Speaker 1This is the Commodity Culture Podcast, where we interview prominent investors, fund managers, analysts, and company CEOs to give you an edge when it comes to investing in the commodity space. Michael Oliver, great to have you back on Commodity Culture. I want to kick the conversation, as I often do with you, with the silver market. Now, it's been looking like it wants to breach $70 for a while now, but hasn't been able to quite get there. Of course, we've heard a lot of cries of manipulation out there. There's several people who believe that they're managing the silver price and they're not letting it get past. They're defending that $70 level. I'm wondering what your thoughts are here on silver's recent price action and what you think it will take for us to break that $70 level.
Speaker 2Yes, August the 5th, you could go look at any chart you want. Like silver. Gold, GDX, the minor ETF, SIL, the silver minor ETF. Just circle August 5th. That's when we said, buy. On an intermediate basis, it said, we're going to have another rally. Like, you know, we've had two big rallies since the Jan-Feb drop. Okay. Then two big rallies. This is the third one. Okay. We argue that we think this rally will be different than the other two, meaning it's not going to fail and go down and make yet another low. By the way, every time silver made a new low since that February low, it's been marginal and it goes up again. So somebody's buying every new low. Okay. But right now we're trading around $65 for the front month contract. And that's back above all three of the prior lows. The low in January of 63.90. The low in March, I think, was 61. Then we get down to 55.56. We're back above all of them, even in this sell-off. No. But if you look at what happened August 5th through about four weeks ago when we made a high. We've had counting from that top week to the present week. That's four bars. Top week, down week, down week, down. And yet you've only given back several dollars weekly close to weekly close compared to the August 5th surge, which was twice as strong as this pullback has been. And the August surge was really like two to three weeks of sharp upside. And you've only managed with more time on the downside, four weeks of pressure to reach the top. So we've had counting from that top week to the present week, that's four bars. And yet you've only given back several dollars weekly close to weekly close, compared to the August 5th surge, which was twice as strong as this pullback has been. So we've only managed with more time on the downside, four weeks of pressure to reach the top. And yet you've only managed with more time on the downside, four weeks of pressure to reach the top. going fundamental driver that's now finally come to the fore. We've been arguing for months that it's going to happen, and that is the T-bond crisis. That's the biggest monetary crisis we've had in a century. It beats the mortgage crisis hands down, you know. And what's the central bank going to do? Panic. What's Treasury going to do? Panic. Watch Besson's comments he made a couple of weeks ago. Like, you know, I'm in charge. Okay. I call it a Monty Python moment. It's, you're in charge of what? Anyway. And as we were speaking, you know, today T-bonds made a new low, new high in yields, you know.
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Speaker 2This is a couple of weeks ago. We showed to our subscribers just some examples of that. There's so many myths about gold in relationship to this or that, like, well, if the stock market goes down sharply, so will gold. That's based on about one or two instances in history where gold had a sharp down with the stock market. You know, October 2008, everybody remembers that, you know, S&P, a full year off the tide, already been going down for a year, finally had a crash month and gold said, I'm going to puke too. Except gold, it was a correction, immediately turned around and kept going up. This is the other wisdom, and that is, well, if the Fed raises rates, like, you know, they're all nervous about of late, you know, oh, they're going to raise rates, that's