Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19
ADL Predictive Modeling Suggests A Big Move In Silver - 7th June 19
US China Trade War Will Start a Recession, or Worse… - 7th June 19
Land Rover Discovery Sport Brake Pads Expected Life, Worn Pads Dash Warning - 7th June 19
The Post Room Selfies Fun at Meadowhall Sheffield, From Game of Thrones to Desert Island... - 7th June 19
SAMSUNG - South Korean Electronics Giant - Investing in AI Stocks - Video - 7th June 19
Gold Price Rally or New Bull Market? - 7th June 19
Digging into the Rising Gold: Trade Tensions, Recessionary Worries and Dovish Fed - 7th June 19
The Risky Stocks Big Lie That Keeps Many Investors Poor - 7th June 19
Gold and HUI Short-term Strength Is a Strong Call to Action - 7th June 19
Fear Drives Stock Market Expectations - 7th June 19 - Chris_Vermeulen
Next British Prime Minister Tory Leadership Betting Markets - 6th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Smoke and Mirrors Markets to Sponsor Gold and Precious Metals Mania

Commodities / Gold and Silver 2010 Apr 06, 2010 - 01:00 AM GMT

By: Captain_Hook

Commodities

Best Financial Markets Analysis ArticleAt the risk of getting what may appear to be even more bizarre in my current views on how the various markets we cover are about to unfold, in our current view moving forward (our intermediate to long-term view), which has changed (in the intermediate term) for reasons that will be discussed below, gold is preparing to make a move to new highs at the expense of bonds, and stocks will also continue to benefit from liquidity escaping debt markets in spite of rising interest rates. And while the bureaucracy (government, media, etc.) will bill this as recovery in the economy, with equities and interest rates rising in unison, it would of course be just the opposite, the result of hyperinflationary policy that tripled the US monetary base since the onset of the sub-prime (credit) crisis.


The idea here is as confidence in the bureaucracy’s ability to contain it’s exploding deficit spending erodes, increasingly, money will come out of the bond bubble (ranging from corporate to sovereign debt) soon, unleashing this inflation into the economy and markets, pushing prices higher across the gambit. Here’s one guy who gets it, and appears to be on the right page right now. (i.e. severe inflation dead ahead.)

The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Tuesday, March 23rd, 2010.

Surprisingly however, there are not a lot of people not on this page, which should harden the resolve of contrarians. Instead, they are on the deflation page, which is where we were up until last week when we witnessed the psychopathic resolve these people were exhibiting despite being proven wrong for some time now. What the deflationists are thinking is they will be proven right if they wait long enough, which is in fact correct. However because the extremes involved here are of Grand Super-Cycle Degree proportions, what will happen is their timing could be wrong for a considerable margin, potentially up to a year. (i.e. we could have a hyperinflationary sequence enabled by wrong-headed speculators [deflationists] over the next year.) The potential for an extended inflationary cycle running into next year is well covered here. It would be sponsored by the inflation dynamic (money coming out of bonds) coupled with bearish stock market speculators maintaining the perpetual short squeeze currently underpinning prices. What’s more, if this sequence were to extend past April, it would be the longest uninterrupted post bubble bounce in the history of the US Empire era, validating the present sequence is of Grand Super-Cycle Degree.

What could cause such a sequence? It’s the degree of the bad news. The news, and within it, prospects for the future, is just so bad, and potential prospects so dire, that as explained last week, people (speculators) simply find themselves compelled to buy puts in an effort to protect their futures, with their psychologies understandably being quite negative. And truly the news is ‘that bad’, which in turn fuels the put buying, which then leads to a continued short squeeze in equities as the liquidity that was showered on a collapsing Ponzi Scheme (our fiat currency economy) that is now our economy last year finds its way out into the light of day.

So don’t be fooled when you hear increasingly bad news, as it will not matter when it comes to prospects for the stock market if people continue to buy puts. As an example, it appears Obama’s health care bill will fly, which of course is bad for the economy because it will further empower the socialists, reducing the efficiency of the economy by misdirected spending and increased taxation. This is what somebody schooled in classical economics has been taught to believe. And if this somebody is a straightforward thinking portfolio manager not schooled in bubble economics he / she might be tempted to speculate hedge in some puts to protect the portfolio from what will surely be the deflationary effects of such misguided policy.

 
And this must be especially true with growth rates in the M’s all contracting now, right? Again, and why this impending manic move higher in equities could resemble the craziness witnessed in the tech wreck a la the year 2000, is like then, where Greenspan panicked due to all the Y2K worry and printed way too much money, in the final analysis it will go down that the lax monetization policy provided by the Fed (swapping worthless junk for T-Bills and Treasuries) last year, and all the other years to a lesser degree for that matter (the bond bubble is huge), can provide a tremendous surge in liquidity despite sagging growth rates in the M’s, especially if confidence in the bureaucracy, economy, and currency are waning, causing the desire to sell bonds to rise. And rising rates must mean stocks are going to crash with the consumer on the ropes right? So, this is another reason to buy puts right? And the exploding deficits are yet another reason to buy puts right? As a matter of fact, for the bears, this backdrop makes just about every piece of news about the economy another reason to speculate in puts, and market timers can find historical / mathematical / sentiment related reasons on infinitum to buy more puts, so don’t forget about this dynamic. 

