Economic Uncertainties Continue to Buoy Gold More than any single factor, broad-based fear is keeping gold prices elevated (with silver benefiting by extension). As we talked about in the previous report, gold’s “fear factor” has returned with a vengeance as inflation concerns—combined with other economic worries and geopolitical unrest—have converged to give gold a strong supporting bid as we head closer to summer. The biggest headline fear of recent weeks, of course, has been inflation. Discussions over the likelihood of higher commodity prices, as well as higher consumer goods prices, are rife in the mainstream media. But as I’ve argued here, it’s not inflation itself that’s boosting the yellow metal, but the fear of what inflation might do to undermine the economic recovery that has increased safe-haven demand for gold. Whenever investors sense that a serious bout of inflation lies ahead, their initial reaction is to diversify and move away from owning too much cash and instead turn to assets that tend to benefit from a weaker dollar. Gold, and to a lesser extent silver, typically top the list of inflation-protecting assets. Inflation is more than just dollar devaluation, however. It also entails diminished overall rates of production across several major service and manufacturing industries. Last year’s Covid-related shutdowns obviously contributed to the diminution of manufacturing and services (e.g. partial and permanent business closures), although many businesses are reopening this year. Nonetheless, the effects of lost and/or diminished business are still being felt and is a key component of inflation. A less discussed factor that is still contributing to inflation, however, is loan forbearance and extended unemployment benefits. In the former case, both college student loans and home loans have been in forbearance since last year, with forbearance plans scheduled to end in September 2021. A question that some real estate analysts are beginning to ask is, “How many homeowners will be in trouble once forbearance plans end in just a few months—and will they be forced to sell?” According to Black Knight, some 2.3 million homeowners had forbearance plans as of April, which represents 4.4% of all U.S. mortgage holders. Even though the total number of forbearance plans are down over 50% from their peak level of just under 5 million last April, there are still a substantial number of homeowners that aren’t paying loans—and which could create significant distress for the real estate market should forbearance not be extended in September. 
Another worry among real estate experts is one that was recently articulated by Robert Campbell, editor of The Campbell Real Estate Timing Letter, who asked rhetorically: “Once the Covid-driven eviction/foreclosure moratoriums end, how many demoralized small landlords (which provide 40% of the rental housing in the U.S.) will put their rental properties on the market once they get their tenants out?” This is an important question, as the current white-hot real estate market is part of what is driving the inflation trend in the U.S. While a deflationary outcome to the current forbearance plans would almost certainly relieve upside price pressure in the housing market (and by extension relieve some of the inflationary pressure in the economy), it wouldn’t necessarily kill gold’s upside momentum. After all, gold benefits as much from economic confusion as from inflation—as we saw in the aftermath of the 2008 credit collapse. Yet if Congress capitulates to the growing chorus of demands that forbearance agreements be extended, there likely wouldn’t be any foreclosures, forced sales or incurred housing losses which, in Robert Campbell’s words, “would represent a complete bailout of the housing market by the Biden Administration.” Such an act would not only be inherently inflationary in the long run but would almost certainly necessitate additional stimulus measures. This outcome would be equally beneficial for gold’s longer-term outlook due to the obvious boost to gold’s currency component. The bottom line is that from an intermediate-term (3-6 month) perspective—and regardless of the eventual outcome to the forbearance/bailout conundrum—there are enough uncertainties surrounding the economic outlook to give the gold market plenty of underlying support from safety-related bullion and ETF demand. Consequently, I believe investors are justified in maintaining a bullish posture on the metal from an intermediate-to-longer-term standpoint. 