going to hurt gold. Go back to 1980 and you see gold went from like 100 to 850. Well, Fed funds rate from four and a half to 19%, all during that time. So I guess you shouldn't have bought gold, right? Okay. And then another example, I could have shown more. This is 2002 to 2008. Again, you know, Fed funds went from 1% to 5.2, and you can see the circle points on gold where those rates were at the time. And look how much gold went up. It doubled. Okay. Okay. And then the bottom chart is 22 to 24. And you can see we had zero rates back in 2022. And then they took rates up to five something. And yet gold had a heck of a 50% gain during that time. So in other words, there's too many popular notions out there that are mistaken. They don't correlate the reality. And if you could find an instance or two, you could find an instance or two the other way as well, meaning it's a coin toss at best. And there are also times when the Fed cut rates and it didn't boost gold. So it's not always a good correlation. The Fed is not a leader. The Fed is a causal factor in boom bus cycles. And every time there's a bus, they try to come in and save it by booming again, meaning printing money, QEs, whatever tool they can concoct. And I don't just mean the Fed, you know, I mean the Western world, Bank of Japan, for example. The prime minister over there said a year or two ago when she got elected, we're going to print, print, print. Okay. You know, great. Super. You know, that's what, that's their tool is to degrade the value of the money unit that they're dealing with. And so if you look at an M2 chart, which we don't have here, but it's an upward parabolic curve, it's lovely. You wish you were long. Okay. And if you actually go back and look at how gold has done since let's say the year 2000, it's beat the money supply growth fastly. S&P has only barely matched it. So in real dollar terms, you haven't made money in the stock market since for the last quarter of a century. It's been lovely upturn, but it's only been reflective of the decay and the real buying power of the thing in your wallet. So there's a point at which this falsehood that the Fed is in charge of the price of money and the quantity of money. Well, that's true. They are, but it's ongoing degradation. Like, you know, last the July report of M2, it just came out recently, if you go back to July, the year before, it's been an 8.62% gain in the money supply. Whoa. In other words, if your asset didn't go up at least 8%, you didn't match the decay in the money unit. You get the point. Well, the problem is now we've got a government bond crisis, and that's going to take a lot of fire hoses, more than the mortgage crisis to try to defend against. And so gold knows this. They're going to have to go and do a massive decay problem. The Japanese, they show us how to do it. They've been doing it for a while. Print, print, print. We're now going to have to do it as well. And you can look at the yields in Europe and UK. They're off the page vertical. They're going to have to, we've got a crisis here. And you know, if you want to invest in something, what do you normally do as an alternative? You buy T-bonds, right? Instead of stocks. Okay. Uh-oh, that doesn't work anymore. So what are you left with? We're going to have to do it. Okay. And we think the stock market, for example, is topping right now. And I think by the next quarter, you'll see the evidence of that. I don't mean crash, but I mean enough that people will panic and start to say, well, where the heck do I go? And I think the smart money is already making the move.
Speaker 1Before I move on to discussing the precious metals miners, I just want to unpack the sovereign debt crisis that you're speaking of, because things certainly look dire across the world. I mean, Japan, their rates are also screaming to historic levels. What do you think is the ultimate end result of a potential meltdown in the international sovereign debt markets? Is this potentially a prelude for a major downturn in the broad market? In other words, if the debt market cracks, could that then burst the big tech AI bubble?
