Weekly Hot Take - New Year edition
2/01-6/01
Happy New Year!
Happy New Year! I hope that you’ve had a wonderful holiday season and that you're feeling refreshed and ready to tackle the new year. I am very excited to see what the next year has in store for us and I’m looking forward to continuing to bring you the latest weekly Hot Takes, TA updates and informative write-ups in our weekly newsletter. Thank you for your continued support and I can't wait to see what we'll accomplish together in the coming year!
Hot Takes!
Gold / $XAUUSD
$XAUUSD has reached 1830 after a 14% price rise since November, and this has sparked a lot of discussion among investors and analysts. Many are still calling for new lows, while others are way too bullish already. A rally happens when the sentiment is bearish and people do not believe in the investment vehicle. That is exactly what we got the past few months: a rally built on disbelief, climbing the wall of worry. Will we see a short-term pullback, very possible. But in my opinion this is a time to add on dips.
Extremely important is to be flexible and to not focus on only bearish content nor solely on bullish content. The bears like ‘you know who’ have been calling for a severe pullback for multiple weeks because of a negative divergence in the RSI. While this is indeed true, a bearish divergence doesn’t have to materialize directly in a downwards price move. You will be left behind and you will get shaken out on every small dip while price keeps going up. However as we are currently still in the bull stance, it is very important to take these bearish divergences into account and we shouldn’t be ignoring these signals. So my opinion is to stay long and have certain levels highlighted as hard stops. I recommend to look at both the mid-week update of previous week and the introduction article to cycles to get a better understanding.
In current macro-economic environment many investors see gold as a store of value in times of crisis, and with the possibility of a recession looming and central banks hiking interest rates, many people are turning to gold as a way to protect their wealth. This is why buying around november was a wise move.
One of the reasons gold is seen as a good store of value is that it is a physical asset that cannot be easily printed or manipulated by governments or central banks. In times of economic uncertainty, people often flock to gold as a way to safeguard their assets. Additionally, gold has a long history of holding its value over time, making it a potentially reliable investment option in times of crisis.
The concluding hot take is that $XAUUSD is set to keep rising gradually while sentiment stays this negative.
Junior mining companies
I entered junior mining companies around the July/August timeframe and I’m currently up around 150% on the overall portfolio. I was able to achieve this success by carefully choosing the right miners with excellent risk reward setups. It was not an easy process, as the mining industry is full of risks and uncertainties. However, by doing due diligence and staying informed about the latest developments in the industry, we were able to identify companies with strong potential for growth. A key element is to follow the right people in this space! For example people like gold ventures have a whole team doing due diligence and then providing valuable info in threads on twitter. Hot take is that we don’t have to worry that much about the metals prices alone. When we select a company with a proven resource and with a promising drill program we can perform regardless of the metals being in a regular rally or a bear market rally/relief rally.
Technical Analysis
Technical analysis is one piece of the puzzle when it comes to making an investment decision. Therefor it is important to be able to read the charts. For companies we mainly look at volume build-up and horizontal supports and resistances. Volume build-up can be an important indicator of future price movements. If a security is experiencing a significant increase in volume, it could be a sign that there is significant interest in the security and that the price may be poised to move in a particular direction. Horizontal supports and resistances, on the other hand, refer to price levels at which a security has historically had difficulty breaking through.
Example below is where you can see big volume building and then followed by a strong move to the upside. First price broke above the red horizontal resistance and was then followed by a backtest of the red line as support. If the volume keeps rising even after the breakthrough then it is likely that the price will continue it’s trend. If the volume drops then a pullback is likely to come.
When analyzing commodity prices as a whole, the best technical analysis methods are Cycles analysis and Elliot waves. Cycles refer to the recurring patterns of highs and lows that can be observed in commodity prices over time. Elliot waves, on the other hand, are a method of technical analysis that involves identifying patterns in price movements based on fibonacci extensions and retraces. By combining these different methods, we are able to gain an even deeper understanding of the future price movements and make informed investment decisions. Hereby I refer to the
An article on Elliot waves will be published aswell in the coming weeks! Feel free to subcribe to not miss these articles.
Correlation to the general market
The general equity market, as represented by tickers like $SPY and $QQQ, has been in a steady decline in recent months due to the rising interest rate policy by central banks. Higher interest rates can make it more expensive for companies to borrow money, which can weigh on their profits and ultimately impact the overall stock market.
However, it is important to note that gold and silver tend to behave differently than the broader equity market. While they may temporarily decline along with equities, they often rise much faster afterwards. In fact, during times of market volatility, gold and silver prices tend to rise as investors seek out assets that are perceived as being more stable and reliable.
So, while the equity market may be facing headwinds due to rising interest rates, it is important not to get too caught up in the short-term movements. Instead, it is important to focus on the long-term trends and consider the role that gold and silver can play in a diversified investment portfolio. These precious metals have a long history of holding their value and may be an effective way to preserve wealth in times of market turmoil.
$SPY (blue) and $GOLD(orange) overlap: You can see that while SPY has done a 20% drop since January 2022, gold is slightly green on the year 2022. Proves again the point that gold is a good hedge instrument in times of crisis.
Thank you for your attention!
This was the new year edition. I hope this information has been helpful in understanding how I approach investing in junior mining companies and analyzing the gold and silver market. If you have any other specific topics you would like me to elaborate on (Technical Analysis methods, market sentiment, correlations, crypto), please let me know in the comments. I am always happy to share my knowledge and insights with my followers.
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