Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Stock Market Crash Edition - 26th Mar 19
Handy Ways to Boost Your Home Income - 26th Mar 19
US Treasury Bond Yield Inversion and Political Fed Cycles - 26th Mar 19
Golan Heights Oil all about the Shekels - 26th Mar 19
Falling Yields a Catalyst for The Gold Catalyst - 26th Mar 19
Can We Lock Up Rachel Maddow Now? - 25th Mar 19
Real US National Debt Might Be $230 Trillion - 25th Mar 19
Friday's Stock Market Sell-Off - New Downtrend or Just Correction? - 25th Mar 19
20 Days Left to Find Buying Opportunities In Gold - 25th Mar 19
Will the Historic Imbalance in Gold Stocks to Gold Price Resolve ? - 25th Mar 19
EasySMX Wireless Games Controllers Review - 25th Mar 19
Stock Market Short-term Top - 25th Mar 19
UK Population Growth - Latest ONS Immigration Statistics and Consequences - 24th Mar 19
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

Forex Volatility Predicts Bottom in Gold and Silver?

Commodities / Gold and Silver 2014 Oct 01, 2014 - 10:49 AM GMT

By: Jeb_Handwerger

Commodities

Summary

  1. Volatility in foreign exchange market as investors flee euro and yen for liquid U.S. dollar.
  2. Euro and yen hitting multi-year lows. Inflation picking up outside US.
  3. US dollar seen as temporary safe haven. Could the US dollar be the next currency to decline?
  4. Precious metals and junior miners trading at historic discounts should be considered as an alternative to fiat currency.
  5. Deflations set the stage for hyper-inflations.

Over the past few months, I have seen an influx of capital and high net worth investors who are getting interested in the junior mining resource area. Now may be the worst time to panic out of the precious metals and junior mining sector into the overbought US dollar. Smart capital may be carefully looking at ways to diversify away from the euro and yen which has collapsed hitting multi-year lows. Inflation may pick up rapidly in Europe and Japan. The European Central Bank is printing euros (NYSEARCA:FXE) like crazy causing a collapse in the currency and its worst quarter in many years. This is a manipulative attempt to stimulate a weak economy and boost exports from the region.

The flight of capital from Europe and Japan (NYSEARCA:FXY) has looked for temporary liquidity in the US dollar (NYSEARCA:UUP) which is hitting three year highs as investors expect the Fed will raise interest rates by 2015. But I wouldn't count on that so quickly. Investors are also buying the S&P500 (NYSEARCA:SPY) large caps sitting on record cash positions. The US may be the most dangerous overbought market right now that could correct from those nosebleed levels delaying interest rate increase.

The US dollar has soared as a liquid alternative. For how long is the main question. Can the S&P500 continue to rally alongside the dollar? The yen and euro is collapsing. Could the US dollar be the next currency to fall or could it be the US equity markets which have gone up for three years now with no meaningful correction?

A strong US dollar could put pressure on the large US multinationals and S&P500 as US exports become more expensive. US deficits continue to soar to record levels and they must be paid with cheaper dollars.

Eventually, the large US dollar position should rotate into the commodities and natural resources as deflations set the stage for hyper-inflations.

What one must do during these periods is prepare for inflation to pick up by buying precious metals and junior miners. Deflationary periods do not last long. The long term trend favors inflation. Three to four years is already an extended period of time for a correction by historical standards.

Deflations breed the best buying opportunities as one can protect oneself ahead of the inflationary storm that may be directly ahead.

Gold (NYSEARCA:GLD) and silver (NYSEARCA:SLV) prices have been declining since 2011 but may soon bottom as the US dollar begins to test multi-year highs. The US dollar is very overbought as investors fear that the US will raise interest rates while other countries continue to print money like the ECB, Japan and China.

This rally in the US dollar should not last much longer as it may be a dead cat bounce before the next downturn. This may actually be a great time to transfer cash into real assets such as the junior miners (NYSEARCA:GDXJ) trading near multi-year lows.

The US deficit is continuing to increase especially as new wars are announced in Europe and the Middle East. The Fed will continue to support inflationary policies and prevent deflations at all costs.

Rising deficits and war are usually quite bullish for gold and bearish for the dollar. Silver is already in new four year lows trading below $18. Gold has not yet violated the $1200 mark but may soon bounce off that level. The Junior Gold Mining ETF is continuing to hold its 2014 lows.

Meanwhile, the US dollar is strong at new six year highs despite billions of dollars of bailout and quantitative easing. The Fed is running the risk of deflation and may actually be forced into more easing to boost inflation. The U.S. must pay back its record debts with cheaper dollars.

Right now, the bottles of champagne are popping in the US as real estate and equity markets continue to hit new highs. However, the piper must be paid and it is harder to pay down debts with a strong dollar. Don't be surprised to see the Fed eventually make a reverse move to devalue the dollar to pay down debts. Expect more bubbles to explode not just in 3-D printing, but in social media stocks and get rich quick real estate scams.

There is a huge cash position waiting on the sidelines to buy real money such as gold and silver especially from the Europeans right now dealing with a currency on verge of collapse and China, which just announced a new Shanghai Gold Exchange. Major institutions are sitting on large amounts of US dollars/bonds and must transfer that into the form of real money in the form of gold, silver and ounces in the ground controlled by the junior miners.

Look for huge volume and accumulation in gold and silver over the next few weeks and in some high quality junior mining stocks. Negative capitulation followed by strong accumulation could be the indicator that the smart money expects gold and silver to bottom. The question for many is when this will occur. It should be soon as this correction in the junior miners has been one of the worst and longest in decades providing possibly a once in a generation buying opportunity.

Subscribe to my free newsletter to get up to the minute updates on rare earths, uranium, gold and silver.

By Jeb Handwerger

Disclosure: Author owns no stocks mentioned.

http://goldstocktrades.com

© 2014 Copyright Jeb Handwerger - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 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