Just to be perfectly clear then, what we are saying here is because of previous, present, and future inflationary policy, where it could be argued last year’s bailout of the banks and financial system was a hyperinflation episode, the wheels are about to come off the bond market (see Figure 2), which in addition to the reasons discussed above, is evidenced in a now flattening yield curve. And it’s the liquidity coming out of bonds that will fuel a bubble in the relatively tiny precious metals markets, with silver in the lead believe it or not. Historically silver outperforms when the stock market and economy are perceived to be ‘good’ as it was branded an industrial metal long ago by high powered banking interests. So while the stock market may not be good at preset, it is outperforming gold, which is why it’s silver should lead the precious metals complex higher here, eventually shedding its industrial metal association in favor of its longer-term history as a monetary metal. This is when silver will really shine. That being said, in the meantime stocks will need to be perceived going higher for silver to outperform. So it’s a good thing the news is so bad out there speculators / hedgers still feel compelled to buy puts in increasing quantities, which will continue the perpetual short squeeze in stocks moving forward. (See Figure 1)

Figure 1


 
Source: Schaeffer Research

For new subscribers, this is how one can be sure a bid will remain under equities, with open interest put / call ratios on the US indexes the most reliable sentiment measure in the market today. It’s the fact the utility of this indicator is not widely appreciated by the market that allows it to forecast movements in stocks so well. Right now, as per our remarks above, with the ratio for the SPX options series (on the S&P 500) back at the highs of the past two years, you can count on a bid remaining underneath the broad measures of stocks until this condition changes, which won’t hurt prospects for silver any. This is what will fuel the out-performance discussed above until silver begins to outperform due to its presently unappreciated merits as a monetary metal. Just wait until central banks begin attempting to accumulate gold aggressively to replenish their reserves (as they won’t be able to conduct international trade without it at some point), this is when silver will push into triple digits in the future. Figure 1 is the open interest put / call ratio as of the close last Friday, so expiry related changes would likely occur. This is why I will post updated charts on Thursday and comment on how the markets / ratios are progressing into next month. As you can see by the weekly chart below, silver is on what has previously proven to be a topping timeline interval, which is a significant negative to go along with bearish seasonals. (i.e. if silver bucks this timeline trend however, this would mark a bullish acceleration point.) (See Figure 2)

Figure 2

What’s more, with both Comex options expiry and the CFTC meeting this Thursday, normally I would say don’t expect much for precious metals from this week. As you may know, with a disproportionate number of calls to pay at the $1100 strike for gold, this will have the effect of holding prices back, which will weigh on silver too. And then on Thursday JP Morgan and DaBoyz will get the green light from the bureaucracy to keep selling futures in maintaining the suppression mechanism on paper precious metals pricing. This is how the bureaucracy’s price managers have kept a lid on gold and silver prices all these years, by illegally naked shorting the metals via the futures market. So it will be instructive if gold can close above $1130 and silver $17.50 this week in spite of these impediments. Such an outcome would signal trouble for the banking cartel as this would mean not only did they have to pay the options holders, but more, the influence of paper pricing mechanisms that have effectively held prices back previously is dissipating. Why could this happen now? Because of unusual strength in the larger equity complex, where the broad market gamblers are caught in another short squeeze that carries over to precious metals; again, led by silver as it responds to strength in equities. So, watch for a breakout in the Silver / Gold Ratio moving forward, which as you can see below is long overdue by some measures. (See Figure 3)

Figure 3

And again, this is where all the liquidity coming out of the bond market is finally going to catch these buggers (our price managing and self-serving bureaucracy), where in ironic fashion, they will not be able to handle their own insanity, which is the creation of the mother of all bubbles in the bond market. In terms of profound leading indicators the fun is about to begin then, all we need to see is silver break above Fibonacci related indicated below and a manic move higher should ensue, with money fleeing a failing sovereign bond market on an increasing basis. So you see, what will happen here is the mania that has been built up in bonds, which topped last year, will effectively get transferred to precious metals as the smart money looks to secure conservative money in the safest asset group possible, which in an inflationary environment, is precious metals. And then positive price action will beget more of the same as loose headed speculators enter the game, which will come in the later stages of the move evidenced by unbelievable moves higher in unproven explorers and the likes. (See Figure 4)

Figure 4

So watch for a break above 1170 in the SPX, as a lasting break above this threshold should send the bond market reeling, with a great deal of liquidity looking for a new home. And while initially this liquidity may gravitate towards utilities, dividend paying stocks, and corporate issues, over time, with the precious metals markets so small, just residual amounts of new capital entering the market will have a material impact on prices, which will lead to increasing money flows later on as speculation grows, and the precious metals mania matures.

Good investing all.

By Captain Hook

http://www.treasurechestsinfo.com/

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

Copyright © 2010 treasurechests.info Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by treasurechests.info Inc. No part of these pages, either text or image may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

Captain Hook Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules