David Kranzler: US Dollar Crisis is Not the Only Factor Pushing Gold Higher

welcome back to palisade radio i'm your host tom bogervicks and joining me today is a new guest to the show david kranzler from investmentresearchdynamics.com he also is the author of the mining stock journal and mining stock daily how are you today dave i'm doing well thanks how are you doing tom excellent great to have you on the show i was wondering if you could share with us a little bit about your time as a silver futures trader ah well um i wasn't trading like on the comex floor or anything what happened was i started getting into the precious metal sector in the middle of 2001 i got dragged into it kicking and screaming because i was having too much fun shorting you know the tech bubble stocks and i kind of just dove headfirst into the entire sector and started trading the junior mining stocks and it just kind of flowed from there that i don't want to say maybe around late 2003 i opened up a futures account commodities account and started trading gold and silver futures and then i focused on silver and you know back then the margin that you had to put up was minute compared to the margin requirements now part of it is just because back then the price of silver was you know five bucks an ounce six bucks an ounce so and what i ended up doing is i you know i started making some decent money trading silver futures so i instead of trading the junior mining stocks i kind of set up a portfolio of junior mining stocks and i spent all my time just trading futures and i kind of discovered there were certain patterns that were tradeable you know at certain parts of the day and there's also certain times of day because even back then you know they basically traded 23 hours you know five days a week and so in terms of denver time the comex floor pit would open up at 6 25 a.m gold would open up at 6 20 and maybe it was 6 30 i don't remember specifically i think maybe there's a 10 minute lag but at any rate so i would essentially get up and you know i wanted to trade when there was decent volume during the day or you know late at night so i would get up early enough to start trading around five in the morning and then when the stock market closed you know i would shut down and take a nap and do some things in the afternoon or the nap would go late afternoon and then try to have a bit of a life for a few hours take my dog for a run or whatever and then things would start to heat up again around 8 or 9 p.m denver time and then i would just trade you know late into the night until i couldn't stay up anymore and i go back to bed and repeat the process so you know that did that for probably i don't know two and a half three years and i mean it just got to be too grueling so i scaled way back and i guess at one point i you know i stopped doing it full-time but you know i keep small core positions and i i just assume we're in a long-term bull market so if you're long and you manage your your risk exposure and your and your margin risk you're probably going to make money over the long term and it might have been the summer of 2008 i just kind of abandoned trading gold and silver futures for my personal account because the market had become so manipulated and you know we we saw that in march 2008 when gold and silver had both run up to new bull market highs and all of a sudden they got taken down right around the time bear stearns was going bankrupt and it didn't make sense right it was like gold and silver should be going through the roof when bear blows up like this because of the implications for the financial system and that started the big sell-off in gold and silver that bottomed out in late october 2008 and then you know when lehman collapses and they all of a sudden they start rolling out all these money printing and government bailout programs and then it made sense as to why they started taking down gold and silver in a big way and it was march 20th march 21st 2008 when i think it peaked i was actually up on a ski trip and crested butte and i was trading in the morning and all of a sudden you know the metal started heading south but at any rate and you know that summer i just gave up trading especially silver futures because it had become so manipulated that it made it almost impossible to try and make a living off it as a small day trader sounds like an interesting way to really get an education in the uh gold and silver space oh it totally is yeah so we're speaking here on monday the 27th we saw gold less than 24 hours hit a new all-time high and i was wondering if you could explain to us a little bit about let's let's contrast and kind of pose it as a question is gold only going up because the us dollar is falling well that's actually a great question and i was having a discussion about this last night with chris powell goddess chris powell we were exchanging emails and you know that's the mainstream narratives that's their attribution for why cold's going up let me see if i can find the email because i got some interesting things in here here we go you know i said the last time gold hit 1900 in september 2011 the us dollar had dropped below 75 right and so you know right now the us dollar where i didn't even see it wasn't watching it today closed at 93.63 and since late 2018 gold has run from 1200 up to where it is and in late 2018 the index of the dollar index was at 95 and now it's at 93 right so i mean that does not explain why gold is run from 1200 to over 1900 the dollar index doesn't explain that um and yeah the dollar's down quite a bit but not even close to the amount that it dropped the last time silver was up at these levels and i think that the dollar has room to move a lot lower i mean without getting into a complicated conversation you know there's to some degree because of all of the foreign issued dollar denominated debt there's a natural bid for dollars globally right and also because it's still the reserve currency so if 60 or 65 of the global trade still settles in dollars that means everyone needs to hold dollars in order to conduct trade and that's changing and i don't even know what percentage of global trade is settled in dollars i know the last time i read an article about it a few years