Gold Revs Back Up While Bitcoin Enthusiasts Fly High

Mike Maharrey: Greetings. I'm Mike Meharrey, a reporter and analyst here at Money Metals, and I'm joined here today by Greg Weldon. Very excited to have him back on the show. He's a market researcher with decades of experience, everything from working as a gold and silver floor trader at the Comex to institutional broker to portfolio manager, and now as an independent market researcher who is in very high demand. How are you doing today, Greg?

Greg Weldon: I'm doing great. How about yourself, Mike?

Mike Maharrey: I'm doing well. I'm glad to have you on the show. I appreciate it. You're kind of coming on last minute for us and I appreciate that very much. I thought we kind of start off talk a little bit about the election and Trump's victory and I don't know about you, I wasn't really shocked by the result, but I was a little bit surprised that he won as handily as he did. What were your thoughts on the election itself?

Greg Weldon: Well, my thoughts were he's either going to win in a landslide or they're going to steal it. I mean the other side would steal it and make sure that he can't be president and there's a lot of people that think that something's going to happen between now and January that's going to still make that the case. We're not quite to the finish line yet from that perspective. Now, I don't necessarily think that's what's going to happen. I think there's a couple of points that need to be made. The first one is that the stock market rallies right away, that this is a new era, it's a new sense of this pride in America waiting for Charlie Daniels and the fiddle to come on. We're never going to beat America. We stand together again kind of thing. And I love it. Okay, and I'd love to think that that can happen.

The problem, Mike, is that this is not 1982 Ronald Reagan, okay? This is not coming off the poll Volcker where he defeated inflation with high interest rates and you had no debt. You have so much debt now it changes everything. And when you listen to Jerome Powell speak, kind of going back to 2018 with the white papers, 311 pages that the Fed put out and the Jackson Hole speech, that was kind of a landmark speech, if you will, laying out the new policy paradigm, and this would be we're going to let inflation run. There's no tolerance bans meaning we're not going to say well gets to five, we'll start to start to adjust policy. We're going to let it run free and wild to whoever wants to get and then we'll reign it back in and we know how to do this.

Paul Volcker gave us the playbook for this and that's all well and good. The problem is that both Yellen and Powell had mentioned things like we need to see consumer credit come down and the last thing he want is a credit crunch. I mean that's the absolute worst scenario than inflation because in fact they can fight inflation. They can't fight a credit crunch, not with a policy. We already learned from the failed European experience that negative interest rates don't work. It sends the wrong message. From the perspective of then taking this back to this is almost a Reagan like revolution, that's just not the way it's going to play out because of the debt issue number one, and Trump will expand the debt. I don't like the way that the media made it out that he was more of a debtor than was Biden.

Biden was by far the biggest debtor. It's not even close. And if you extract the second quarter of 2020 when Trump saved the economy with three and a half trillion, it's two to one Biden, it's not even close. That whole narrative on the bond market is faulty from the start. But going forward maybe it's not so faulty because of course the only thing we can do is print our way out of it. We've chosen this path and we're going to have to stick to it. This takes us back to where are we now with this seemingly big breakout? Is there going to be a 20 30% rally that goes on for a year and a half in stocks here because of this? No way.

The economy, people say the economy is strong and I saw the guy today even you get the bankers who come on, you have Bank of America, you have Capital One. And the guy today was from Wells Fargo on television talking about how strong the consumer is, how much spending the consumer is doing. And it's like, of course you're talking this because you are the credit card lenders and this is what they take their data from is their credit card receipts. And we know that people are stressed out and using their credit cards to pay the bills. We know that consumer savings is now less than credit card debt. Personal savings is below credit card debt. The only other time we saw that was 2007. Delinquencies now are above 10% on the seriously delinquent credit card. The only time we saw that 2008, 2007, 2008, the similarities in the consumer are really mind-blowing.

