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Why gold, stocks are plunging and what's next says Phil Streible

Kitco News

Both the equities markets and gold are seeing a sell-off on Monday, with a combination of a strong dollar and political factors behind the push downwards, said Phil Streible, chief market strategist at Blue Line Futures.

“The dollar index is coming up, it actually broke up to the upside. That’s going to weigh on commodities in general, so if you look at all the commodities: agricultural markets, energies, metals, they’re all under a lot of pressure so that’s one part of the equation, is the dollar coming up,” Streible said. “There’s a second part here which is kind of political…with the Republicans indicating that they’re going to go forward in nominating the Supreme Court justice, what that did was it really got the Democrats quite upset and they’re going to do whatever they can to retaliate.”

What’s next could vary depending on whether the economy sees stagflation or deflation, Streible said.

“Whether or not the dollar index is going to go up or back down determines whether we go into a deflationary environment, which is not good for commodities or gold, or stocks, or we go into a stagflation, which is actually good because you’re creating inflation, with that slower growth, and they’ll try to re-stimulate that growth so it’s a good situation for commodities,” he said.

In the context of the overall picture, today’s sell-off is manageable, Streible said.

“That’s why gold futures, coming into the Fed meeting, had gone into this wedge pattern where we’re like kind of at the pinnacle of the wedge pattern going to break out into the upside or downside. I think it’s a small sell-off that we’re having. It looks big in its scale but depending on your position, it’s probably a scale-off if you’re managing your positions properly,” he said.

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