Inaction as Action – Sometimes it’s Better to Do Nothing

Intro

For those following TEC’s FB posts and blog posts, you’d have had ample warning of issues arising that should lead one to err on the side of caution in collecting. The majority of collectors/investors/buyers cannot afford gold – especially in the American market where the middle class is heavily indebted following successive financial crises. It is for this reason I look to the price of silver to better determine precious metals’ price behaviour relative to the American dollar. Silver was saying recently that PM’s are not ready for prime time. So I raised cash and chose “Wu Wei” – inaction as action during this period of turbulence.

Everything’s on Sale

Despite the recent rapid sell off of the American dollar, everything is for sale. PM’s should be going up, along with Cryptos. That these two assets are weakening at the same time as the USD is illustrative of the illiquid market as fear reigns supreme. Following Sam Bankman-Fried’s epic failure and now Binance’s French investigation for money laundering it is clear that government’s are laying the ground for complete state control of crypto assets worldwide. Given the non-centralised nature of crypto creation and transactions, a G8 to G20 organised ban on such untaxed transactions and capital gains is just as likely.

Physical Markets vs Cash Markets

By far the best resource I’ve read for understanding the state of physical markets in precious metals is Ronan Manly of Bullionstar Traders. The article in the link is priceless in understanding the state of physical silver for delivery in London today – basically 3/4 of sweet FA. I ignore daily moves in the cash markets (i.e., the daily advertised market prices for gold and silver in London and NY) because, like Cryptocurrency, wash trades push prices where market makers want but do not reflect actual demand for physical gold and silver. A wash trade is basically buying and selling back to oneself or a small group of traders with the purpose of maintaining the fiction of a deep market full of buyers and sellers.

Hints of the Next Move in Gold

Gold has been much easier to read for precious metal outcomes than silver (Having said that – I suspect silver will shock to the upside soon). The May high in XAUUSD (gold in USD) is the 3rd knocking at the door of all time high (ATH) prices, whereas Australian gold prices have been continuously creating new highs since 2019. So as the USD sells off again and I note the price of gold trading sideways instead of up, I am comfortable knowing that with gold prices just 6% below the ATH in US markets, the path of least resistance is up. A trigger will come along at some point to deliver that “fear of missing out”, with buyers overwhelming sellers on the electronic markets. In physical markets the premium in physical is already evident when Australian dealers are selling Perth Mint coin at 20% over spot between themselves at major coin shows. Those are DEALER prices, not end retail prices.

What will Trigger the Scramble for Discrete Physical Assets?

Alas, Washington is providing plenty of surprise triggers for a major breakout in previous metals. From Covid lockdowns, allegations of Presidential family corruption, prosecuting political opponents, the destruction of foreign energy assets like Nordstream 2, supporting war and major graft in Ukraine, destroying law and order in dysfunctional state capitals across the country – the hits just keep on coming.

It is more than likely that we will wake up one day to find prices breaking out to new highs while the shock headlines follow, giving us the reason why. That’s a principle of market psychology elaborated upon with simple elegancy in Edwin Lefevre’s “Reminisences of a Stock Operator” and highly recommended reading. You can read the book in PDF format for free in TEC’ s library – https://topendcoins.com.au/wp-content/uploads/2021/01/Edwin_LeFevre_Reminiscences_of_a_Stock_Operator.pdf.

Tune Out and Live Every Day as Your Last One

As my favourite and very witty blog writer just published – “Does Anyone Believe American Propaganda Anymore?” This author does not; and not because I prefer fantasy narratives and dark conspiracy stories but because like Brian Maher (the author linked above), a degree plus extensive self-study in International Politics, philosophy and history leads one to see that the wheel has turned.

America – that great liberator in WWII – has succumbed to the same arrogance and hubris that over millennia brought down Athens, Rome, France, India, China and most recently England. It is now America’s turn and we watch the revival of the Chinese and Indian economies as the Asia century comes about again.

Thus I continue to sit on a collection of gold sovereigns and grit my teeth through a 50 hour work week. I begin to have an inkling of the resilience that my grandparents and their forebears endured during periods of difficulty that we have no comparison to as of yet. This decade will be known as our great depression, yet central bank liquidity continues to hold the bubble afloat. It’s when that no longer works that I mentally prepare myself for and live each day as if it was my last.

That’s what it means to be present in the moment.