Big Short Squeeze Coming Soon In Gold Mining Stocks?

Short interest in some larger gold miners has increased a lot in the last 6-8 weeks.

This January 5th, 2021 article cited 30% or larger increases in short interest in some gold mining stocks and since then paper gold prices have been smashed even more https://m.investing.com/news/stock-market-news/hedge-funds-raise-mining-shorts-as-covid-vaccines-seen-tamping-gold-gains-2379870

Fred Hickey analysis of latest gold commitment of traders (COT): https://twitter.com/htsfhickey/status/1350199455971160065

Meanwhile, US Mint Sales are 700% higher (in US Dollar amount) since last year and central bank are net buyers of gold again since November: Six Central Banks Increased Gold Reserves in November https://schiffgold.com/key-gold-news/six-central-banks-increased-gold-reserves-in-november/

Bottom Line: Many gold miners and gold stocks are back to valuations when gold prices were around $1500 to $1600/oz and with short interest much higher in many large gold miners than 6-8 weeks ago, a large short squeeze in gold miners is setting up for when gold prices rally over $2k/oz again.

Chart of Newmont Mining, Agnico Eagle Mining and gold mining indexes (GOAU, SGDM, GDX, SGDJ) over the last 6 months: https://www.tradingview.com/x/T6JKsOOC/

Top 10 List of things for gold investors to watch in 2021: https://sprott.com/insights/sprott-monthly-report-2021-top-10-watch-list

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Another day and another paper price match in gold and silver futures contracts unfortunately this has been very common for weeks now the gold and silver prices have been smashed any time they get above 1900 and this is in spite of the dollar index not rallying too much it is above 90

Right now it’s not about not back to 91 yet and the yields on the 10-year us treasury have only risen about 30 or 40 basis points i don’t think they’re gonna go a lot higher there are people talking about yields going much higher i don’t think the fed will allow

Yields to go much higher we are headed unfortunately towards japanification the fed is going to have to monetize and expand its balance sheet a lot more and buy up a lot of u.s treasuries because the fed is the buyer of last resort and the us government broke uncle sam or drunk

Uncle sam as my friend george gammon says cannot afford higher interest rates so there is a short squeeze in my opinion developing with a lot of these gold stocks there was an article that came out in the last couple weeks about the short interest rising on gold stocks

So there is a lot of physical demand for gold it’s not helping the paper price now but if you talk to your gold bullion dealer there is still strong premiums and a lot of retail products are not available for a lot of physical gold and silver the us mint sales are

Still very strong for both gold and silver especially silver and we’re starting to see both central banks pick up with their gold purchases and also the data that’s coming out of china lately for january we’re starting to see a pickup in physical gold demand again with shanghai gold exchange and other

Data points and i think that’s probably because of the chinese economy improving although china has stockpiled a lot more commodities than gold but there’s been rumors for months now that china is stockpiling massive amounts of silver but it looks like china’s gold purchases have started again whereas they were stockpiling

Other commodities now they’re starting to stockpile gold and a lot of it has to do with china’s economy improving as they’re exporting massive amounts of stuff again although probably not as much high-end stuff because the us consumer and the european union consumers pretty much tapped out and many affluent consumers

According to the data i’ve seen are not spending but a lot of middle class and working class and poor people are not consuming anywhere near the amounts because they don’t have jobs and don’t have savings but we are starting to see physical gold demand in china so you have chinese new

Year which is coming up and historically in terms of gold seasonality that is normally a very very good time for gold demand normally that about six to eight week period prior to chinese new year is historically very good for the gold price and probably another reason why the paper price match is occurring

But it looks like we are going to see a short squeeze develop as we’ve seen according to this article that you can see there on your screen and real interest rates also besides the article real interest rates are still deeply negative so even though we’ve seen a spike in nominal yields

Yields are not going to be rising that much so as you can see there on your screen in the upper right hand chart yields are still negative if you count for account for a real inflation rate not the phony consumer price index but even if you use the consumer price index

Real yields are still deeply negative below zero the black line the solid black line i put a zero so it’s still deeply below there even with a spike in nominal yields but this is setting up for a short squeeze in gold stocks so the fourth quarter

Q4 2020 numbers should be out for a lot of these gold miners and gold stocks in the next month or so and we should still see spectacular numbers for earnings and profit margins for a lot of these gold miners the two best gold miners right now in terms of dividend yield

Balance sheet margins and industry wide according to some of these gold analysts the profit margins are still eight hundred and eight hundred dollars an ounce to nine hundred dollars an ounce for many producing gold miners so those profit margins are still at record highs but you have dividend yields now and this is

Shows how good of a bargain some of these gold miners are with rising short like newmont mining which has a 2.5 percent dividend yield and you then you have agneco eagle which has a dividend yield at exactly two percent as of this weekend so those are two extremely well-run gold

Miners that you are getting paid to wait they’re selling at reasonable valuations and their earnings should be very very solid along with their profit margins and the shares have come down so you’re going to get paid to wait so there’s not many companies in many industries like a newmont mining or agneco eagle