ago it was down to like 66 or 67 percent from several years ago being in the high 90 percent so the world still naturally has a bid for dollars and i think that helps hold up the dollar i do think at some point especially with all this money that's being printed we're gonna see a massive drop in the dollar and that could explain a big part of the run-up in gold the fed prints a ton of money on a delayed basis for whatever reason the dollar still stays at a pretty lofty level despite all the money that has been printed and thrown into the system and a big part of it is probably gold investors anticipating an eventual decline in the dollar but you know again if you look at the dollar index say over the last 15 20 years it hasn't really dropped that much in the context of a decade or a decade and a half i also think that there's a likelihood that i mean as you well know there's a huge universe of paper gold derivatives in all kinds of forms not just comex futures or lbma forwards there's there's all kinds of otc structured derivatives there's central bank gold swaps and the bis is a huge participant in the gold swap market and that creates a natural short position in gold potentially and so i think what has probably happened is there's a couple factors i think a lot of entities you know wealthy entities and families and wealthy individuals have started to decide that they want to take delivery of the gold that they own sitting in vaults in london or wherever and so that's going to put some pressure on the physical market especially given the fact that i mean it's immeasurable now the amount of paper gold derivatives relative to the amount of physical gold that's available to be delivered should people start standing for delivery as the long side counterparty to those derivatives transactions and again it's impossible to quantify it because no one really knows i'd be surprised if jamie dimon understands the degree to which jp morgan has risk exposure to the precious metals derivatives market i mean he may have some vague idea or some general idea but there's no way he knows the nuts and bolts of it and i can say that speaking from experience because when i was a high yield trader in new york we did all kinds of maneuvering to hide positions from the risk management people in the back office it's not that hard and back then it was harder because the risk management people actually did their job now they just look the other way you know that's how you end up with those situations like the london whale i mean that was what about a six billion dollar hickey that jp morgan took jamie diamond had no idea about that the guys that were two levels above the trader that was responsible for that probably had no idea so the other factor is and again it's hard to prove or quantify other than you know the fact that the data that i see every day with regard to india's gold importation indicates that once their economy was reopened or partially reopened they became a voracious gold importer again now there were several months where india was not importing any gold and you know that started before the country was locked down because of the virus crisis and so you know if you say well india wasn't really importing any gold from december 2019 roughly they went several months without gold that the public demands for all the various things that they demand gold for and once they started opening up all of a sudden the data that i look at started lighting up like a christmas tree and it was obvious india started importing a lot of gold and the interesting thing about that is typically historically india will like you know they've got seasonal periods where they import a lot of gold and we're starting to head into one of those and when the price jumps say 20 30 40 bucks at a time over a few days india like will pause its importation the public there is very price sensitive to what they're willing to pay for gold over very short periods of time now what happens is as they get used to seeing the higher price of gold and then they start back up importing again so you know their price sensitivity is not present right now so in other words let's say gold's run up what i i don't gold's up uh you know a hundred bucks since july 21st right so they haven't stopped importing i mean that's 100 move in what six days some of the data indicates that you know they're slowing down a bit but they've still been importing despite this huge price rise three or four years ago a price rise like that and india would have disappeared for a week until you know they got comfortable with the idea that that was going to be the price they have to pay and i think part of the factor there is that because they went for several months without importing any gold the public starved for it and so once their economy opened back up it was like waking up a starving elephant and now the elephant is feeding voraciously on gold and i think that might have taken the bullion banks by surprise again i no idea i can't prove this for sure but it's just you know after pretty much doing nothing but this sector for the last 20 years it's just it feels like that's what's going on and if it's not india there's some force out there in other words it's the physical market that's pushing this higher and that's why we haven't seen long extended deep manipulated price takedowns like we used to see from 2001 until basically the last year over the last year if you look at a chart of gold an intraday chart of gold you will see like those fishing line waterfall type drops but they're very short-lived and you get a v bounce the perfect example of that is the one in march and gold rebounded from that very quickly and i think that's our indication that the powers that be the bullion banks and the central banks are losing their ability to manipulate the price of gold using derivatives so dave as you're speaking about all the manipulation and stuff explain to us a little bit about how the comex works and how taking deliveries works versus deciding not to and how they actually manipulate the prices well the manipulation scheme isn't just on the comex i mean that's a partnership between the lbma and the comex and you know ultimately the bis is at the top of the food chain