Speaker 2The stock market will go with it too. Now, you know, we could always fantasize that, well, we're going to go. Just halfway Weimar Republic style, like we're doing now, Japan, U.S., Europe, money supply growth. People still don't need wheelbarrows to carry their money in. Now, maybe we get to that point. And if you do, then maybe the stock market goes parabolic too. Because, you know, they're printing the money, everything goes up, you know, loaf of bread doubles every month, you know. So it's not real. But I don't think that's going to happen. I do think the stock market is topping. I think it's going to, once it breaks, that's when you'll get the data points, that the Fed likes to point to, to say, okay, now we have justification to cut rates. And that's the unemployment data. And, you know, if you've examined the categories of the unemployment data or the employment data over the last year, you'll see all the gains have been where? You can tell me. Hospitals, hospice care, hospitality, bartenders, waitresses, cooks, okay? Not industrial, not transportation. Not that kind of stuff. Not major core industries. But in that peripheral area, also state governments, I think recently was a boost in that last data. And so you've got this stable looking unemployment number. So the Fed said, oh, the job market looks good. Well, the job market numbers never forecast a bear market in the stock market. If you go back and overlay an S&P and then an unemployment chart on it, you'll see that unemployment really doesn't get dark until the stock market's already topped. It might be 20% of the stock market. It might be 20% off its high. And then suddenly, oh, we've got a weak employment market. But it didn't lead you into it. It followed the stock market. And I think the stock market is in the topping process. And it won't take a, I'll give you, I won't give you the specifics because that's what we do to our subscribers. But basically speaking, you cannot afford what you call even a moderate correction. You know, what's a correction? 20%, bear markets, 30, I don't know, whatever the rule is. You can't even afford to approach something like eight or 9% drop in the stock market at any time because you'll trigger some of our very long-term momentum technicals that say, oh, you just broke a multi-year uptrend. You won't see it on the price chart, but momentum will always break first. But momentum right now has built these structures where if you were looking at our momentum charts, you'd say, oh gosh, that looks like the bridge over the River Kwai. I hope we don't break through that floor. And that's what exists below the market right now on our momentum charts. And what would it take to break? That kind of dimension of drop. High single digit percent drop will break those structures saying, uh-oh, it's over. And that's when the Fed has full excuse to ignore the inflation mandate and go to the, besides when they define inflation, how do they do it? Secondary effects of inflation, CPI, hope. The real inflation is the M2 chart. And as I just explained, it went up 8.2%. 6.2%. They're talking about 2% inflation. Why don't they get the money supply down to 2% growth? Anyway, you ask what might happen on the other side of this? A whole lot of things could change in the political world and in our notions of what institutions need to exist or cease to exist. Maybe we don't need central banks to manipulate money price and quantity of money. Maybe it'd be better to have money backed by gold or silver. And if you go into a crisis like I see coming, it's already beginning in the bond market, that's going to bring on a whole lot of changes. Rethinking. And it's hard to guess what they might be except to say they could be major. So that's my answer to you. What could happen?
Speaker 1Major changes. Well, let's move on to discussing the precious metals miners and the potential opportunity that you're seeing there. I'll bring up, the latest or one of the recent editions of the MSA letter. You've got a chart here on Newmont and Wheaton precious metals, talking about the big caps, gold, one of the biggest gold producers, the largest gold producer, and one of the biggest royalty streamers as well. Why don't you walk us through this and what you're seeing there?
Speaker 2Yeah, Wheaton is the biggest cap silver miner. And Newmont is the big gold miner, biggest cap gold miner. Now, gold just turned up at August 5th. And so did these guys. In fact, August 5th is like that first little day coming off the low there out of that little base you see on Newmont down there at around 95 bucks. There's a little day that popped up there. That's about August 5th there. Okay, look what happened to it. It went back and made a new high in a heartbeat. Where were the sellers? Gold didn't go back to a new high. Why did the two blue chips, gold and silver blue chips, miners go back to their highs so easily? And right now they're still just congesting right below those highs. They're not getting repelled. They just stalled there. But how did they get back to the high with no resistance? And when you look at the miners, we don't have those right now, but they didn't get back to their high, but they got back closer than gold and silver did. So suddenly what happened in the miners that caused this? And I haven't seen it brought to the attention of financial press public, you know, CNBC or Fox