From the Trading Desk
Prior to the FOMC statement yesterday, gold was already on shaky ground as it continually tested support ($1,268 at the time) on a trendline dating back to the beginning of the year. Post FOMC, gold was unable to maintain its footing above this area and the yellow metal completely broke down. The Fed minutes rattled markets that had, until recently, all but ruled out the possibility of a US interest rate rise in June. Fed officials stated that a June hike is now “likely” if the US economy continues to improve. The USD spiked against a basket of currencies and reached its highest level in nearly two months while equities and commodities plummeted. Despite strong physical buying out of Asia in the overnight session, gold fell yet again today before finding support around the 50 day moving average of $1,249.50. After completely outpacing gold on the move up in April, silver has now officially caught up with gold on the move south. It also found support at its own 50 day moving average of $16.30 and this remains the near term level to watch.
The dollar is still a key to watch as well as the overall market which is weak. I would be selling any moves up in the stock market and miners at present. A week or so ago I gave the 94.50 level as a reason to get out of miners and we did have a fall in price of the miners but they did also rebound after gold touched its 50 day moving average.
Let the dollar show you the way still with the micro point of view.
Others are coming on board the deflation outlook. I noticed this week that Larry Edelson was talking about deflation but he makes the mistake of looking at prices only in a letter to his subscribers. Prices are the result of deflation.
Martin Armstrong also wrote an article on deflation you can find here: https://www.armstrongeconomics.com/armstrongeconomics101/basic-concepts/the-wave-of-deflation-rising-unemployment/
He speaks of the movie The Terminator as robotics take over human labor. In my book Illusions of Wealth I address robotics and “the rise of the machines” that’s in motion. Deflation in replacing the $15 wage worker with a machine doesn’t do anything to help consumer spending. If consumers are 70% of the economy, and more and more replaced by machines as we are seeing with McDonald’s self service or even grocery store checkout areas, what will drive GDP? Other fast food companies and minimum wage industries will follow suit. Of course we can always arrest more people and get them the 20 – 31 cents an hour wage that keeps some corporations rolling in profit (joking of course, but there is some reality to this as the U.S. leads the world in incarceration.
Our country is a mess and most don’t even know it. More to come from my next book “We the Serfs!” which I am diving into next without a break from the Illusions of Wealth book as I simply want to bring awareness and better solutions to what can make America, erm, great again. And no, we are not great no matter what side of the isle you come from. We have deep rooted problems that neither party will resolve.
Note: I did get the Illusions of Wealth book back from the formatter today. Without the Table of Contents, Introduction and Index it is 409 pages long. There will be 2 types of investor who will appreciate this book. The first group are those who want to know everything (or close to it) before doing anything. The second group are those who just want to know what to do with their money. You will find this book as thorough as they come and I can’t wait to hear what investors have to say about it. I am very proud of it and think it will help all investors, whether they utilize trusted advisors or navigate choppy waters themselves.
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About Doug EberhardtDoug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Disclosure:
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.