there and that's kind of a complicated conversation but in terms of the comex i mean there's delivery quote unquote and then there's real delivery so you know let's just say you're you're you're an entity and you got a contract and you want to stand for delivery so you know the day before first notice day your account has to be fully funded in order because you can get noticed you know as soon as the market closes the day before first notice day you can get noticed that evening and that's really when the notices go out so again i without getting into like you know the nuts and bolts of what actually happens with warehouse warrants and things like that well you know essentially what happens is you stand for delivery and the title to a certain bar is transferred from the counterparty that was short the contract to the counterparty that is long the contract and is standing for delivery now the bar doesn't leave the warehouse per se i mean most entities that stand for delivery they opt to just have the comex safe keep the bar and i i want to put quotes around safekeep and the comex incentivizes that because the co you know the storage fees at the comax are a lot cheaper than if you use a private vault a private non-comex vault so at any rate i mean you could be long a gold bar that's sitting in a comex vault and you may never possess it touch it see it you just know it's there and then you know maybe at some point down the road you decide you'll sell it so you short a contract and that's how you unload it the problem i have with that is and the comex banks know this the problem i have with that is that given that the comex banks know that they know they don't have to have the real gold there because they know the whole delivery process is going to be electronic right you get issued there's something called a warehouse warrant that gets attached to a bar that meets comex standards and that makes it registered or eligible for delivery actually when it moves into the register category it has a warrant attached to it and it's all done electronically and you take delivery and and there's an electronic transfer of that warrant from the previous owner's account to your account and that's it now what i think would cause a default on the comex is if a large percentage of the people who are standing for delivery decide that they want to actually take physical possession of their bars and the comex makes it a pain in the ass for that i have a small precious metals and mining stock fund and we decided i think it was it was like the spring at 2009 and the premiums on the money that we invest in physical bullion we invest in one ounce bullion coins sovereign men and bullion coins mostly american eagles gold and silver and the premiums were really high and my partner and i were like well we've got money coming in the best way to to get the closest price to spot for silver is just to go along you know take delivery on the comex and we did that and we stood for delivery and it actually took six weeks for hsbc was the counterparty it took six weeks for hsbc to actually do the electronic transfer process and and because we wanted to remove the bars and move them to the depository where we keep our bullion and it took six weeks for that to happen technically we had a larger fund we probably would have filed a lawsuit just to screw around with them because technically they're supposed to if you request delivery like that they're supposed to deliver it within three days of the end of the delivery period we had to wait six weeks so obviously something is screwed up there something's wrong and it's also there's a bunch of different fees that are associated with it i mean we had to go fill out a bunch of paperwork in order to authorize a brinks truck to go up to the comex vault wherever this vault was where the bars were and get our bars and drive off with them so the comax incentivizes people who take delivery to leave their metal in comex vaults and i think there's a good reason for that and that's because i don't necessarily believe that the bars that they say are in the vaults there are actually there almost like a fractional reserve yes exact strategy that's what we saw in london and i kind of know this not necessarily from a primary source but from a rock solid secondary source and there was a lot of entities that were going around remember the the whole oh the comex we're going to make 400 ounce bars available for delivery on the comex blah blah blah you know there was this alleged shortage of gold bars in london and they started blaming it on the fact that the gold refiners were shutting down well there's some colleagues of mine and i were told by someone who was in a position to know that it was extremely big because he was representing some entities that were trying to get all their borrowers out of london and he said it was extremely hard at that time and this is going back to before the end of 2019 it was very difficult to get a hold of bars to remove them from london vaults and get them out of the country so the thing is i get asked all the time about investing in gold and silver i'm like buy physical gold buy physical silver and don't leave it in a custodial account you don't own it unless you have it in your own physical possession some sound advice there let's move a little bit to obviously we already touched on the fact that we've seen a new all-time high so typically this would make most investors kind of fearful so i'd like to kind of get your perspective on where we are in this bull market and why it's not necessarily time to be overly careful i i mean i think it depends on what your objective is if you're just trying to trade around gold and silver you know day trade it or swing trade it you know just ride short term positions higher and then and then sell them and and look for a pullback to buy the pullback we've had a huge move in the sector and from my standpoint i actually think it would be healthy technically if we get some type of pullback i can just see all kinds of frothiness in the market that you would associate with a short-term top but at this point i mean we will get a pullback gold and silver extremely volatile for a lot of different reasons but we will get a pullback i mean it