“Fundamentals and technical analysis are two sides of the same coin”

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Claudio Grass
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Interview with Laurent Halmos

For most die-hard physical gold investors and students of history like myself and most of my readers and clients, technical analysis is often seen as a bit of a taboo, or at best something irrelevant to our worldview and investment approach. Nevertheless, to paraphrase the old saying about politics, just because you are not interested in the charts doesn’t mean that the charts are not interested in you. 

I met Laurent Halmos in the summer of 2020 when he fled to Switzerland with his family in search of more freedom. He was shocked that he had previously been imprisoned for months in Panama with his family and that they were only allowed to leave their apartment for 3 hours a week. Today, he lives with his family in the south of Switzerland and feels safest there for the things to come. 

In our conversations with each other, it became clear that we share the same values and our view of the world and like me, he is also convinced that we are on our way to another “reset”. Laurent is first and foremost an investor and loves to play the markets, a very different approach to investing from mine, but successful nevertheless. His extensive experience and passion for markets, cycles and trends have made him one of the best analysts in Japan, where he lived for over 10 years. He went on to start his own business and now lives a free and self-determined life by studying financial markets on a daily basis. 

Like I mentioned, Laurent’s trading style and philosophy is arguably the exact opposite of mine and of most of my clients’ and readers. This is another reason why I consider myself fortunate to know him: I have already learned a lot from him and there’s still so much left to learn. After all, the happiest and most successful people are those who do what their talent and passion enable them to do better than others and those eager to listen to them, even if their views don’t completely align, are also bound to share in that happiness and success.

When we met in 2020, Laurent said that based on his analysis, it was still too early for precious metals, as he had not yet seen the signals for a new long-term bull market. He shared with me that the basis of his successful career was his self-discipline, as he was aware of that his ideas and theories could sometimes be erroneous or ill-timed and so they must always be confirmed by real market data and by his own analytical system before he makes an investment. That being said, I was happy to hear end of 2021 that Laurent personally turned bullish on Gold and purchased for the first time physical precious metals as an insurance against the stupidity of central banks. 

Understandably, I was more than pleased when he contacted me a year later in October 2022 and told me that the time has come to increase his physical precious metals position again as insurance against the “reset”. According to his view, we are at the beginning of a long-term bull market, especially for gold and silver, as well as for commodities. The signals he had been waiting for have now all arrived, or as he puts it in the following interview, “the stars are all aligned”. 

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Claudio Grass (CG): Long-term physical gold investors tend to be suspicious, or even dismissive, of technical analysis. Most of us hold gold for fundamental, monetary and geopolitical reasons and because we believe that “gold is money, everything else is credit”. Even though your own investing style and focus are entirely different, would you say you see the merits of this position, overall?

Laurent Halmos (LH): I am not a Goldbug because physical gold is a long-term investment, a kind of insurance against when TSHF, and not a trade. In my career until 2020 I never had a clear reason to buy physical. Because in the long run gold goes up

1.  when real interest rates get negative, which always is followed by high inflation (as we saw since 2020)
2.  when people lose confidence in the government (e.g. during the Weimar Republic) and 
3.  when there’s a risk of war. 

Until 3 years ago, none of these conditions were really in place, but it all changed in 2020 during the corona circus when governments all over the world started to restrain freedom of speech, of movement and of doing business. Then they started to print and take on debt like there is no tomorrow. So, 2020 was for me a game changer and I bought physical gold for the first time at the end of 2021. 

Physical gold is an insurance for the long term that you don’t trade around and I think it should be 15-20% of your total wealth. (So, more than in 2020, because precious metals should replace your bond allocation, which will get eaten by higher yield and higher inflation – not talking about default risk).

But then there is a cycle in everything from sea waves to your breath or financial assets that you can trade around. Not with physical, but with paper gold (ETFs) or gold equities. And like I told you at the end of November, my charts were telling me that precious and base metals were turning up, so I bought gold and copper equities and made a 15-30% return in a few weeks; not bad. So again, I bought physical as an insurance against the coming monetary reset and I trade the paper/ financial assets to make a living.

CG: I often find that technical analysis gets a bad name, especially amongst us the so called “gold bugs”, because it can seem like arbitrary guesswork to the layman, a bit like seeing shapes in the clouds. However, there is an abundance of evidence that proves that it goes way beyond random pattern recognition, isn’t there?

LH: Yes, you are right, chart analysis is a pattern recognition game. And like in every field, the 80/20% rule applies. You have 20% of clever guys and 80% of mediocre. It’s like in tennis, not everybody with a racket in his hands can become a Federer. You just need to find the clever ones. I can give you 3 names of chartists I respect: https://twitter.com/allstarcharts, https://twitter.com/alphacharts,  https://twitter.com/badcharts1.

These 3 analysts turned bullish on gold at the same time 8-10 weeks ago. In Ancient Greece, oracles could read the future when the stars were aligning, same with my clever chartists.

CG: In your own investing process, do you ever consider any fundamental factors before a trade? Are there any other forces apart from price action that you look at when considering a new investment?

