Futures dip, oil tops $100 as Iran reviews U.S. peace plan - what’s moving markets
According to mainstream media, the dollar is rallying. The media claims that the dollar is rallying because of the surge in the price of oil. Are they correct?
The dollar’s rise is probably more related to the current swoon of the outrageously overvalued US stock market.
Investors are panicking and moving to cash.
The US government (both democrats and republicans) uses the stock market as a macabre “poster boy” for the mainstream economy. Its pundits demand massive interest rate cuts and they are doing it while inflation threatens to surge out of control.
The proposed cuts would financially annihilate elderly savers but keep the stock market from collapsing into a 1929-like heap… and allow the government to take on exponentially more debt.
Another look at the dollar’s supposedly powerful rally. On this long-term US dollar versus gold chart, there is no rally. Fiat looks to be enroute to a destination like Hades.
The endless rise in the cost of basic food, shelter, and transport can be directly correlated to the government’s obsession with fiat. Horrifically, in terms of damage to citizens, fiat money has ruined almost as many people as war.
Clearly, all citizens need to accumulate gold, now, and for the rest of their lives. Some great zones to do that, $5000 (now), $4850, and $4650 are three great zones to eagerly grab more gold, silver, and miners.
Excitingly, Stochastics (14,7,7 series) is near a low, and if that low were to occur around $4850, a huge bull triangle would come to life! The triangle target would be about $6600.
Tomorrow brings both the PPI (producer price inflation) report and a Fed interest rate decision. Sadly, the Fed is basically a glorified soup kitchen… and the government is the biggest bum in the lineup to get free rate cut soup.
Given the 100% surge in oil since his last outing, Fed chief Jay will have a difficult time justifying no hike. I expect he’ll talk about “temporary” inflation pressures from the war (even though inflation has been well above the Fed’s 2% goal for many years).
The good news is that savvy gold bugs don’t need to worry about what the Fed says or does. They just need to focus on the greatest price zones to get more gold, silver, and high-quality mining stocks.
What about oil? The US government is trying hard (and taking on more debt) to stop the Hormuz attacks and I expect some sort of good news event is probably just 1-2 weeks away.
That will launch my projected stock market rally (including gold stocks), but it appears that oil is in a big range trade between $80-$120… and odds favour the congestion pattern being resolved with an upside breakout and surge to $160. Here’s the bottom line:
Significant damage has likely been done to oil production and transport infrastructure in numerous countries in the Mid-East. Getting it all back up to speed will probably take years.
What about Venezuela and a possible spike in production there to offset the mid-East damage? Well, that country is run by a much more conniving communist (Delcy Rodrigues) than the previous hooligan Maduro, but international oil company managers are just as smart as she is. They will move very slowly to add meaningful production there.
In a nutshell, $80 could be a new floor for oil, and that could mean the new floor for inflation in the CPI, PPI, and PCE reports is going to become 4%-5%... and potentially more.
Miners? The CDNX has gone nowhere since I issued my profit booking alert five months ago at round number resistance of 1000.
From a technical perspective, this pause in the upside action could continue until the fall. That would create spectacularly bullish left and right symmetry on the chart.
It’s a time for eager gold stock bugs to get their allocation house in order… so they are perfectly postured to patiently endure the pause, and to reap the mindboggling benefits from the breakout and multi-year surge that almost certainly follows.
The bullish SIL (silver stocks ETF) chart. Basis the Edwards & Magee chart book, the rectangle pattern has a rough 67% chance of resolving to the upside, and the target is $130.
Rather than trying to call a “final low”, my suggestion for investors is simply to identify great buy zones (like the current one) and buy modestly there. Gold $5000 correlates with about $92 for SIL. Additional stock (in GDX, SIL, and associated component stocks) can be bought at a gold price of $4850.
The current global government times are wild and becoming more debt-funded all the time. Gold, silver, and mining stock bugs of the world can afford to watch the insanity from the sidelines and focus on all the great zones to buy!