could happen a lot higher from the point where we are right now um i don't know it could start happening tomorrow on the other hand if you're just a long-term investor i wouldn't worry about it you know it's just like buy a little every month whether it's mining stocks or gold or silver just buy a little every month i personally think so i look at we're in a secular bull market for the precious metals and that has to do with the massive devaluation of fiat currencies and and i think we're in the final stretch of that but you know i look at a lot of people like break down 2000 to 2011 you know into sub components and i i just say look we had an 11 year cyclical bull run you know what we saw away from you know just removing the factors played by the manipulation and the factor that manipulation played and pushing the market lower in 2011 we're starting in 2011 so then we had about a four and a half year corrective pullback period that ended in december 2015 and we're in the next leg of a cyclical bull move higher i have no idea how long it could last it's i think this one lasts as long as the central banks can keep the fiat currency durable on the wheel at some point that gerbil is going to die look at all the money that they're printing as cocaine that they're injecting into that gerbil just to keep it running and keep it alive at some point that gerbil just it won't tolerate anymore and it'll collapse and so you know that could happen next week it could happen five years from next week i don't know but either way i would say that we are in the very early stages of another cyclical boom move higher and i think we're going to go a lot higher and i also think that notwithstanding what all the other central banks around the world do or have been doing i think the fed's going to have to print a lot more money and we'll be printing a lot more money and that that'll be the primary factor that you know that drives this bull market absolutely one of the other things that doing some research kind of coming across on your twitter account was some of the shorts on the silver market could you define for us what a short squeeze is and how that can actually push the market higher you know i think when there's a short squeeze in a stock that means the short interest is so high that you know so the guys that have large short positions are going to have a hard time buying shares in the market especially when they start getting called in so when you get called in on a on a short position in the stock market you know the way technically the way it works is you have to go out and purchase the shares and return them to the entity that lent you the shares that you shorted and when that happens all at once especially an engineered short squeeze you know that's what drives the stock a lot that's what drives a stock that's susceptible to a short squeeze a lot higher so i mean the short squeeze is kind of a generic term that gets thrown out there you know when i talk about it in the silver market it just means that there's a high degree of short interest saying in comex futures and the price starts running up and the shorts have to scramble to cover those shorts as the price runs up especially with futures because you got such enormous leverage there now where you could really see fireworks and we could be seeing the beginning of this process right now i don't know i mean i don't think anyone knows for sure but you know again when you're short a gold or silver futures contract there's a counterparty on the other side i mean futures are a zero-sum game there's a counterparty on the other side that is long and has the option of saying okay well i don't want to just sell this long position back to you and take my money and go buy a further out month so you know right now we're getting into the roll period for the august gold contract and what a lot of entities do especially the hedge funds that just use comex futures to index gold and silver is they'll sell their august contract before first notice and roll it out to a december contract that's the next front month or the next most active trading month but where we could see a short squeeze is if you start to see a lot of entities stand for delivery and the banks have to scramble to find gold or silver in order to satisfy those delivery demands now we've we've seen i guess april and july silver saw a record amount of contracts stand for delivery and silver also saw as the june silver had a huge amount of entities that stood for delivery now all that means is that they opted for the change of ownership of bars presumably sitting in comex vaults and where it could get really interesting is if those entities decide hey i think i'd rather safe keep my gold on my own or move it to a private vault closer to my house and that's where i think you could really see a short squeeze in the precious metals market is when that happens that'll tell us whether or not the banks the bullion banks have any clothes on underneath their cloaks right that's going to be really interesting to see um dave one of the other uh terms that i heard you mentioned was a good quality move or a high quality move versus a low quality move and maybe if you could explain the difference between two of those and maybe use tesla as an example one of your favorites [Laughter] so well i mean we could talk about tesla but um the perfect example for a good quality versus a low quality move in the sector you know at the end of 2015 all of a sudden gold and silver started perking up and shortly thereafter a bunch of speculative money started flowing into the mining stocks especially the juniors i think the gdxj it doubled or tripled in like six months and it was basically if you looked at the chart it went parabolic and i just said to myself you know this is a real low quality move it's all this hot money just all of a sudden flooded into the sector and we're gonna see a correction and we did we saw basically saw a pretty much a two-year correction i mean the market didn't sell off like it did from 2011 to the end of 2015 but it sold off and then it kind of went sideways it zigzagged sideways until august 2018 so the move that we've had since august 2018 has been a lot more gradual except for the last few weeks