New Recommendations/ Updates Barrick Gold (GOLD), the world’s second-largest gold mining company, is poised to benefit from the gold turnaround currently underway, and its copper exposure is also a long-term positive (along with declining per-unit copper mining costs). The million-ounce gold producer forecasts all-in sustaining costs for gold (a key metric) of around $929 per ounce as of last year’s fourth quarter—well below current prices of around $1,911 per ounce—giving the firm plenty of room to take on additional projects. Also encouraging for Barrick is a balance sheet featuring zero net debt, $500 million in cash and a $3 billion undrawn credit facility. What’s more, the company trades at a reasonable price/earnings ratio of 17, which makes the stock attractively valued compared to many of its peers. After shares rallied 8% from our initial recommendation, I previously suggested taking partial profits (based on the rules of our technical trading discipline). For now, I also suggest maintaining the previously recommended protective stop-loss on the remainder of the trading position at slightly under the 23 level. HOLD Cleveland-Cliffs (CLF) is one of North America’s largest integrated steel makers and is seeing higher steel demand (and higher steel prices) thanks to global economic recovery and tight supplies. Recent quarterly results provided some insights into why things are rolling for Cleveland-Cliffs, as discussed in previous issues. Since then, Bank of America has reinstated coverage of the company with a “buy” rating and an upside target of 25, referring to it as a free cash flow “machine.” I recommended that investors maintain our recently purchased conservative position in CLF provided the 18 level (our latest stop-loss) isn’t significantly violated on a closing basis. This level (which also hosts the psychologically significant 50-day line shown below), was recently tested, but the stock seems to have met with supporting bids around this area. HOLD Freeport-McMoRan (FCX) is one of the world’s top-four copper producers and is also benefiting from higher gold prices, with recent sales 9% above the company’s guidance in the fourth quarter. Management projects a copper sales increase of 20% over 2020, with gold volumes expected to rise by more than 50%—even as production remain low (projections which will likely prove conservative). Freeport is further benefiting from the “clean” energy transition tailwind now accelerating under the current White House administration, as well as recent computer tech trends (where copper is heavily utilized). The company’s quarterly dividend has also recently been reinstated, tying a nice bow on an otherwise attractive package. I previously suggested using a stop-loss slightly under the 39.35 level on open long positions in the stock. I’m maintaining this recommended stop-loss for now. HOLD We recently purchased a conservative position in the GraniteShares Platinum Shares ETF (PLTM), which is backed by the physical metal and is held in allocated bars (a daily updated bar list is posted at GraniteShares’ website). Platinum and the platinum ETF have lagged the recent gold and silver rallies, and PLTM is now testing a key trend line that I don’t normally emphasize, namely the 120-day moving average. (While I normally focus on the 25-day and 50-day MA combination, there are times when the 120-day trend line has proven to be a pivotal support for platinum and platinum ETF prices.) Accordingly, I recommend that we maintain our long position in PLTM and keep the stop-loss unchanged at slightly under the 11.50 level where the influence of the 120-day line is now being felt. A decisive violation of 11.50 on a closing basis would break this key psychological support and would convince me that sellers have no intention of relinquishing their hold on the metal in the near term. HOLD We recently purchased a conservative position in the iShares Gold Trust (IAU), my preferred gold-tracking vehicle of choice (and the most actively traded of the U.S. exchange-listed gold ETFs). IAU has rallied persistently in recent weeks as fears over inflation widened. There have also lately been substantial inflows into IAU ($291 million week over week, to be exact) as investors—retail and institutional alike—have increased their appetite for gold in the wake of economic and geopolitical concerns. While higher inflows in IAU can sometimes serve as a contrarian signal (thus hinting that a trend reversal is imminent), higher inflows can also be interpreted as a bullish development in the early stages of a turnaround. All told, I’m still expecting a fairly vibrant gold market this summer. I suggest raising the stop-loss on this position to slightly under the 35 level on a closing basis (where the 25-day line’s presence is currently felt). BUY UNDER 36 Aggressive investors purchased a position in the iShares Silver Trust (SLV) on May 11. This is my preferred silver-tracking vehicle of choice and is one of the most actively traded of the U.S.