This morning I spoke with a contact in London who manages a precious metals & mining equity fund, part of a multi-billion dollar asset management firm. While he cannot be referenced at this time, I asked his thoughts on last week’s terrifying smash of the metals and miners.

Here’s what he said:

“I bought some silver investments for myself last week when I felt we washed out…but you know what, I think we’re really done here. There’s only so much [they] can do on the short side…and you saw that volume in the silver futures market last week. It’s not sustainable. When those people want to get out [the shorts], that will lead us higher.”

When asked if any new interest came into the market, he said, “[Right now] it’s all the same people, and we’re all still playing in the same paddling pool. Until it turns into a swimming pool, and then an ocean—we’re going to be range-bound.”

However, the sentiment among money managers is slowly changing he explained, because, “When I pitch the idea of buying to my colleagues, they seem more interested now. They’re recognizing that the overall market looks quite expensive, and gold and silver look quite cheap.”

Concluding he said, ”Are you going to go buy a bank share? The answer is no. That sounds a bit simple, but if people stopped putting money into bank shares…and instead put it into gold and silver shares, or even into the metal itself—that would qualify as the new entrants/money flow that the sector needs.”

Bottom Line: The metals markets remain tiny, a “paddling pool” as mentioned by our money-managing friend. That suggests we are still in the early days of this bull market.

Additionally, if gold and silver is “money”, and gold & silver producers are “money producers”…will there be a tipping point in which smart money flees bank stocks, and reallocates that capital to “money” and “money producers”?

Such a scenario is plausible, but may only occur amid a renewed solvency crisis among banks, combined with a currency crisis.

What are the odds of that happening? If Japan’s recent smashing of their currency is any indication, that date may be in the not too distant future.

Best,
Tekoa Da Silva
Bull Market Thinking

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