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I very much doubt China would be weaponising its Treasury asset...

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AverageJoe

41,404 Posts.

1007

11/09/20

15:19

Post #: 47274521
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Originally posted by eshmun ↑

"Anyone calling sub $5 on SAR is simply wishing for a bargain that is unlikely to eventuate"

and the very next day it trades below $5.

Seriously. It's like predicting that an on the money option is likely to expire worthless. You could have done yourself a favour and picked a lower support level.

We are dealing with a complex system at the moment. If the Chinese carry through with their plan to accelerate the selling of US treasuries it's going to put upward pressure on bond yields and tank markets further. Then the Fed will need to come to the party and print more money to step into the breach on top of all of the other demands placed on it through the ailing US economy and temper tantrums of the market speculators which are not at the top of the priority list.

As I predicted SAR and gold stocks just behave like equities when equity markets are falling. Gold itself on the other hand is in a class of its own and will only be pressured if we see another liquidity crunch. If that happens don't be surprised to see 10% daily falls in these types of stocks like we saw in March. We might not be there quite yet but as I have stated before the chances are we will see the beginning of the cyclical bubble market crash before the inauguration of the new president in January.

Remember you were also dismissing my ideas when SAR was trading at over $6 dollars only a short time ago. Your buy recommendation would be pretty deep in the red now. The landscape for equities after the next market crash will look very different to what we see now. It will look like a market where the Fed's ammo cabinet is laid bare and open for all to see and when people look in to it they will see that it is out of bullets. Imagine a child's water pistol as the water runs dry. This type of market is a cyclical bear market and there will be some real pain in reaching the bottom of that market. It will play out over this decade, but the silver lining is that gold will eventual shine above most other assets in the race to the ground. If people have the intestinal fortitude to ride out the volatility and stick with gold I think it will serve them well, but beware of vanilla gold products like ETFs and even gold companies which carry many many more risks including operational risks, market risks, market manipulation risks, regulation risks, jurisdictional risks, exchange rate risks. The list goes on and on.Esh

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I very much doubt China would be weaponising its Treasury asset unless it wants to decouple from US. The dilemma could be money printing and QE on an even bigger scale to Bernanke's version. Post GFC and the medication to fix its economy (US) was non-effective, just prevention for a worst-case scenario. The QT/Rate rise were just in preparation for any black swan event and we experience that in March BUT the caused had already started in Sept 2019 Repo pump shot through the ceiling with an earlier bond yield inversion.

It is always a known fact that gold equities do not behave like a defensive sector or asset class because it is a leveraged play with a much higher beta that can go both ways exponentially. March equity collapsed also dragged gold price down. 13% fall in the gold price was a 30% fall in SAR and its peers. If one is bullish gold besides the ST market sentiment type of fear and greed, then any big sell-offs are good dip-buying opportunities. If you are correct in this strategy, payback in gold equities is amplified compared to gold bars. There is no free lunch as the opposite is also true.

I very much doubt without a vaccine, bond yields can rise meaningfully besides the yield reactionary to any monthly Feds monetary policy. We are in very gold friendly investment opportunities in general from the wider global macros. However, within this sector, there are the laggards and outperformers (overvalued) in the ST.

In the ST, I can see a gold price pullback further but we do have Nov election just around the corner........

SAR Price at posting: $5.11 Sentiment: Hold Disclosure: Held
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