With the recent running bull markets slipping of late, what could it mean for gold & silver?
First, let’s step back and consider what’s happening fundamentally in the markets today. Or more specifically, let’s consider US Politics, Geo-politics and the overall market health.
Starting with American politics. We have what have been dubbed as the “most important mid-term elections in the history of all mid-term elections” coming up.
Geo-politically, the world is on a knife edge, with tension over Saudi Arabia’s alleged assassination turning heads across the globe. Iran and Israel are at each other’s throats and the situation in Syria shows no signs of getting better. Across the ocean a BREXIT deal is looking less and less likely and in the Americas, trade wars and trade deals are nowhere near anything resembling a resolution.
Why is this important?
Well, despite the gold standard ‘expiring’ in ’71, gold seems to be perfectly priced for economic, market, political and geo-political perfection. And right now, all four of these contributing factors are on the cusp of turning from perfectly peaceful to complete global chaos. That means that the ‘perfection’ that gold is priced at looks to be very short lived.
Let’s Check out the Technicals
You can see that the daily chart of gold on MT4 is currently holding the 50 SMA since its recent pop, though nothing really convincing in terms of a trending move.
While silver does the same and looks to be forming an Inverse Head & Shoulder pattern at the same time.
With the raising of interest rates, we’re seeing a huge amount of money transferring into gold from US treasuries as a ‘safe-haven’ asset, and to aid in hedging against equity market risk. We’re seeing big investment shifts such as Russia ditching nearly all their holdings of US debt and Treasuries, and moving their money into gold, while China are doing the same. But it’s not only the powerhouse countries that are stockpiling gold. We’re seeing plenty of emerging economies as well as countries like Poland, Hungary, Kazakhstan and Mongolia significantly buying up physical gold.
What this all means, is at this stage unclear, however with a high degree of uncertainty in the air, time will. If history is any guide, it could spell plenty more turmoil in equity markets and the broader economy as a whole is on its way.
Source: Vantage FX Blog