After a rough few months in the junior resource sector there are signs that the worst may be behind us and the seasonal tailwinds just over the horizon are a welcome respite for weary investors. Given the potential importance of this recent inflection point I felt it was a good time to have a conversation with Bob Moriarty and get his insights on investor sentiment and where we might be in the investing cycle. The conversation didn’t disappoint. Without further ado here is Energy & Gold’s July 2018 conversation with 321gold founder Bob Moriarty…
CEO Technician: You put out a couple of pieces in the last week which pointed out that everything is lined up nicely for a bottom in precious metals. Can you elaborate on what you’re seeing?
Bob Moriarty: Have you read the piece I wrote on July 6th last year?
CEO Technician: Yes.
Bob Moriarty: I called it absolutely accurately to the day last year. The problem with this year is that the exact cycle low is on the 12th (July 12th) but we had a full moon on the 28th of June. I think we’ve seen it, I think we’ve made the low. Monday they were running the stops, platinum was down $40 or so and gold briefly fell below $1240 in the August futures. Now they always run the stops before they run prices back up. I think we’re going to have a two month rally and probably go up $150 on gold.
CEO Technician: You think gold will be back near US$1400 again within a couple of months?
Bob Moriarty: Yes.
CEO Technician: Have you also noticed that the gold miners have been outperforming the metal itself recently? GDX is basically back to where it was a few weeks ago when gold was trading near US$1300.
GDX/GLD Ratio (Daily – 1 Year)
Gold miners have been outperforming gold since February and we’ve seen an upside breakout in the GDX/GLD ratio in the last week.
Bob Moriarty: Yes, that’s a good indicator. That’s the sort of stuff we see at the end of declines. Now i’m not going to say this is a bottom but I will say it’s a tradable low. I think we will see at least two months of upside. However, I will put one proviso in, I think we are going to see the crash of the century sometime in September/October.
CEO Technician: You think we’re going to have a crash in the broader stock market?
Bob Moriarty: Correct.
CEO Technician: What will the catalyst be for that?
Bob Moriarty: It’s going to be a combination of the euro, interest rates, and inflation. What we know is that the world is functionally bankrupt and there are so many potential flashpoints. It could start in Italy, it could start in Mexico, it could start in Venezuela. We’re due a crash, and when is the only question, not if. It’s going to happen and I suspect it’s going to be in September/October. So while I think we’ve put in a bottom in the precious metals sector and we’re going to have a nice move up for a couple of months, I highly recommend going to cash in early September.
CEO Technician: You think the crash will be a liquidity event in which anything that can be sold to raise cash will be sold?
Bob Moriarty: Correct. If you go back to 2008 I called the top fairly accurately in March 2008 but I didn’t realize the gold mining shares would be crushed as badly as they were in September/October 2008. So rather than a buy and hold strategy, I much prefer a trading strategy which would mean getting into cash around Labor Day.
CEO Technician: I was just on a tour of the Yukon sponsored by the Yukon Mining Alliance. I visited about half a dozen camps for companies such as White Gold (TSX-V:WGO) and ATAC Resources (TSX-V:ATC). One of the popular topics of conversation was the trade war between Canada and the US and how it might affect various aspects of the mining industry in Canada. There were a lot of questions being asked but not a lot of answers on this subject. What are your thoughts on Trump’s trade wars and how it could affect the mining sector?
Bob Moriarty: When you are transporting liquid nitroglycerine what do you want to make sure you don’t do?
CEO Technician: Ummm…you don’t want to spill it?
Bob Moriarty: Or shake it. You want to be really stable. I think a good analogy of the world’s financial system is 50 million tons of nitroglycerine. I think the people wondering what’s going on and not having answers are exactly right. Nobody knows what’s going to happen. I certainly don’t have any clue. I just know from an economics 101 point of view that trade wars are always a disaster. Trump has pulled the pin on a hand grenade and that’s a very dangerous thing to have done. You talked about liquidity, if Trump destabilizes the world financial system there will be a flight to liquidity and everything will get sold off. This is going to be an exceptionally dangerous time. Think about 2008 squared….or cubed.
CEO Technician: Wow. Switching gears back to the juniors, a lot of companies are doing summer exploration programs right now, particularly in the Golden Triangle of British Columbia and the Yukon (areas where it’s difficult to work during the colder months of the year). We’ve begun to see some Golden Triangle stocks and some Yukon stocks moving up in anticipation of exploration news. What are your thoughts on how to play the summer exploration news flow from an …read more
From:: Common Stock Warrants