LH: I always have a forecast for the future of every asset in my mind, but you have the reality and your constructed matrix in your brain. And they are two different things! It is said that 80% of traders are losing money in the long run and it’s because they believe they can forecast the future, they listen to themselves. But unfortunately, the world doesn’t work that way. The charts are the reality of today and if you are bullish on a stock but the chart is going the other way, you have to know that the market is always right. So I try to mix the two. I turned bullish on gold in my mind (the so-called fundamentals) after 2020, so I bought some physical. But my charts told me last November that precious and base metals were bottoming after a 15-month long bear market, so I doubled my exposure to metals by buying ETFs and gold and copper equities.

CG: One of the most famous examples of gold investors embracing a technical approach is looking for buy signals in the gold/silver ratio. Why is it considered so reliable? What did it show in the past and what is it indicating now?

LH: Silver is like a volatile small cap and gold a liquid large cap. So when metals go up, silver tends to outperform gold and vice versa. Gold is a defensive asset, a bit like a bond without a coupon, going down less than the stock market when it is in a bear phase, but silver goes down more, a bit like a volatile Nasdaq stock. Silver was underperforming gold (going down more) since end of 2020 but at the start of November 2022, it broke up vs Gold, a sign that the PM bull market was back. See chart below.

CG: A recent Special Report by AllStars on precious metals, laid out an impressively bullish outlook, outlining how gold could hit $5000. What needs to happen to set us on this trajectory and what is the rough timeline for this price target?

LH: The guy at AllStars, one the 3 clever guys I mentioned before, is looking at things on an absolute level and then gives a target. Me, I simply look at the trend on a relative basis. I check everyday on my charts the relative performance of the 4 main asset classes, stocks, bonds, commodities and precious metals and overweight the asset which outperforms the others. I compare gold with many other assets but especially with bonds. You can see in the chart below that from 2000 to 2011 gold outperformed bonds because we were in an inflationary period where gold, commodities and emerging markets usually do best. Then from 2011 to 2020, gold underperformed bonds because it was a disinflationary period with interest rates going down to below zero in Europe!

Then since 2020 and the return of the printing press and negative real yield, gold started to outperform bonds once again and recently it reached a 20 year high vs bonds. In fact, 2 months ago, gold started to break up vs bonds, but also vs the S&P and commodities like oil. And like I said, when all stars align…. you go for it ! I believe the Marxists took over the world during the Covid crisis, they are going to inflate the huge amount of public debt by printing fiat money, productivity in the real economy will go down and real assets will explode to the upside. That’s what is in my brain. But I need to see confirmation in the real world/charts to go all in with my fundamental ideas.

CG: What about silver? Could you summarize your outlook for us?

LH: If I am bullish on gold mid/long term, I have to be bullish on silver because, like I said, silver is gold on steroids. I would have a weighting in precious metals of 70% gold and 30% silver because firstly, the latter is much more volatile than the former and secondly, I own gold as a defensive asset to hedge my more risky ones like equities or commodities, something that silver doesn’t give you. But I would still have a 30% weighting in silver because it boosts the total performance of my precious metals holdings in the long run and because if we do get a monetary reset and cash gets banned, silver coins could in some way replace cash for trading stuff.

CG: If we turn to the bigger picture for a moment, that is the markets and the economy at large, the outlook there sure looks grim from a fundamental viewpoint. What do the charts say? 

LH: Stock markets bottomed last October and since then it’s bullish, in part thanks to the end of the zero Covid strategy in China, the second global economy. China’s stock market bottomed, taking with it other emerging markets, metals and commodities in general. I am currently quite long in my personal portfolio with overweight in metal and energy equities, especially gold, copper, oil, coal and uranium. But I know that the global economy, ex China which is rebounding after 2 years of lockdown, is on life support from the central banks. So, things could turn ugly very fast in the next few months. With inflation roaring back, central banks are losing control of rates, like recently in the UK and Japan. This is the black swan of 2023 which could trigger a deflation event. So, I check the strength of the US$ and US treasuries. If they start to break up vs more risky assets like the S&P or oil (see chart below), I would immediately increase my cash position. But not yet.

CG: For conservative, long-term precious metals investors, like myself and most of my clients and readers, do you think it still makes sense to educate ourselves and understand at least the basics of technical investing? What advantages could be gained by combining the two ways of thinking about investing?

LH: The problem by being too conservative is that you miss a lot of upside opportunities through time. But on the other side, investing in the stock market without experience or a proprietary system is like walking into quicksand territory without a map…. at some point, once out of luck, you lose it all. The market is a chaotic system, and like God, its ways are mysterious. 

For me, the market is like a game that I can make a living playing, which I have been doing for the past 25 years. I love it and have a real passion for it. It’s like a Rubik’s cube contest or deciphering a code, so I put a lot of effort into developing a proprietary system to read the market. If you don’t have time to spend in fundamental and chart analysis, it’s better to outsource investing to a good professional (you have clever fundamental experts like you and you have clever chartists) or follow the three twitter feeds I gave before. These 3 guys are usually right more than 60% of the time, so you then have probability on your side.

Feel free to contact Laurent Halmos – he can be reached via email: [email protected]

Claudio Grass, Hünenberg See, Switzerland

This article has been published in the Newsroom of pro aurum, the leading precious metals company in Europe with an independent subsidiary in Switzerland. 

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