And when you look at the retail index against the stock market, it's breaking down. It's near the 2020 lows and it has not kept pace and it always leads one way or the other. And it's basically warning that a major correction is coming because you're disconnected from the economy. The economy is not AI. And I think we said this even on your show before that AI is great and AI will revolutionize things, but it's not the internet which was price discovery that was different. This is actually replacing human tasks and doing it more efficiently. And that's what businesses need now to keep pace because of inflation. It all kind of fits in, but when you kind of then start to talk about the consumer and when this AI thing and it's kind of starts to be running out of steam a little bit, the tech sector's been the leader, the XLK and the semiconductors. They're failing now relative to the S&P.

What's the engine of economic growth here and what is going to lead the stock market to the next bull market leg here, I don't see it. I think you're going to have kind of a day of reckoning, if you will, to kind of correct these really wide divergences and then that's what's going to force the Fed to acquiesce because inflation is already rising. You have problems with food, you have weather, you have drought, you have the US right now is more than half of the country is in a moderate drought and 25% of the countries in a severe drought. And it's one of the worst droughts outside the one we had three years ago in the last a hundred years. Food prices will be interesting over the next 12 months too.

To make a long answer shorter, all right, the bottom line is you are in this situation, the feel good factors kicked in, there's going to be a reality check to that and when that happens. And so just to add the one little layer that's important that I missed here, which is the real Trump trade is a higher dollar because of the interest rate differential, number one. And more than that because of tariffs would be a dollar positive thing for some time at least. The worst thing for the stock market is the dollar appreciation. It's directly negatively correlated and it's the most tight and historically significant correlation that's out there between two markets. A higher dollar on the Trump trades not bolster stocks. You don't have the Reagan ability to print money vis-a-vis debt to outspend the Russians, let alone the Russians and the Chinese and OPEC are banded.

Russia is a lot stronger now than it was in the early eighties. So all of this kind of works against that until it becomes evident above the ground that the consumer is choking and struggling. When you start to get some bad economic numbers, it will force the Fed to act. They're going to have to act aggressively, they should be neutral now and that's not priced till the end of next year. None of this is fast enough and I think that that's going to set up for the next big trade and goal because the Fed's going to be behind the curve again and you're going to have to act more aggressively and the dollar will come down finally. But in the meantime there's probably more economic pain. There's probably more two-way action in the metals and we'll see. I think you've had a correction that may be over already, but it's not a really overwhelming high probability either.

Mike Maharrey: Yeah, it's amazing how much on the same page we are. One of the things I kind of watch is the consumer credit. The Fed releases consumer credit data every month and if you've watched it over the last two or three months, it started to tank, especially the revolving credit, which represents primarily credit cards. You're starting to see that pain. And I wrote an article right after the election, and maybe it was too soon because it upset a lot of people, basically saying love or hate Trump. There's a lot of things that are beyond his control when it comes to the trajectory of the economy.

One of which I agree with you is the inflation and the debt. And even if there is a will to rein it in, you've still got to get the cooperation of Congress and I'm not sure that the will is there at all. And then on top of that, there's only so much discretionary spending that can be touched. I agree with you. Let's talk a little bit about bold and silver specifically. You mentioned that there was a bit of a correction in post election and I wasn't really surprised by that. I doubt that you were either, I mean you hit some of that safe haven trade unwound.

Greg Weldon: Dollar higher.

Mike Maharrey: Yeah, and the dollar higher. Exactly. Just like you said. It was looking like gold was running toward 3000 before the little election correction. Do you still see 3000 on the table as we move into the Trump era or is maybe that going to be pushed back a little bit as we have this dollar strength?

Greg Weldon: Well, I got two things I would say. The first thing to answer that direct question is we predicted or projected, I don't like the word predicted, projected at the beginning of the year, that 2650. And at that time it seemed kind of outrageous and people were kind of like, "That's kind of nutty." And we kind of adjusted that at some point to 3000. But that was just kind of an alley-oop slam dunk.

I think that it's important that we go back to what you just said about the consumer because we're getting the data, like you just said, it's so important to look at sometimes the micro and the macro or the macro and the micro I should say. And what we just had, what you just said was perfect because you have seen the Feds consumer credit data, the revolving credits has had two out of the last three months where it's actually down, the rate of change was slowing dramatically. And then what we get to is the weekly commercial bank data. Last week there was a 19.3 billion decline in loans, bank loans total. We're talking about a credit crunch. That's the biggest thing we have to watch out for here because that'll make the Fed act really aggressively, which ultimately will be the thing that drives gold to the next big bull move. That's why it's important to note this.

