Gold/Silver: Welcome to the economic disaster party
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
It was a shortened trading week with U.S. Equities and other key commodity markets factoring in signs that economic conditions continue to deteriorate domestically and globally. Inflation data cycled to new highs, and Friday, we saw a better than expected jobs report, which further cements an aggressive Fed policy. When will volatile broad asset classes ultimately stop their decline? We see no signs of this volatility abating until the Fed pivots dovish once the damage is complete (3-4 quarters from now). What about a pause in rate hikes? That will cause another bear market bounce which we expect to be short-lived.
Looking at consumer data, U.S. savings and personal income have been deteriorating to the lowest level since 2008. Consumer spending and discretionary income continue to decline at an alarming rate where pandemic support and stimulus have run out. Additionally, consumer confidence has hit an all-time low in many countries.
Daily Nasdaq Chart
Platinum gained 9.7% this week on news that the chip shortages are easing despite the gloom and doom. Gold and Silver stabilized, and while monitoring the technicals, we see the first higher low on the charts in both acting as support levels. Given the current economic environment, Gold will continue to be supported by the rotation out of risk and high beta assets. My only concern with Silver is its high correlation to Copper and China which can easily have a major setback on any covid related development. To help you with technical analysis and identifying trends, I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold but can easily apply to Silver." The guide will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.
Daily Gold/Silver Ratio chart
Looking at other markets, we will continue to diversify and expand our core asset allocations into other markets such as commodity-based Currencies (Aussie and Canadian Dollar), Energies, Wheat, Soybean Oil, Treasuries, and the U.S. Dollar. The U.S. Dollar will continue to be supported by the shrinking balance sheet and a more hawkish Fed. You will want to keep clear of high beta, high growth storytelling stocks on any significant bounce along with European currencies such as the British Pound and Euro. Remember, as of now, the Fed and many other Central Banks are working to fight inflation, not support their equity markets. To learn more, we completed a new educational guide that answers all your questions on how to transfer your current investing skills into trading "real assets," such as the 10 oz Gold futures contract. You can request yours here: Trade Metals, Transition your Experience Book.