The Last Fed Meeting Didn’t Bounce Gold – What’s The Deal?
Craig Hemke, from TF Metals Report addresses the fact that after the last Fed rate hike the metals have been unable to bounce. The overall commodity complex is down but that can present opportunities for investors.
Click download link to listen on this device: Download Show
USD looks like it is going to explode to the upside of the weekly chart, courtesy of a collapsing yen.
The real bear in me looks back at the 2016 commodity rally as nothing more than bearish consolidation after probably the biggest 2 year decline in the commodity complex in history. I mean between 2013 and 2015 they absolutely did a number on GCC–one for the ages. After such a massive and rapid drop, its just normal that you get at least some sideways consolidation to allow those long term MAs to catch down to price. You could chalk up the price action from 2016 to present as nothing more than a bearish continuation pattern.
As long as the banks survive and the stock market is at all time highs, the CBs love this. Do you think they give a crap if some small mining operation or oil well goes under? Hell, it just means the bank takes possession for peanuts. Plus, lower commodities means lower input costs which means increased profits for first world companies. And the masses are happy because fuel and food is affordable.
All that matters is currency flows. As long as the US is tighter than the rest of the world, there is absolutely no reason for EMs or commodities to rally.
The stock market will continue to be the liquidity sponge. The Fed has successfully created the greatest moral hazard in the history of the world. The more EM currencies tank, the more attractive US assets become. It’s a virtuous circle now. The CBs can totally manage inflation due to coordinated interest rate and QE policy. As long as the US is relatively tighter than the rest of the world, money will continue pouring into the US. And they can modulate the amplitude of the stock market by adjusting the yield spreads between US and foreign bonds via these policies. Not only that, if the stock market were to actually drop, the CBs just go into the futures market and buy or they can take the more overhanded approach and adjust their monetary policies to modulate the currency flows.
The price action in commodities between 2016 and now is absolute nirvana for CB. They have pulled off a masterclass.
Craig. Let’s cut out all of the bla bla bla and get to the point. Gold is heading lower. All of your penetrating insights won’t change that.
Bob
It is probably due for some sort of bounce soon in terms of cycles. But they can do a ton of damage in days, so its irrelevant. So if you bought today, there isn’t even a guarantee you would have a large enough window to get out at a profit when it does bounce. In any event, I don’t think it gets past the now declining 100 WMA at $1274 much less the 50 WMA around $1300. It will be heavily shorted if it reaches that high.
I think gold and the miners are going lower into 2019. I would be a buyer next summer just before the 300 WMA will cross below the 200 WMA.
I said at the beginning of the year that the Dow reminds me more of gold in 2006 than gold in 2012. And we all know what gold did between 2006 and 2011. I expect the same sort of explosive hyperbolic move in the Dow–a double in the next 5 years.
A lower price will spark a run up in gold.
Eric Sprott discusses why there is truth in the “peak gold” theory
By Craig Hemke – Weekly Wrap-Up (July 13,2018)
– The strange thing happening in the silver market
– Why there is truth in the “peak gold” theory
– How to make money in a tough market
https://www.sprottmoney.com/Blog/eric-sprott-discusses-the-truth-in-the-peak-gold-theory.html
https://www.tfmetalsreport.com/podcast/9111/tfmr-podcast-wednesday-july-11