And then within the 19.3 billion weekly one week decline in lending bank loans, commercial bank loans, outstanding. 65% of it was credit cards, 12.3 billion was credit cards, 12.5 billion was credit cards. That's a single week. That's a huge decline. What did we also get last week? The senior loans officer survey. What did that tell us? We're going to continue to tighten standards on credit card loans except for the super prime. It's not just prime anymore. Now they have the super prime category, but the most people getting the dynamic around the credit card debt is really tightening in terms of the availability.

And then you're talking about not only that the rejection rate on credit cards has skyrocketed, the rejection rate on expanding your limits has skyrocketed. I mean seriously, like 44% of people are getting rejected when they asked now for an increase in their limits that was below 20 just a year ago. And when you take all of that together, what you just said before really leads to the main point in this where you reach a saturation point where consumers are either unwilling or unable to keep borrowing this much money. And you talk about inflation service sector X energy is 4.8 and out of 11 components, eight of them are above 4.5% year over year. I mean, so there's still a great deal of inflation to where the consumer with a 1% real wage gain with savings that again are below credit card debt is still choking.

So to come back to that and what does that mean for gold? Well yeah, the dollar higher is kind of the problem. And we saw that coming, so I don't know if you caught it, but we actually advised all our clients to get out completely get out of gold and silver because we just thought this would be a thing where if Trump wins, the dollar goes higher and it's going to be a corrective moot. Now what's interesting about it is open interest still remains very low. Historically you had some pop, it's come down some and especially even in silver too.

I think you have a situation here where you could, the market might look through to the next stage of the fed move and it might be asking too much, but I think this correction, either it's over or it was the a-wave of an ABC and at a rally and then come back down and make a new low and then it's over. That's what we're going to look at. We're going to look at that pattern and see if you break that pattern. And if you break kind of what would be the B-wave counter reaction rally now that we're I think just seeing beginning today then that would speak volumes to this isn't ABC, the correction actually already bottomed. And I think when you talk about silver getting back down to 30 bucks, I mean it's right where it broke out. I mean it's almost perfect. Some of these things, the technical corrections are perfect, especially in some of the minor shares.

Mike Maharrey: When you look at silver. I was going to ask about that actually. I'm glad you brought it up because silver of course, as most people listening to this are going to know that it's both an industrial and a monetary metal. You have both of those factors in play. What do you see with the trajectory of silver? On the one hand we're talking about the possibility of more Fed intervention, weaker dollar ultimately driving precious metals higher. But on the other hand we have the potential for an economic slowdown which could put a drag on in industrial demand. How are you looking at that and playing silver right now?

Greg Weldon: Well, the thing I would point out right away when we talk about silver is something that was very evident this past week and over the weekend, which is G in Peru celebrating the new port that they built there so that South Americans send all kinds of goods, food, and particular stuff to China, but also silver and the Chinese demand for silver, actually the physical demand is skyrocketing and this is the way they now go and this is what they're doing. This is what China's doing all over the world.

I mean this is a world war already and it's about resources and China's beating the crap out of us. They're playing above the rim. And it pains me to say that it really does. But in that context, I think that this kind of shows you too, when you talk about the precious metals in particular, silver is still the poor man's gold, silver still has a chance to kind of become its own tier one asset, whether that's official or not. And you have kind of Peru and it makes me think of the Spaniards and back to silver coins and it used to be all silver, right?

It's like it's fun to think about, but at the same time this is serious stuff going on here. And I think that when you look at silver, you really have a very interesting correction. The correction down to the low of 2975 first gets below 30. That's psychologically important to me, number one. Number two, it's a perfect 38% of the retracement of the move all the way from $20 back in October of last year and you were at 50% retracement of the move from the August low at 2960. When you start talking about that and then put it in between 100, 200 day moving averages, I mean that's a technical setup where if this market were to get above 3160 bases the spot futures contract, I think that's enough of a breakout to go with it and see. And if it comes up and it kind of fails and it turns out to be a B-wave, you might end up getting out even.

