The headline above was the subject line of the free, weekly, no-spam email I sent out last Saturday. I am not claiming I knew precious metals would retreat as much as they have—so far—this week. But I do think it’s important to share what I wrote with those of you who missed it.
 

Here’s what I said:

I see choppy waters ahead—but this has nothing to do with the Mueller report the financial media are obsessing over. That was going to be a political rugby scrum no matter what.

What has me on alert is the apparent good news from China. You may recall that last week I wrote about China’s mixed economic reports, saying that the April 17 GDP report would be key in the near term. Well, those numbers are out now, and China beat expectations, clocking a 6.4% gain in Q1 2019.

I posted my take on this at the time, but I want to draw everyone’s attention to it because I think it’s important—particularly for gold.

Setting aside how accurate China’s upbeat GPD number is, “it is what it is,” and it should bolster commodity prices for the quarter ahead. That’s the good news.

The not-so-good news is that this and the return of happy days on Wall Street could greatly reduce safe-haven demand for gold over the next quarter. If China’s economy does heat up this year, that should produce more “wealth demand” for gold. My concern is that increased wealth demand would likely take a quarter or two, while reduced safe-haven demand could hit this quarter. One could argue that it already has.

With gold having rolled over and dropped well below $1,300, it could easily test the $1,200 level this summer, as it did last summer.

Or not. Despite the better-than-expected GDP number from China, the global economy is still under pressure from deceleration in Europe. It’s also clear after last fall’s wakeup call on Wall Street that the irrational exuberance there could turn to stark terror in a heartbeat. And in China itself, more dismal car-sales figures would hurt commodity prices. Negative housing figures there could really send things into a tailspin.
 

As usual, I’m resisting the urge to predict which way things will go. Bold predictions make for great headlines—but they put us all at risk of losing a lot of money if I get it wrong. I believe it’s more useful to help think through the possibilities. I see three main ones ahead:

• We could see a summer surge in industrial minerals prices coupled with a slump in precious metals prices.
   
• We could see fear return to the global economy, resulting in the opposite: higher precious metals prices and lower industrial minerals prices.
   
• We could also see the status quo muddle along, with no breakouts or breakdowns in either precious metals or industrial commodities.
   

Note that in any of these cases, cash is not a bad thing to have.

Note also that the third scenario is not a safe outcome. If nothing changes and we see “sell in May” thinking, it could result in a miserable summer for junior resource stocks—even if the prices of the underlying commodities do not fall significantly. For Mr. Market, “boring” is just as bad as “falling.”
 

So, what am I doing?

1. I’m not selling anything (unless one of my companies fails in some material way, but that would have nothing to do with this market analysis).
    
2. I’m looking to build cash, in case this summer presents me with some irresistible buying opportunities. If I was overweight in gold stocks and couldn’t take the heat if their prices dipped this summer, I might lighten my load to build cash. The same thing would go if I were overweight in copper or other industrial metals.
    
3. Fortunately—but not accidentally—I have a balance of precious, industrial, and energy minerals in my portfolio. If one group slumps and the other goes up, my gains should offset my losses. This way, I can stay long in great companies that I believe can deliver terrific gains this year, almost whatever the markets do.
    
4. I still see uranium as being largely immune to economic news. The main—and by far the most important—factor is whether I’m right about secondary supply no longer swamping demand. If so, we’ll see higher prices in uranium this summer and over the year ahead, regardless of which way the global economy and resources in general go. There is one specific uranium play I’m hoping to buy in the nearest term.
    
5. If demand for industrial commodities does pick up this summer and precious metals retreat, silver may fall less than gold. Silver could even decouple from gold if demand for solar panels increases faster than most analysts project. So I’m also on the hunt for a great silver play.
    

As always, if you’d like to see which stocks I’m putting my own money into and receive constantly updated guidance on them, please subscribe to The Independent Speculator. But if anything important comes up, like the risks discussed above, you will get analysis of the general issue in this free service every week.

…

I want to stress that I’m not turning bearish on gold. I see a risk in the very near term, and I feel it’s my duty to alert you to that fact. But I’m not saying gold will—or should—see lower prices. And if it does, it wouldn’t change the big picture, so I’d see that as a buying opportunity.

I know that gold bugs won’t like hearing this. But it’s not my job to tell people what they wish were true; it’s my job to tell it like I see it, as best I can. Anything less would be a disservice.

As I say, I’m not a cheerleader, not even for my favorite metals. The internet is full of reports of imminent disaster that will send gold to $10,000, or whatever. For those who want such reassurance, I’m sure they are a sight for sore eyes.

Personally, I’m sympathetic to those views. But I’m tired of waiting for financial doomsday—and I have no intention of going broke making the wrong bets while waiting.

For those who want levelheaded assessment of opportunities and risks in the markets, I’m your due diligence guy.

And at the end of the day, I do still think the odds favor gold breaking out—to the upside—by the end of this year.
 

Sincerely,