and it didn't get any notice from the mainstream media or from hot money investors well that you know that's kind of changed in the last couple weeks all of a sudden i'm starting to see a lot of hot money momentum chasers start to come into the market and that's a little bit troubling but i'm not that worried about it because we've built a nice base on which to launch from you know we had sort of a gradual rise for the better part of a year and a half and it's started to get a little bit frothy over the last few months but especially the last few weeks but it's a lot different than the character of the move that we saw in the first six months of 2016. so that the first six months of 2016 i would characterize as a low quality bull move and what's happened since august 2018 has been a much higher quality and i think it's a much more sustainable move now again that doesn't mean we're not going to get corrective pullbacks here we will and i'm i mean again i'm expecting one any day but you know that any day could be any month from now you know and tesla's the same thing i mean it's it's completely disconnected from any possible fundamental valuation that you could put on tesla i mean i don't even think the enterprise value of tesla is worth the face value of all the debt that it has on it but you know test has gone parabolic since the low in march and it looks like the primary driver of that although the robin hood retail idiots get tagged for it it looks like the primary driver of that has been the chinese speculators because you know as we were discussing before the call tesla is only the third best performing ev stock over in china well they also trade on this exchange since the march lows so to me it's you know there's all these crazy tesla bulls out there saying see this move in tesla affirms that tesla's dominating the ev market well then how do they explain the fact that neo has outperformed tesla by 150 basis points since the march low and byd beyond your dreams which warren buffett has at stake in has also outperformed tesla since the march low so tesla's really only the third best performing ev stock since the march low and to me that's just you know it's a low quality move you've had a ton of hot money over in china and the chinese traders historically have been even probably a little less sensitive to risk than u.s hot money chasers so i mean at some point you know all three of those stocks are going to suffer horrible collapses i just don't know when somehow that's hard to believe that they're even crazier than some of the u.s investors um well i remember that in the tech bubble years you know 99 and 2000 i don't know if you remember there were these these incubator stocks that were introduced in this market and there was some chinese incubator stocks that went even more parabolic than the us incubator stocks some interesting times for sure um dave why don't you tell us a little bit about what you include in your uh mining stock journal and the mining stock daily well my name is doc daly is actually um trevor hall produces that and it's it's kind of his gig and i i just contribute to you know i script out the market color that he talks about every day he does a daily morning podcast where he goes over the select mining stock news information you know if a mining company if a junior mining company appoints a new board director that's not going to show up but if a junior mining stock makes you know releases some strong drill results he kind of goes over that he starts off with market color you know what happened the day before in gold and silver and i i script that part so um the mining stock journal is it's a newsletter it comes out twice a month every other thursday and i focus on the speculative junior exploration stocks but i you know i've also started incorporating a lot more you know a lot more of the material i also focus on either producing stocks that are turnaround situations or you know relative value plays in the larger caps but for me my interest and my passion is the junior exploration stocks so i i have a stable of of stocks that i cover some of them have done really well some of them have gone nowhere and the ones that have done really well have more than made up for the ones that have either been a bust or gone nowhere and then you know i look for stocks like new gold where new gold got slammed below a dollar for good reason and i did a bunch of work on it and decided that i thought it was an interesting turnaround situation and so far it's worked out pretty well and i also provide some analysis my view on what's going on in the on a macro basis in the precious metals market and almost every stock i cover and present in the money stock journal i also invest in with either my money or um i put it in the fund that i manage so you know i like to say i put my money where my mouth is on my ideas and i don't accept any sponsorships from mining companies or and i don't get paid to promote any particular mining stock it's i do all my own research and you know i spend a lot of my time looking for new ideas excellent david we'll have all those links for your newsletter and stuff in the show notes thanks for your time today dave thank you tom i enjoyed it excellent we'll hopefully have you back soon absolutely this podcast is for general informational purposes only nothing on this podcast should be taken as investment advice guests on this show are not compensated for their appearance listeners are urged to educate themselves and make their own decisions do not base any investment decisions on the information contained to view our full disclaimer please visit our website [Music] i think you understand the junior mining sector and you think that the participants in the mining sector junior mining sector are good people and kind people hit the bid how violent that term could be it actually could be quite violent it could be a rip your face off uh uranium rally and the world is always going to need raw materials it's going to be copper and gold and nickel and so forth totally destabilized hey hey troll did you hear what's going on in yemen

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Id: CSQRpINCPHg

Length: 33min 52sec (2032 seconds)

Published: Tue Jul 28 2020