I mean so it's not so bad, but if it isn't and it is something bigger. And again, the other thing I would say too is if the stock market comes off, is that going to be bearish first and then really bullish or is it just going to be straight up bullish and I think it could be bullish. I could still see another scenario where you see the tech sector kind of roll over and stocks come off and it just goes sideways for a while waiting for something to happen, wait for the Fed to happen, the economy, people think it's strong so it's not really going anywhere and then all of a sudden it's like to the degree that you get a rotation out of all these and into the precious metals because they're rallying and because they're appreciating and because they're in demand and it's global, this is still a central bank led demand dynamic. It has not yet even been US investors. It has not been a speculative boat. You've run this thing up to 2800, 2900 without a speculative fever at all.

That's what gets me excited. If you do the math on a long-term basis, now that we've had this kind of move and now correction and we have some more numbers to deal with here, it gives us a one to three year projection, it's a lot closer to 4,900. There's a lot of potential upside here. And just think about where we are now and the dollar hasn't gone down at all. Imagine what happens when the dollar starts going down. This is where it really shows the devaluation, the purchasing power of the dollar is screaming from the gold market. And just imagine when a dollar goes down how high this is going to go.

Mike Maharrey: Yeah, absolutely. Are you a Bitcoin guy?

Greg Weldon: I am. I mean, let's put it this way. I look at it, well if all these currencies that are getting whacked, you look at the dollar and we're so dollar centric, you have some currencies around that have just gotten smoked and a lot of them are currencies from commodity producing countries like Angola, like Nigeria, you're talking about major energy sources, a lot of these types of places, even Ghana with the Seti had a big blow up recently and a major cocoa producer. What happens cocoa quadruples in price to record highs partly because of weather, partially they can't get the product because they're financially bankrupt. You have so many of these currencies where the purchasing power is getting annihilated that we don't understand because we're not seeing it and happening. It's happening all over.

What's someone going to do to protect themselves there? If you say you're Angola or in Nigeria, you're not running down to the pawn and buying bullion, you're not ordering somewhere and putting in a vault in Idaho, what are you going to do? You have a phone, you can have a wallet, you can buy crypto. To me this is more of a global currency, the whole world, 300 trillion in debt around the world, over 307 trillion in debt. Think about that kind of thing with the currencies and how many people could theoretically buy something like that to protect themselves from currency depreciation. That's why I like it.

You kind of throw in Ethereum in because it runs kind of counter to it. It has the blockchain technology attached to it. It can do a lot of other things too. I feel that some point down the road, the whole decentral land will be something, not what people thought it would be when they're buying homes and clothes, but it will be some kind of exchange of goods and services at some point in time. I believe in all that kind of technology. What I don't believe in is some of these other things that people throw out there like Doge mean or some of Solana or some of these things. And to me that's just riding the wave of a Beanie Baby type of mentality and I don't see the functionality or utility of some of these things. That's not to say that something like Tau with Bit and Soar, which is now an AI kind of protocol that maybe has some excitement. It's not to say all. So I'm open-minded about it, let's put it that way. I think some of them have some value and I think some of them don't.

Mike Maharrey: Let me run this scenario by you. A cohort brought this up as a possible strategy and I wanted to run it by you. You've got this, you've had this extreme blow up in Bitcoin, massive move up and we all know that Bitcoin tends to be pretty volatile. You could certainly anticipate a correction. This person was suggesting maybe it wouldn't be a bad idea to hold those crypto profits in a precious metal, say gold or silver, as you start to see it correct back down and then kind of preserve your wealth through gold and silver and then reinvest it in crypto as it starts to go back up. What do you think of a strategy like that?