business. What's going on? Going on in Newmont and Wheaton. My argument is this, probably you're getting some major asset managers in the portfolio managers, fund managers who are saying, you know, I'm not quite confident in the stock market anymore. No, I'm not bearish, but you know, I kind of want to lighten my load and move 10% over to some other category, maybe a little more later, whatever, as I get more nervous. So what are you going to do? Well, the normal alternative is the T-bond market, you know, 60%, 40%, the old rule. Morgan Stanley told us months ago that the CIO of Morgan Stanley that, hey, that rule doesn't work anymore. It should be 60, 20, 20, 20% being gold. He understated it, but it was a good step in the right direction. Well, maybe some large asset managers came in and said, well, you know, I got to get into the gold category, but we can't buy futures. We can't buy bullion ETFs. We're not allowed to do that. We're not going to buy junior miners, you know, $2 stocks and stuff. We're going to buy the big ones with good earnings and all that stuff. We're going to buy the big blue chips. Okay. So what are the two big? Here they are. They went back to their highs. That tells me that something happened here in the blue chips that tells me some money just flowed into this from somewhere. And it's not evident in the gold chart either. Gold went halfway back to its high. These guys went to a new high marginally on wheat. I think it's big money. Starting to move assets to what they perceive to be the better category. And it hasn't, it's only begun. Imagine these guys making new highs here shortly. And right now, all they're doing since this chart, which is late August is congesting around where you see there. They're not really falling back. They're just spinning their wheels right below the high. You go through that recent congestion zone and make an all-time new high. Then you'll start to maybe hear it mentioned on financial press. And maybe that'll cause some other big asset managers to say, Hey, you know, my buddy did that. And maybe I need to do that too. And again, this is like a wet bar of soap situation. This is not a huge stock market category. It's very tiny, relatively speaking. So it wouldn't take a lot to blow this category off the page. And that's, that's what's going on more broadly among the miners. Not quite this strength, but something close to it.
Speaker 1Well, let's take a look at the gold miners versus the price of gold. As well. You call it the most important chart here. XAU, the Philadelphia index of gold and silver miners versus gold monthly going all the way back to 1985. Can you walk us through what you're seeing here and its significance?
Speaker 2Yeah, well, at the end of each month, we take to XAU simply divide its price into an ounce of gold, nearby COMEX contract front month. And we plot it as a percent. And you can see that that upper range there was a range that. Basically about 25 to 27% was about in the middle, and it got up over 35% at one time, and the repeated lows down around 18%. So it lived in reality of that range, in terms of valuation to an ounce of gold. And all of a sudden, in 2008, it broke down and collapsed to a low in 2015 and 2015. At 4%. Okay. It's old reality had been about 27%. Up and down above that. It goes to four. I mean, what is it going to do goes to zero. We don't need gold miners anymore. I mean, I don't know. This is beyond me in terms of investor reality. People ignored this. And so for the last 13 years, even before it got to the 2015 low in 2013, and got into that little range that I defined there. And there were three rallies, one in 2016, coincident with the gold rally, by the way, at that time, miners were strong. Then there's the rally in 2020, 2021, which is also strength period for gold, but miners were stronger. And then there was a rally to February this year, where mining stocks went up to their highs, peaked a little after gold about a month later. And the spread went again, back up to the top of that range, which is all those three highs are in the mid 8% level, eight and a half, that kind of thing, give or take. But they're all above eight. And we then we had the back off since the February high, you can see some little down ticks from that. Last surge, once we bumped the top of the range. So when the miners broke down and corrected and gold pullback and corrected and silver, etc, the miners pull back relative to gold, but marginally, they didn't really puke up very much in their relative gain that they'd seen. And the August close, closed out above that range above 9%. We're gaining a bit more this month, even. So the XAU versus gold, the miners versus gold is telling us, I'm tired of being undervalued. I'm going to seek, this is like silver confined at 50. Okay, I'm going to seek a normal reality. Heck, the gold's been in the bull trend all during that process, that little tiny range at the bottom, where the miners have been capped at very low valuation levels, and yet they're making money like crazy. Literally, when you look at the ballot sheets and the earnings and so forth, stuff we don't do. But I think finally, it's becoming recognized. Remember the Newmont chart and the Wheaton chart. It's to some extent being reflected by the broader gold and silver miners breaking out above this range. Okay, if you're a technician, you say, okay, well, I