SGDM

Uncertainty over the US elections remains elevated in the near term while the economy is running out of "stimulus".Closely contested elections have historically resulted in choppy markets in the final weeks of the year.Investors should hedge themselves by going long US dollar, gold and low-correlated sectors such as global mining stocks.

Gold had become overbought in the past month, trading well above trend, making it ripe for a correction. Once gold started to fall, momentum built as profit-taking set in and bullion exchange-traded products saw their first redemptions since June.Since gold broke out on June 20, 2019 into its current trend, the gold price has gained 45% and the NYSE Gold Miners Index 79%. However, this outperformance has not led to overvalued stocks.With higher gold prices, we will see lower-quality gold mines being built. These are deposits that were not economic at lower prices because they would have high operating costs and/or high capital costs due to low grades and/or mining challenges.

Gold stocks are in correction mode. They shot parabolic into early August, surging too far too fast exhausting the capital firepower available for near-term buying.Then they quickly plunged into a mild correction, which has morphed into a high consolidation since. But a resurgent correction is likely given the lingering serious overboughtness and elevated greed.That could easily extend to 25% in GDX, another 20% lower from this week’s levels. The depth of this rebalancing selloff for gold stocks depends on what happens in gold.

Gold and gold mining stocks remain stuck in neutral, but not for long.Fed policy will keep downward pressure on the dollar, lifting gold prices.Technical signs indicate that gold stocks are in strong hands right now.

Although gold prices reached historic highs this summer, we still see some potential drivers that could move prices even higher.In our view, gold may benefit from bouts of elevated market volatility and mounting concerns over the coronavirus's economic impact as investors seek perceived safe haven assets.We continue to like the long-term prospects for select gold- and precious metals-focused equities, especially if gold prices can hold near current price levels or move even higher in the months ahead.

Deficit to outlay ratio tops 60%, above the hyperinflationary threshold of 40%.Q2 2020 GDP shrank 31.7%, but will improve in Q3 2020.Delinquencies are on the rise on record high corporate debt.U.S. dollar will lose value due to ultra-low interest rates and QE.Gold is the only safe haven.

The deadline for rolling over the September silver contract expired on August 27, and 14,663 contracts remain open. Record monthly silver deliveries is 17,294 in July.14,663 is close to the nonreportable long positions from the last COT reports of 17,572, and the nonreportables are more likely to stand for delivery than managed money.Unless someone in managed money is specifically in the market for physical silver, like the Sprott Physical Silver Trust.Meanwhile, the new Gold Enhanced Delivery 4GC contract saw its first deliveries on August 20, and it seems only one party is behind it.