Oil price surge & bank failures: got gold?
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Apr 4, 2023
- Just days after Fed chair Jay told excited stock market investors that his rate cuts were almost finished… Double-click to enlarge this key oil price chart.
- First the Fed promised there would be no inflation. Then they promised it was transitory. Next, they tried to end it with a few modest rate hikes from the zero marker. They iced their cake of errors last week, by promising that rate hikes were almost done… just in time for OPEC to put a rocket launcher under the price of oil!
- When the bull wedge began forming on the oil chart, I called it spectacular; however I predicted the imminent breakout would be followed by a disappointing "ooze" back towards the neckline… and likely put the price at my key $65 buy zone.
- That's exactly what happened, and I then urged investors to take note of the "spikey" chart action. It implied that something violent was in the cards, which turned out to be the OPEC production cut. What's next?
- Well, a big inverse H&S pattern is in play, but the US government's failure to keep the governments of Saudi Arabia and Iran at each other's throats opens the door to more OPEC member cuts… with the Chinese government getting cheap oil from Russia and enjoying the action.
- Oil could also just surge above $83 with minimal consolidation. Regardless of how it gets over $83, my long-term target is $200/barrel… accompanied with mayhem in American grocery stores and gas stations.
- The US government's proxy war against Russia (and a planned one against China) will fail if US middle earners and the poor can't buy basic goods. The citizens will stage food and fuel riots, and a full insurrection is possible if the government doesn't stop its crazed warmongering. My question to all citizens of the world is a simple one: Got gold?
- Double-click to enlarge this FXC (Canadian dollar proxy) chart. A double bottom is in play and this currency is highly correlated to the price of oil. FOREX traders refer to Canadian fiat as the nation's "C-bone".
- I've moved significant funds from USD to the C-bone over the past six months, in anticipation of an oil-oriented collapse in the USDX… and the move seems prudent.
- Mainstream investors anticipate higher stock market prices because of a lower dollar. In contrast, I've suggested stocks, bonds, and the US dollar could all fall at the same time… as a new bout of oil-oriented inflation causes more rate hikes from the Fed, and those hikes cause more banks to fail.
- A 1929-style run on the banks (featuring terrified depositors racing out of fiat and into gold) is quite possible in the years ahead, and my main thesis for America remains a bizarre hybrid of the markets of 1929 and 1966. Note that both were bears.
- For a look at the weekly USDX chart, which is quite disturbing. Note the lack of right shouldering action on the right side of the chart in comparison to the left side. This lack of symmetry typically indicates a very weak market.
- A decline below 100 could be quite violent and would likely feature gold soaring to $2200-$2400.
- Double-click to enlarge this short-term gold chart. Lawns need to be mowed, hedges need to be trimmed, and positions bought at low prices need to be sold at higher ones.
- I've sold the miners I bought at $1808 as gold has traded in the $2000 area congestion zone. Now it's all about sitting back and enjoying the core positions ride.
- I urge all investors not to engage in mindless selling if the price keeps rising; just as price can decline much more than is comfortable, it can keep rising and investors who sell core positions to "call a top" can end up with nothing… while the price begins skyrocketing from there.
- Simply put, if a homeowner mows their lawn too close to the ground, they end up with no lawn. It's the same with booking profits in the gold market; core positions need to be left alone.
- For a look at the daily chart for gold. Double-click to enlarge. There's a big inverse H&S pattern in play and gold is close to breaking out from a small bull pennant pattern.
- The rally is extended but it's likely to continue until the next Fed meet on May 3. If oil has burst above $83 and rallied toward $100 by then, Jay is likely to sound quite aggressive… ushering in the next $100-$200/oz price sale for gold.
- In contrast, if oil is under $83 on May 3, Jay is likely to sound more dovish and a gold market dip should be mild.
- The year 2022 was a mixed year for gold and a year of meltdown for the US stock market. This year (2023) is likely to become a year of consolidation for the stock market and a decent year for gold.
- 2024 should see a brutal down phase for the stock market, much higher rates, and more bank system mayhem that initiates investor panic buying of gold.
- Many institutional money managers are mandated to buy only equities. They can't buy gold bullion, but they can buy the miners. US banks are sporting about $600 billion in unrealized losses on their failed US government bond investments. As oil moves higher on rising Chinese demand and more OPEC member cuts, bond prices will collapse in another bear market phase. The biggest beneficiaries of this collapse could be gold and silver mining stocks.
- On a related and happy note. Double-click to enlarge this enticing GDX chart. A pause ahead of Friday's US jobs report would be normal, and the $33 area high is resistance. A pause would also create an inverse H&S bull continuation pattern. Investors who sold too much mining stock to "call a top" should consider repositioning now. Gamblers can also buy. Everyone who is properly allocated to the miners can simply sit back… and enjoy what should be a very enriching core positions ride!
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.