broke out of a 12, 13 year wide range. That's beautiful. Where might it go? Well, look at the chart. Where are the old lows? That might be resistance, right? That's 18%. That means you could double the miners relative to gold, just to bump. an old prior lobe. set of lows or just to get to the low level of prior reality not no let's don't talk about 35 again just just 18 that's a doubling in the miners versus gold and it just began in a very precise technical way and it says something to me that's coincident with what happened to new mount wheaton money is moving into the gold and silver miners and it's only just begun now the other major point of this chart is it's not just the gold internal to the monetary metals issue this is happening coincident with what the bond market onset crisis suddenly the investors major asset managers are shifting their attention from ai and semiconductors to what's going on with the bond market that's a nuclear event and that's causing them to rethink allocations and obviously their rethink process has helped cause this breakout now by the way my other argument would be this not only will the spread double likely and quickly probably to double its current value to gold but during that process of upside in the spread gold will continue to rise as well okay now let's speculate that gold merely matches its two prior bull markets the 1980 bull market peak the 2011 peak were both eight-fold gains in the price of gold well if we have an eight-fold gain in this bull market starting from the 1050 low that occurred in 2015 we'd go to eight to nine thousand dollars okay double could double the current price of gold okay just to match the dimensions of its two prior bull markets and yet we're an environment that's far more onerous could drive it a lot higher but let's just assume it goes there well that that means that the miners who might double versus gold but they're going to probably triple or more in price because gold is going up during the same time you get my point that spread only goes up when gold also goes up it just means that the miners are going up more so that that spread breakout also implies that gold's about to launch again too so all these things fit together and it happens to be what coincident with the onset finally the recognition of the bond crisis uh the real fundamental and hence what central bank's going berserk do you think
Speaker 1that the us could use its gold reserves to offset some of these issues i had matthew peipenberg on the show recently and he said that either a a revaluation of gold on the books to you know it's at what 42 22 or something like that right now to 20 000 which he doesn't think is likely to be clear what he was saying is actually if they would just get out of gold's way stop all the manipulation and let it run to say 10 20 000 that could go a long way to at least in the near term solving some of the issues it's
Speaker 2one of those it's one of those one of those side things that could very well happen and it's it's not a causative factor of gold going the rest of the way the causative factor is a simple look at the m2 chart okay as long as they continue to decay the money unit and now they have to because they have to have the fire hoses fully charged and pumping like crazy because their house is on fire japan us europe soon uk their debt markets are exploding as well uh that's the driver and this other issue of well the government debt is enormous we got to somehow deal with that yeah you could be right on that issue uh but it's not the initial causative factor it's merely a reflection of what was already happening anyway over the decades this is not something that's been going on just because trump came in office and pumped up the debt even more it's that it's been going on decade by bloody decade and finally like jamie dimon said months ago we got a government bond crisis this time we're going to have to deal with it you can't push it off down the road another 10 years this is it's it's got to be dealt with now and that's you can't just dismiss that how do you how do you dismiss the government bond crisis gold knows that and therefore what you talked about there yes it could very well happen also there's some countries in the world as we know that are relying on gold to make sure they have a stable environment and so whatever happens to the world economy likely recession or maybe depression when this when the stock market breaks because our market and the decade both are bubble markets by any definition of the term um that will affect the world economy even the chinese they're part of the world economy so they'd be hurt by the drop in the economy but they're not in the same technical condition we are like their stock market the shanghai composite is like a double and a half from its 2009 low sap's 10 times where it was in 2009 low uh nasdaq's 120 times short was the 2009 low same with the nikkei so we pumped those stock markets to bubbles through again m2 chart look at it uh the chinese don't have that problem plus they're shifting more and more to gold so there's going to be winners and losers in this overall global situation some will everybody's going to suffer in terms of economic downturn i think but some will suffer a lot more because they're bubble situations uh and i think we're we're a prime candidate for that and again that's going to help drive gold up and you may be right maybe that's something that will be employed what are
