, and especially copper, of which we’re not finding enough.
I added a third chart to that and talked about why – regardless of what the FED might do over the intermediate term – I am becoming more and more confident in the copper thesis. Caveat is that I can afford to sit on losses for years.
Here are the charts I talked about:
None of these charts say that copper has to run in the short, or intermediate term, though. Copper could very well feel the pain of a end-of-the-year crash. So, for the people who are good at timing and have manparts of steel; I wish you good luck in timining this, I will just keep holding my two copper explorecos but I will not yet be adding.
Lobo Tiggre is not yet buying copper stocks, he told me.
- URNM +12.75%
- URA +11.76%
- U.UN +10.78%
The day after FED day was obviously a pump day for pretty much everything out there besides the dollar.
However, it is interesting that the URNM uranium sector ETF had its best day on Wednesday, when Cameco had its Q2 earnings call in which they confirmed the bull market is coming to a portfolio near you any day now.
What I think would be a very interesting situation is if the uranium spot price ran much higher in Q3 and the equities followed. This could give the uranium sector the strenght it needs to decouple from broad-market equities, if a crash in Q4 matterializes.
Chapman and I talked about the current situation in this week’s show, and he even told me which stocks he likes. He likes companies that are close to production and will be making money off this bull market. He mentioned; Cameco, Boss, Global Atomic, Bannerman, URG, and a few others.
We are talking our book, though, as we own shares of the companies mentioned above, so don’t listen to us.
Lobo told me that uranium stocks are now at the top of his shopping list. If you want to see which stocks he’s buying, consider his newsletter and research service.
Economic Calendar for Next Week
Below, you will find an overview of economic news and data expected next week. I only watch the ones that I deem important for my gold-silver-copper-uranium-focused portfolio. Did I miss something? Please do let me know.
Next week is mostly about PMI numbers across the globe and US jobs. It’s also an important week for the UK. After next week, we’ll have a better picture of the state of the British economy.
- China Caixin Manufacturing Purchasing Managers Index (PMI): this is an important economic indicator for the Chinese economy. A reading below 50 means the manufacturing economy in china is contracting. The more under 50, the worse the contraction is. A reading above 50 means the manufacturing economy is growing. The more above 50, the higher the growth is.
- Previous: 51.7
- Expected: 51.5
If you’re Canadian, take a break. It’s a long weekend. Canadian markets will be closed on Monday.
- German, British, American PMI manufacturing indices. All three are expected to stay within previous readings, with only the German falling below 50 and indicating a contraction in the manufacturing economy of the country. The American & UK PMIs are expected to be above 50.
- US job openings (JOLTs)
- Previous: 11.254M
- Expected: 11M
A contraction in job openings could mean there is less work and thus indicative of a crumbling economy.
- More PMI data from the US & the UK, but the non-manufacturing data, the service PMI, basically.
Although there is no contraction expected in the either of the PMIs, if Monday shows a contraction in manufacturing PMI and Wednseday confirms that contraction by a fall in service PMI, that could be indicative of a crumbling economy.
- UK FED day equivalent. UK’s central bank takes decision on interest rates.
- UK construction PMI
- US initial jobless claims are expected to drop from 256K to 255K. A miss on expectations is not a good thing.
- US unemployment rate is expected to stay the same, at 3.6%. More unemployment = not good for the economy.
- US non-farm payrolls are expected to fall to 250K, from 372K. The larger the drop, the more indicative of a crumbling economy.
- Canada employment change is expected to strenghten from a contraction of -43.2K to a growth of +15K
- Canadian Ivey PMI is expected to stay the same, at a positive 62. Drops are not good. Lower than 50 is not good.
Antonio Atanasov is not an investment advisor. Antonio Atanasov owns shares of companies mentioned in this publication. Some of the companies mentioned in this video and/or publication are paying customers of Resource Talks. More specifically, Core Assets and FireFox are paying customers. The information provided in this publication – and all other publications by Resource Talks – is impersonal in nature and meant for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple licensed, experienced, and qualified investment advisors. Get numerous opinions before taking your own decision in the end. The minimum risk on any investment mentioned in this publication is 100% loss of capital.
Shortly: you will lose all of your money and possibly most of your brain cells if you listen to talking heads on the internet. Especially if they have orange hair and no experience (me).
Readers are cautioned that this presentation likely contains forward-looking statements about expected future events and the financial and operating performance of any companies potentially discussed herein. Reality often varies from people’s expectations. Managements like over-promising and under-delivering. If a manager was speaking in here, beware. Readers are encouraged to read the Cautionary Note on Forward-Looking Information and to consult the Company’s Annual Information Form, which is available on www.sedar.com. Reading the full disclaimer on the disclaimer page on this website is mandatory.
00:00 Important warning
02:20 Lobo Tiggre on FED, gold & silver
23:00 Chapman on uranium, uranium stocks and enrichment
59:20 Why copper must go higher over the next decade
01:05:00 Reading drill results
01:35:00 Reading drill results case sudy – Lithoquest Resources
01:53:00 Economic calendar for next week
Was there something wrong with what the guests said? Did I fail to ask an important question? Did I make a mistake? Please tell me about it. Criticism and skepticism are highly welcome and help me learn. Thank you.