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SX Gold & Metals Advisor
Profitable Investing in Mineral Resources

August 3, 2021

A key factor holding gold prices back after peaking last August has been the diminution of economic and geopolitical worries following last year’s virus-related economic volatility. In short, gold’s “fear factor”—which I maintain is the dominant driving force behind the metal’s intermediate-term trend—was missing for most of that time.

Gold’s “Fear Factor” Keeps Growing [Note: Your chief analyst was interviewed by David Keller of StockCharts’ The Final Bar podcast last week, available free on YouTube by clicking here.] A key factor holding gold prices back after peaking last August has been the diminution of economic and geopolitical worries following last year’s virus-related economic volatility. In short, gold’s “fear factor”—which I maintain is the dominant driving force behind the metal’s intermediate-term trend—was missing for most of that time. Fast forward to this past March, when gold finally confirmed a bottom and turned around. After the recovery in the yellow metal since then, we can now say with confidence that fear is making a much-heralded and welcome (from an investor’s perspective) return. Growing Delta variant worries served as the initial catalyst behind gold’s interim low and subsequent rally attempt. Adding to the bullish backdrop for gold were falling Treasury bond yields and, even more recently, the Fed’s reassurance that a rate hike isn’t in the cards for the foreseeable future. The bullish rate outlook, coupled with a sharp decline in the U.S. dollar index, provided the impetus for last week’s precious metals rally, with gold hitting a two-week peak on July 29 and silver registering its first weekly gain of the last four weeks. Both metals have a lot of ground to cover before they’re completely out of the woods, but one can’t help but be encouraged by the market’s improving technical, fundamental and psychological backdrop. While it’s good to see the front-month gold futures contract decisively back above its 25-day line, the widely-watched (and psychologically significant) 50-day moving average at around $1,830 is still a near-term obstacle. A decisive breakout above this key trend line—particularly on a weekly closing basis—would almost certainly pave the way for some additional short covering and would give the bulls a far greater claim for regaining control of the intermediate-term trend. Elsewhere, there have been some notable improvements in the leading industrial metals following the dollar index pullback and Fed rate statement. As alluded to last week, copper has shown worthwhile strength and is up over 8% from its June low, prompting us to increase our exposure to the red metal (via our favorite market-tracking ETF). Steel, meanwhile, is also on the mend following a 10-week corrective pullback. The NYSE American Steel Index gained 5% last week and is now decisively back above its 50-day line as some leading publicly-traded steel companies have lately posted solid second-quarter earnings and revenue while issuing bullish guidance for Q3 and beyond. Consequently, I’m adding a steel stock to our model portfolio as of today. Updates In light of the short-term technical improvement in the gold mining stocks, I placed leading senior miner Barrick Gold (GOLD) back on buy after its recent show of strength. I further suggest using an initial stop-loss slightly under the 20.50 level (intraday) for this trading position. Second-quarter earnings are due on August 9, and analysts expect an 11% increase in per-share earnings along with a 3% decrease in revenue. A consensus-beating report could serve as a catalyst for GOLD breaking out decisively above the 50-day line (which has kept shares constrained in recent weeks). Meanwhile, the company said it remains on track to achieve full-year gold production guidance after reporting preliminary Q2 output of just over 1 million ounces (in line with estimates), and it expects all-in sustained costs for gold to be 6% to 8% higher sequentially. BUY A HALF In June, I recommended that we buy into the Global X Lithium & Battery Tech ETF (LIT) on weakness. This ETF is what I view as a nice fit with our somewhat related positions in the cobalt (via Wheaton Precious Metals) and neodymium-Praseodymium (via MP Materials) spaces. Investors who haven’t already done so should book some profit in our conservative trading position in LIT after its recent rally to over 20% from our initial entry point (per the rules of our technical trading discipline). I also suggest raising the stop-loss on the remainder of our position in LIT to slightly under 74.50 (halfway between where the 25-day and 50-day moving average come into play). HOLD After gold closed decisively back above its key 25-day moving average, I recently recommended that speculative traders begin nibbling on our gold-tracking ETF, especially on pullbacks. (Conservative investors may wish to wait for silver to join in and strengthen before buying gold again, however.) On July 14, traders purchased a small position in the GraniteShares Gold Trust (BAR), which is a low-cost way