Or in my parlance, a major buying opportunity…..
As a new regime enters into power on Wednesday, Wall Street and the television propaganda gurus will have everyone believe that inflation is the biggest problem facing the American economy now, and soon we will all need wheelbarrows are larger wallets to haul our cash around.
Unfortunately for those who believe this, such a move is not on the immediate horizon. In fact a nice short term rally appears to be on the horizon:
In my opinion, the current rally will surge past the 92 level and rally into the declining 200 day moving average currently at 94.71. The reasoning is simple; Biden’s proposed $1.9 trillion dollar “recovery” plan is nothing more than an honorarium to those who got him elected. The teacher’s unions, government unions, pension fund managers for the bankrupt states, Big Pharma, and of course, Wall Street, are the true beneficiaries of this largess. If he is successful in passing this in the first one hundred days of his rule, it will have the opposite effect of what many think will happen to the U.S. dollar.
The truth is that the final move in what has become a mega-bubble will probably occur. As the states look to repair their balance sheets via Wall Street, one final parabolic mother of a move in equities and speculative investments will probably occur. This will suck in more investment into U.S. dollar denominated instruments from overseas as the hottest casino in town thus creating the short term rally I envision in the chart above.
In the long term, the European Union’s plan to reduce reliance on the dollar in addition to a more regional trading approach in Asia might well cause a massive exit from the dollar during the summer of 2021. Especially since their are hard times ahead for the U.S. economically and politically which will put 2020 to shame.
What does this mean for gold and silver in the short term? For the next three months, bad things in this writer’s opinion:
The price of gold is very dependent on the dollar and as the chart above displays, a pronounced downtrend is now in place. I believe the intermediate support between $1700-$1750ish will hold and allow a short term regroup later this spring to early summer but in the short term, gold bulls will probably be punished.
Silver does not look as bad, but looks can be deceiving:
The consolidation in this area between $22-$28 would normally seem bullish, but the failure to break above $35 per oz. is bearish and could indicate a short term rollover much like gold prices. A retest of the $17 is possible, but if $20 holds, the next surge in prices should parallel gold and indicate a breakout above the $35-$40 range later this year.
Much like ammunition, if you can find physical silver and gold in the interim, buy it. Do not trust Biden’s Buck Breakout as it is a canard to cover for the integration of Modern Monetary Theory (MMT) into our nation’s financial management structure. By the end of 2021, I seriously doubt if the USDX level of 80 will hold and that is when some major new highs in gold and silver will take place.
Along with a lot of international instability needing a cure and fast….perhaps a great reset.