Powell is talking about cutting rates. He is acknowledging now what we all see. A huge crisis ahead. Lots of things breaking. Banks, Gilts, US Treasuries, the middle class, small companies and many others.
He is patently aware that a soft landing is just a dream. The money supply has decreased by 4%, a deflationary indicator. The number of bankruptcies is escalating rapidly. True unemployment is skyrocketing and the quality of available opportunities is decreasing. Think Artificial Intelligence. Car loans and credit card payments are being set aside in order to pay for the necessities of life.
Why suddenly announce rate cuts when real inflation is still running rampant? How about debts falling due in the near future, likely to be rolled over at ‘unaffordable’ higher interest rates? $750Billion in 2024 and $1.2Trillion in 2025. The Treasury is looking at $17Trillion in repricing over the next three years. Interest payments are now at $1 Trillion annually. THEY need the lower rates.
The obvious reaction to the lack of fiscal responsibility of the US government is to diversify out of the US Dollar. We see this depicted in the chart below. Red being the sales of US treasuries by foreign holders and Blue is the purchases of physical gold.
So having placed himself in this precarious position, what can we expect from Powell and co.? The rate cuts will come because they have no alternative, inflation will soar because the rates are too low, the economy will stagnate because people have no spare cash and wages will stagnate as costs soar. People will become much poorer and the risk of anarchy on the streets will rise.
Debt to GDP is around 120%, public debt is around $34 Trillion and the situation economically is getting worse, not better. What does that mean for the future? How do creditors and other promised payments get paid? In totally devalued paper or not at all?
Public, corporate, and household debt is running at around $100 Trillion. In my mind an uncountable, unfathomable number.
The question then becomes how long can the dollar sustain itself? I believe longer than we imagine at ever decreasing purchasing power. As the system is set up now, if the dollar devalues, competitive currencies will devalue in order to continue to supply one of the best markets in the world, the US. This means we will not see the dollar disappear on the cross currencies in the near future. They will try to morph it into CBDC’s (Central Bank Digital Currency).
Where the disparity in rates should be seen is on the gold dollar cross. Here I believe is where the manipulation of the metals prices becomes essential in order not to allow either gold, a monetary asset, or silver, a cross industrial/monetary asset to show the reality of the currency’s falling against the precious metals.
The worldwide financial markets are built around the dollar and have longevity built into them. The dollar influence is being eroded and will continue to be. It is a process and unless there is non-payment or another force majeure, this natural attrition will continue and is being exacerbated by the weaponization of the dollar using SWIFT and sanctions to punish non-compliant (in their opinion), countries. In my opinion, a huge mistake.
The question then is will the government allow deflation? I doubt it. They will print to prevent default, to pay social security, to pay pensions, to keep the wheels on, to keep the markets afloat, but at its core the value one receives will be less and less. Stagflation in a word.
This note is informed by the Gold Switzerland article
My experience is that most people get sucked into the stock bull rally, then the big guys sell out of the market at the top, leaving the rest of us to scrap over what is left of the market, with huge losses and reluctant to get back in, while the big and smart guys buy up the cheap stocks.
BITCOIN AND GOLD
Our system has given us a sell signal on BTC v Gold in other words favor gold against bitcoin. All the indicators confirm this position, the market will produce the final reality.
GOLD AND SILVER STOCKS
Stocks are appreciating at a faster rate than the metal. This is to be expected in a bull market. The stocks have a long way to go to catch up with historic norms.
GOLD AND SILVER
Gold is struggling to overcome the resistance at $2,046.00, but is really close at $2,041.00 If it breaks this level I see resistance at $2,140.00 then a run to $2,231.00.
Silver is meeting resistance where it is now at $24.37, its next resistance is at $25.90. Should it break that resistance I see $27.45 as the next possible target.
No markets run in a straight line so we expect pulls back along the way.
GOLD TO USD
The chart below shows the inverse relationship of Gold and the US$ continuing. Gold has not reacted as strongly against the weakening dollar as I would have expected.
There is no change of the sell signal we have on the dollar at this time. It is looking oversold and we may get a reversal.
A LOOK AT THE GOLD AND SILVER CHARTS
|Gold Miners bullish percent index:
|Dow: Gold Ratio (BahaUS 37308.00 Gold price, $2,044.00)
|Current USA inflation rate (Dept. of Statistics
Gold’s low of the week was $2,016.00 and the high was $2,047.00, now trading at around $2,042.00.
- The monthly chart for Gold has given a buy indication, I am still concerned with the spike high produced by the sharp increase in price followed swiftly by the reversal.
- The weekly chart remains a hold. The spike high still needs careful watching. None of the indicators give a sell indication yet. If anything, funds are flowing into the market.
- The daily chart remains out, with a couple of indicators pointing to a potential buy.
The low for Silver this week was $23.66 and the high $24.48, trading around $24.36 at present.
- Silver on the monthly chart indicates a hold.
- The weekly chart has had us on a rollercoaster and indicates a buy.
- The daily chart remains out. Some indicators are pointing to a buy but not clearly enough for a buy.
Our partner has stock of both gold, silver and Goldbacks in our vaults available in Panama. Please contact us for more information.
A video by Mike Adams on the Goldbacks. Well worth a look!
On the Stockcharts.com charts, the blue vertical lines are our proprietary system buy signals and the red vertical lines are system sell signals – for information purposes only
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This is my interpretation of the market and is not to be taken as financial advice. Before making any buy or sell decisions I recommend that you consult with your professional financial advisor.