Speaker 1your thoughts on energy markets here we've seen wti crude crack a hundred dollars recently on the fundamental side of things we've seen the houthis i believe they destroyed a major pipeline coming out of saudi arabia they potentially have control of the strait of bab el mandab so we could have a situation where the strait of four moose and the straight of bab el mandab is having issues in terms of transportation of crude how do you think this all plays out
Speaker 2well first off oil is still cheap historically okay that's hard to believe uh it was 140 what back 2008 i think it was uh and it stayed up there for a while too it wasn't like one time and then it was 130 in 2022. remember when the ukraine russia war began it then peaked it had been 50 something went up to 130. okay right now we're we're trading around 100 on the west texas okay uh we argue there's something broader going on here other than the iran situation yes the iran situation has helped induce uh perhaps more upside sooner than might otherwise have occurred but back in january crude closed at 65 west texas it had come up from below in the 50s mid 50s very cheap oil by the way historically again measured against itself measured against the bloomberg commodity index measured against the s p measured against the money supply it was off the page cheap okay and it decided to turn up we had an annual and a quarterly momentum breakout at the january close meaning long-term momentum said i'm breaking out when you look at a price chart you couldn't see anything but momentum said no i'm through i'm going up unfortunately a little bit more than a month later starting the first trading day in march the war news hit and they exploded it up and what happened you had headline chasers come in amateur buyers and they bought oil at 110 100 110 115 it got 117 actually in march april uh and we warned even though we were long-term bullish on oil since 65 if you're long you're going to get hurt especially if you bought the news you're going to get killed and sure enough last month's low was it july or august maybe got to 67 bucks on the pullback almost cut it in half from the hive that war rally hive 117 pull back to 67 two dollars above our buy point and right now it's come back up again but if you look at the oil chart since that january february upturn and then the march surge you could draw a line sideways so the war news is come and gone come and gone come and gone and the price has done this too really when you look at it sideways and we're right now about in the middle of the ink but we're still dirt cheap and so i think yes the iran situation causes specifics to come into play supply demand problems but the real reason for oil to go up is the same reason that the bloomberg commodity index turned up back last october our momentum said bloomberg's going up it was 107 then right now it's 145. it wasn't oil that got you up here it was everything grains have recently exploded sugar has exploded i guess that's because of iran too right okay you get my point uh it's a broad commodity complex upturn which reflects i think what you're seeing in the gold miners meaning movement of money by doubters into an asset category they perceive to be lower risk better reward and we argue technically that the commodity complex is now going to follow gold it hasn't been for a while but it's only recently joined gold and be a good secondary place to be over the next couple years as money moves from the burning house into the low risk higher reward areas and i think broadly commodities is one of those areas oil too for those who want
Speaker 1to dive deeper into your research could you tell us about momentum structural analysis and and what it is that that service
Speaker 2provides well we look at all four major asset categories especially today you've got to goals not just going up on its own you look at the money supply look at foreign exchange market dollar index for example which we think is about to implode uh largely because of a yen situation i think is changing uh look at the debt markets we've been looking at those for years it's 30-year T-bonds, especially the end of the market the Fed doesn't control that much. And we said back in April, watch out. The basing action by T-bonds or the attempt to stop the yields isn't going to work. We're going on down. Bonds are going to break. Yield's going up. Sure enough, they did. And it finally smacked people in the face the last couple weeks. And commodities in general, we analyze with a focus on gold and silver. So look at all four categories and debt market, stock markets, commodities, gold, et cetera. They bang into each other. And you really need to be aware of what they're all doing, especially in this day and age.
Speaker 1Great. Well, I'm going to put a link in the description below to the Momentum Structural Analysis site so people can check that out. Michael, as always, great insight shared. Thank you so much for coming on. Thanks, Jesse. Thank you for joining us today on Commodity Culture. Earn up to a 4% annual yield. On your physical gold, paid in gold ounces through Monetary Metals, go to monetary-metals.com slash commodity to find out how to put your gold to work for you. Link is in the show notes below.
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