Where you’re gonna get paid a two percent dividend yield or more whether the company does not have a massively leveraged balance sheet a lot of companies right now that are paying pretty high dividends have a lot of debt on the balance sheet and the gold miners that is not the case

So people would be paid to wait if they accumulate shares of newmont mining and agneco eagle so some of these gold stocks the short interest if you read the article the short interest when the article came out which was january 5th or 6th so it’s a little over 10 days ago

But the short interest was already rising to 25 30 percent the short interest on some of these gold stocks is going to be up to 30 or 40 now so there’s been a massive spike in short interest in the gold stocks in the last six to

Eight weeks so this will set up for a short squeeze when the fed’s balance sheet does start to increase again because the fed’s balance sheet has been stuck around 7.2 7.3 trillion it’s a little above 7.3 trillion now for months now so it hasn’t done very much the fed’s balance sheet has not

Increased massively yet but we are starting to see other countries their central banks start to announce increases in physical gold and so this will catapult things up now fred hickey also on january 15th put out some analysis of the commitment of traders i’m going to read his twitter today’s

Commitment of traders reports so this is from january 15th gold showed who’s been behind recent gold sell-off which was levered futures and options traders managed money mostly hedge funds had enormous five-day drops in their net long contract positions both futures contracts minus 38 000 and futures and options minus 47

000 fell by a third the huge drop in managed money net gold futures and options contract positions was even more than you’d hoped for equivalent to 144 tons of gold dumped in five days and these numbers don’t include wednesdays and today’s dumps managed money and also friday stumps

And then what has been occurring over the weekend attempted paper price smashes for the holiday here in the us martin luther king day managed money futures contracts are at the lowest level since may 2019. now remember though a lot of this managed money was the short-term leveraged speculators the specs

On the futures options contracts and the bullion banks have covered so there was a lot of covering by bullion banks so we’re starting to see covering in the futures market by the bullion banks on the shorts and we’re seeing a rise in short interest for a lot of these gold mining stocks

And these gold mining stocks the underlying businesses are doing extremely well in spite of the paper price matches because the profit margins are still very good the dividend yields for a lot of these companies are starting to look very very attractive and i already mentioned two of them

And the q4 earnings are going to be excellent i suspect that are going to be coming out with the announcements over the next month for q4 2020 and it’s going to keep going like that because at some point gold’s going to bottom because the central bank balance sheets are not going to stop

Increasing unfortunately it looks like the central bank balance sheets in 2021 especially the fed’s balance sheet because of the size of the budget deficits that the us government is going to run are going to be enormous now there may be a temporary rally in the dollar but it’s probably going to be

Short-lived given that i do not see demand for u.s treasuries massively increasing outside of the united states and i do not see the federal government cutting back in fact the exact opposite is happening bernie sanders is going to be in charge of the budget or one of the people in charge of the

Budget and now that the democrats have a slight majority in congress they’re talking about larger and larger amounts of checks and handing out checks to people so this is gonna get crazier and crazier the amount of currency being spent and credit being given given out and the fed’s balance sheet it has not

Done very much for over six months it’s going way way higher and the gold price is correlated heavily correlated to an increase in the fed’s balance sheet so as the fed’s balance sheet goes to 8 trillion 9 trillion 10 trillion and above 10 trillion the gold price is going to react to that

In the not too distant future so you can get paid to wait and wait for this short squeeze in capital gains with some of these gold stocks and then you could get paid to wait with shares like newmont mining and agneco eagle and these are extremely well-run businesses agneco eagles capex just came

Down as they just brought on a new gold mine so they don’t have to pay enormous capex to get the mine up and running and now the profi the cost to mine are going to come down the margins are going to improve and the free cash flow is going to be robust

And that’s in spite of the paper gold price dropping below 1900 and maybe it’ll even test 1800 but again the gold miners some of them especially the producing ones people are going to get paid to wait i’ve looked at a chart comparing a lot of these gold mining stock indexes

And shockingly over the last six months the junior gold stock indexes are actually up whereas a lot of these producing gold miners either the individual shares or a lot of the producing gold miner indexes like the sprott gold miners etf sgdm and the gdx newmont mining is flat basically over

The last six months according to this chart and some of these other gold mining stock etfs are down between 8 and 16 percent but the juniors have shockingly i think it’s probably speculation in marketing but the underlying businesses for a lot of these gold stocks and gold miners are

Doing absolutely superbly despite the paper price match but you have a lot of these hedge funds and short term traders shorting the crap out of these gold stocks the producing ones the ones who are minting money the underlying businesses and gold miners that are literally minting money and raising dividends

Over the long term this is not going to be the case the gold price is going to bottom the miners are going to continue to mint money the dividends according to a lot of these producing gold miners like newmont mining and others are very very sustainable unless oil prices spike rapidly and gold

Prices continue to go down so i think we should see in the next six months or so we should see a big big reversal on this please consider becoming a patron over on my patreon and chipping in five bucks or more per month so that way i can continue

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