-listed silver ETFs. Aside from the obvious inflation factor, silver is benefiting from several major areas of industrial demand (which should increase as the global economic reopening continues apace). Furthermore, silver expert Frank Holmes of U.S. Global Investors recently observed that the metal should become a key beneficiary of several emerging industrial applications, including the global rollout of 5G technology, solar power generation (e.g. solar panels) and the electric vehicle and automotive sector. On a technical note, after hitting a yearly intraday high at 28 on February 1, SLV left a rather prominent “air pocket” that I expect will be eventually filled (as is normal in such cases). The recent pullback in SLV following the April-May rally has found support above the 25-day line; assuming this moving average at the 25.25 level (as of June 1) remains unviolated, it’s possible that buyers will move in again if they see that the pullback wasn’t abnormal. For now, I’m maintaining my “hold” rating on SLV and suggest maintaining the stop-loss on our existing trading position at slightly under the 24.50 level on a closing basis. HOLD An excellent balance sheet and solid production outlook combine to make Newmont Mining (NEM) one of my top picks among blue-chip senior gold mining companies. From a relative strength perspective, moreover, Newmont has been a leader in the present gold mining stock rally, having been the first of the senior miners to achieve new highs for the year in April. And not only does the stock remain in a strong technical position, but it also has one of the strongest fundamental backdrops among actively traded gold miners as well. In a recent conference call, Newmont’s CEO stated, “During the first quarter, our world class portfolio produced 1.5 million ounces of gold and 317,000 gold equivalent ounces from copper, silver, lead and zinc. In line with our full year outlook and positioning Newmont to deliver a stronger performance as expected in the second half of the year.” Analysts concur and expect Newmont’s top line to increase 37% from a year ago in the second quarter of 2021, while the bottom line is expected to increase 145%. Newmont’s all-in sustaining costs, meanwhile, are currently $1,039 per gold ounce, which is under current bullion prices by around 85%. It’s a solid mining story and I believe Newmont stock should be a part of every long-term precious metals portfolio. After the 10% rally from our initial recommendation, I previously suggested traders take partial profits and raise the stop on the remainder of the trading position. Suggested stop-loss for now is slightly under the 67.50 level (our original entry point). HOLD We recently initiated coverage of Taseko Mines (TGB), which I view as an ideal vehicle for gaining some exposure to the strong molybdenum market. Canada-based Taseko is known mainly for being a mid-tier copper miner that operates the Gibraltar Mine, Canada’s second largest open-pit copper mine. Taseko’s Gibraltar mine boasts proven reserves of 53 million pounds of molybdenum. Total molybdenum production for the company in the first quarter of 2021 was 530 thousand pounds, up 29% from a year ago. Taseko reported that molybdenum prices strengthened in Q1 and averaged $11.32 per pound (26% higher sequentially). Analysts expect sales and earnings to improve moving further into this year, in part due to improving copper conditions (management also said it expects higher EBITDA this year). In view of the supply shortages and increased industrial demand for steel (of which molybdenum is a key component to increase hardness, electrical conductivity and corrosion resistance), Taseko is a solid story. Long-term-oriented investors can accordingly do some nibbling on pullbacks down to around the 50-day line at around 1.75 (stop). BUY A HALF ON WEAKNESS Wheaton Precious Metals (WPM) is a world-class precious metals 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, 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 45% from a year ago). Last year, Wheaton closed a cobalt streaming agreement for the Vale owned Voisey’s Bay Mine for $390 million and will make ongoing payments of 18% of the cobalt spot price per cobalt pound delivered until the delivery of 31 million pounds of cobalt and 21.2% of cobalt production thereafter for the life of mine. (Wheaton recently reported the first production of cobalt from the Voisey’s Bay mine.) With gold, silver and cobalt prices on the upswing, Wheaton should benefit from the accelerating growth in demand. Investors can nibble on weakness down to around 42.50 (near the 50-day line). BUY A HALF ON WEAKNESS
| Stock | Price Bought | Date Bought | Price on 6/1/21 | Profit | Rating |
| Barrick Gold (GOLD) | 23 | 5/11/21 | 24 | 4% | Hold |
| Cleveland-Cliffs (CLF) | 20 | 5/11/21 | 20 | 0% | Hold |
| Freeport-McMoRan (FCX) | 41 | 5/11/21 | 43 | 5% | Hold |
| GraniteShares Platinum Shares (PLTM) | 12 | 5/11/21 | 11.5 | -4% | Hold |
| iShares Gold Trust (IAU) | 35 | 5/11/21 | 36.25 | 4% | Buy |
| iShares Silver Trust (SLV) | 25 | 5/11/21 | 26 | 4% | Hold |
| Newmont Minint (NEM) | 67 | 5/11/21 | 73.5 | 10% | Hold |
| Taseko Mines (TGB) | 2.25 | 5/24/21 | 2.5 | 11% | Buy a Half |
| Wheaton Precious Metals (WPM) | 48 | 6/1/21 | 48 | 0% | Buy a Half |
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. Sell means to liquidate the entire (or remaining) position. Sell a Quarter/Half means take partial profits, either 25% or 50%.