Greg Weldon: I mean we kind of do that without doing that, if you know what I mean. We're trading the futures market. I watch the Bitcoin gold ratio, I was actually looking at the Ethereum breaking out against gold today literally. I watched that very closely and it's not to necessarily move money, but it is, it's like where do I want to allocate my more aggressive leverage? Is it going to be here or there depending on what the dollar is doing, interest rate. Yeah, I watch that very closely and I think it's important in that sense. I think too that the other thing that has to be mentioned too kind of about Bitcoin and some of the crypto, and this is kind of a far out thought, but it's something worth thinking about because I'm a guy that is paid to look at risk. What's the risk to some of these things?

It's pretty simple to me. You want to talk about the weather and the science on the planet and all the things that are going on here that is really deep and really long-term stuff that human beings can't do anything about. And you start to talk about a CME, a coronal mass ejection or something like a sunstorm or solar flare. I mean Bitcoin would be pretty useless if there's no electrical grid.

Mike Maharrey: I've thought about that.

Greg Weldon: Keep that in mind too. That's why to me, I don't have a problem owning both and I don't see this whole war between it's one or the other. I mean I think that's kind of silly.

Mike Maharrey: I agree completely. That kind of drives me crazy and I don't know about you, but I don't really view them as the same asset. I think there's a lot of people that really think that gold and Bitcoin are interchangeable and I see them as kind of being different there. I mean there's certainly difference.

Greg Weldon: But people wanted Bitcoin to be digital gold. The problem is Bitcoin acted, and this is where you're in this transition. I think the important thing to look for in Bitcoin now, right now, and we call this market really well. Why? Because it trades. It's an immature market. It trades technically like textbook. It's really been an easy market to make money on. I shouldn't tempt the trading gods by saying something like that, but it was the easy breakout above 66,000. We bought it. A measured count takes you to 99,140. We're there. I mean did it think it would happen this fast? No way. But this was the move and this was what we thought would happen.

The question here is, okay, Bitcoin pretty much in its lifetime for my observations, has acted more like a risk asset. It's more like the stock market. I mean it's more correlated to the stock market than gold. I think everyone wants it to be digital and the question now becomes can it evolve into that? And I think that it takes more broad use around the world. All the things I just talked about I don't necessarily think are replaced to happen. And this latest drive in Bitcoin, you have to ask yourself how much of it is because one big player is accumulating billions of dollars worth of Bitcoin.

There's a lot of questions. I mean this is where it's always funny because you have people that are in the gold market that are very similar to the crypto crowd, always bullish. If you even say there's going to be a correction, they they're all pissed off at you. And it's like, no, these markets have ebb and flows. They trade, we time them and I want to deploy my capital where it's going to be making money and if I think Bitcoin is going to correct, I'm getting out, I'm not going to hold it. And then people are like, "Why'd you get out? Oh my god," people go crazy. We got out and it's like, doesn't mean I can't get back in.

Mike Maharrey: Yeah, exactly.

Greg Weldon: It's really easy.

Mike Maharrey: Yeah, people, it's interesting the way psychology works, especially in... You get a lot of folks kind of in the political circles that I travel in, there's a lot of Bitcoin people and a lot of the holdlers and it's almost more of a philosophical badge than it is like an investment. And so I think they have a hard time disconnecting from that psychological marriage.

Greg Weldon: It's a badge. That's a cool way to look at it. I like that. You're absolutely right. It's a badge.

Mike Maharrey: And why should we see that in the gold and silver markets as well? There's that same kind of mentality.

Greg Weldon: You do. No, same thing mean especially people that love the junior miners and that kind of thing too. And again, I mean anyway, I think there's a lot of good value being created in somebody's moves into mining shares though, that's for sure. And especially in the Canadian miners. Canadian dollar lower now. I mean this is the other thing you want to talk macro. We can talk UK and Canada, both of which higher inflation this week than was expected just like we thought it would be. Most of it coming from food, you're seeing the base effect in energy start to flatten out. Okay? All you need is something to pop off in energy. And I think gasoline's bottom, inventories of gasoline in this country is pretty low. I mean crude oil has rallied, has fallen rather, despite the fact that inventories are way down because you've used those inventories to pump gasoline out. You would think gasoline inventories are built but they haven't. This really sets up a situation where gasoline could be really bullish come the spring, come three, four or five months from now.