to track price movements in the physical gold price. I suggest using a tight stop-loss at this time for BAR since gold isn’t completely in the clear yet (with regard to silver’s lack of confirmation). Accordingly, I suggest exiting long positions in BAR if the 17.66 level is decisively violated on an intraday basis. BUY A HALF We recently added the iPath Series B Bloomberg Nickel Subindex Total Return ETN (JJN) to our portfolio as a recommended buy. Keep in mind this is an exchange-traded note (ETN), not a traditional ETF, which is an unsecured debt note that trades more like a bond than a stock. That said, I recommended only a small, conservative position in this nickel-tracking vehicle. JJN was up 8% last week in the wake of the Tesla supply deal announcement. If you haven’t done so, I recommend booking a partial profit in this stock (per the rules of or trading discipline). I also suggest raising the stop to slightly under 24.00 (50-day moving average) on an intraday basis on the remainder of this trading position. HOLD I previously recommended that lithium investors with a speculative bent take a closer look at Sigma Lithium Resources (SGMLF on the OTC, or SGMA on the Canadian TSX exchange). The company’s stated goal is to “enable EV industry growth by becoming one of the world’s largest, lowest cost producers of high-purity, environmentally sustainable lithium products” and it is developing a world-class lithium hard rock deposit with exceptional mineralogy at its Grota do Cirilo property in Brazil. Speculators interested in initiating a conservative position in SGMA were instructed to use weakness to nibble down to around the 6.14 level (stop) in the TSX symbol and down to around 5.00 (stop) in the OTC symbol. After the 20% rally in SGMLF on August 2, I now suggest taking some profit and raising the stop-loss to slightly under 6.00 on an intraday basis for the remainder of this trading position. [Caveat emptor: Unlike most recommendations made in this report, this is a fairly illiquid stock.] HOLD After the recent strength in the physical market, I placed the United States Copper Index Fund (CPER), my preferred copper-tracking vehicle, on a speculative buy. Traders who don’t mind the near-term volatility risk can purchase a conservative position in CPER (preferably on pullbacks). I suggest using an initial stop-loss on this trading position slightly under the 26 level (intraday basis). BUY A HALF Wheaton Precious Metals (WPM) is a world-class precious metal streaming company, featuring a high-quality portfolio of long-life, low-cost assets. (Streaming companies make an upfront payment, plus a fixed payment per ounce of metal—often 20% of spot price—giving them the right to a percentage of a mine’s future production and allowing them to leverage rising metal prices.) As the world’s largest silver streaming company, with 14 silver purchase agreements, as well as gold and palladium agreements, Wheaton focuses mainly on high-quality, high-margin operations with a goal of returning a minimum of 30% of cash flow to its shareholders, with the remainder used to grow the company. Aside from precious metals like silver, one of the main drivers behind Wheaton’s stock price right now is the company’s growing exposure to the valuable cobalt market (cobalt prices are up 75% from a year ago). I recommend holding WPM down to slightly under the 42.50 level (stop). Earnings are expected on August 12. HOLD New Recommendations After the recent strength in steel prices, I’m placing steel and steel products manufacturer Nucor Corp. (NUE) on buy. Traders can purchase a conservative position in NUE using the 96 level (or a level slightly below it) as the initial stop-loss on an intraday basis. NUE closed decisively above its 50-day moving average last week after recently reporting a 103% year-over-year revenue increase, to nearly $9 billion, for Q2 while net earnings hit a quarterly record of $1.5 billion (versus $109 million in the year-ago quarter). Operating rates at Nucor’s steel mills climbed to 97% from 95% in Q1 and 68% from a year ago, while total steel mill shipments increased 41%. Management said it expects increased profitability across the steel mills segment going forward, and analysts anticipate 97% sales growth for Q3. BUY A HALF Portfolio

Stock Price Bought Date Bought Price on 8/3/21 Profit Rating
Barrick Gold Corp. (GOLD) 22 7/29/21 18 -17% Buy a Half
Global X Lithium & Battery ETF (LIT) 69 6/10/21 81 18% Hold
GraniteShares Gold Trust (BAR) 18 7/16/21 18 0% Buy a Half
iPath Bloomberg Nickel Subindex ETN 24 7/9/21 25 4% Hold
Nucor Corp. (NUE) - New - - Buy a Half
Sigma Lithium Resources (SGMLF) 5.17 6/29/21 6.38 23% Hold
United States Copper Fund (CPER) 27 7/26/21 27 -1% Buy a Half
Wheaton Precious Metals (WPM) 48 6/2/21 46 -4% Hold

Sell means to liquidate the entire (or remaining) position. Sell a Quarter/Half means take partial profits, either 25% or 50%. Buy means purchase a position at or around current prices. Buy a Quarter/Half means allocate less of your portfolio to a position than you normally would (due to risk factors). Hold means maintain existing position; don’t add to it by buying more, but don’t sell.