In that context, that's thinking about in the calendar and where were we last year in February, March, April with gasoline. Do we have? This could be very interesting with inflation and how that affects central banks. We might get lead time on that from the UK and from Canada and the UK always tends to lead the US on the macro side. To me this week's numbers were really interesting just to give you that little sideline.

But I think the Canadian dollar metals shares like Torex is a really good candidate or Wheaton, those have been top performers. The corrections have been much more shallow and short-lived almost all the way back towards their highs already. Obviously a lot of that has to do with Canadian dollars broken down against the US dollar. But so what? I mean we'll still play it and Fortuna silver would be another one that looks really good too. It had a nice run and then it broke down. It's holding it to some of these key moving averages and key technical retracement levels. There's opportunities out there. We just did a big special on that, which we'd be happy to send any of your people, in terms of which of these shares might've seen some technical bottoms here and if not then how much lower do they have to go to provide value and how high do we think they can go in terms of looking forward.

Mike Maharrey: Well, that's outstanding. I really appreciate again you taking the time. I'm going to let you get off here and it's about dinnertime in my house. But before we go, I do want, I hope people can see the way that you do analysis. And I love the fact that it's macro and micro. You're looking at kind of both ends of the scale. If there are people listening and they're thinking, "Man, I would like to get more info and get in on Greg's analysis," where can they go?

Greg Weldon: They can go, they can email me. Just email me straight up. [email protected]. And yeah, that's what we do. I mean it's top down and then bottom up and really want everything to meld them together. You want the psychology, you want the position dynamic, you want the fundamental supply demand, you want the technicals. And we even do some quant work, some of the algorithms I wrote when I was in my twenties, so it's really blended. And we do the global macro strategy report, which is the research product. And that is pretty much global macro strategy. I mean it's what we say, but it's also specific trades and we give you specific trades, stop-loss levels, the whole nine yards. That's our main research product. We also do the gold guru, which is gold, silver specific. A lot of the mining shares, a lot of quant work, a lot of technical work on that too.

Not so much the companies and their mining operations. It's really more macro influence and the bigger picture. But we also do uranium, which I think is really hot here by the way. I mean the top ranking shares right now in that sector are all uranium, [inaudible 00:27:23] and some of the other ones, Denison is up there. Canadian also another flavor in the uranium stocks.

And we do the crypto too. We do Bitcoin and Ethereum and we actually got bullish and bought Ethereum today. We had been holding Bitcoin throughout the last few weeks waiting for Ethereum to bottom and come back up through its breakdown pivot. And it did that today pretty convincingly. Any of that, and I'm also a CTA, we have a high minimum, it's managed accounts. You open the account in your own name, there's no commingling of funds. You see the report every day on what we're doing and we, it's basically the GMSR strategy is what we do in the managed accounts. It's all the same stuff. All the work that we do for the research is work I'd be doing anyway if I didn't produce research for the trading business. Yeah, shoot me an email with any questions or we'll send you some information or some of the research products.

Mike Maharrey: Outstanding. Well, thank you again and hope you have a good evening and we'll definitely have you back on as things progress.

Greg Weldon: Hey, I got to mention one more thing.

Mike Maharrey: Absolutely.

Greg Weldon: Otherwise, I would be remiss if I didn't mention, we also doing the podcast, so it's yeah, Money Markets and New Age Investing and it's kind of stocks like this, but it's also global and economic, A little more political, a little more policy, and then a little more equity too. And looking at the ETFs and how can we use ETFs to recreate a hedge fund/CTA portfolio because those are the kinds of things you have to be in the currencies, be in the bond markets, be in the commodities especially, especially food commodities. If you want to keep pace in the next round be in passively long stocks, that was okay during the 40-year downtrend in interest rates and inflation. It's not okay that now the 40-year downtrend has been violated and we're on the backside of that. From that perspective too, it's @Money_Podcast on Twitter or you can find us on any of the podcast sites, Money Markets and New Age Investing.

Mike Maharrey: Awesome. I'll check that out for sure. That's good to hear. Well again, thank you so much and have a great evening.

Greg Weldon: You too, Mike. Thank you.