Gold, Silver, & Main Street Inflation Stewart Thomson
Oct 6, 2020
Historically, gold tends to do well ahead of US elections and after the Chinese “Golden Week” holiday.
Both these events are currently in play.
Please click here now. Double-click to enlarge this important weekly gold chart.
The low at about $1875 is light support and so it’s a small buying area for investors. The $1788 zone is a large buying area.
Note the 14,5,5 series Stochastics oscillator at the bottom of the chart. It’s in the 50 area which is where momentum-oriented moves can occur.
Also, the key 5 WMA and 15 WMA and moving averages are at a “kiss” point.
Please click here now. Double-click to enlarge this short-term gold chart. To avoid the weekly chart moving averages kiss becoming a sell signal (and Stochastics melting under 50), gold needs to trade above $1925.
That would also activate a breakout above the neckline of the inverse head and shoulders pattern on the short-term chart!
Please click here now. Double-click to enlarge this Dow chart. The Dow needs to trade above 28,250 on the December futures contract to restart the pattern of higher highs and higher lows.
It’s still early in the crash season month of October, but US politicians from both parties are eager to send out more trillions in welfare payments to waylaid small business owners and workers, so they can buy products from the big companies that trade on the stock market.
For all practical intents and purposes, universal basic welfare (UBW) is already here. For the gov’t, banks, and money managers, it takes the form of QE to infinity.
For small business owners and workers, it’s called Corona stimulus, and stimulus to infinity is also likely here to stay.
Printed money inflates the items it flows into. QE aimed the printed money at OTC derivatives, government bonds, real estate, stock markets, and of course those were the items that were inflated.
In contrast to central bank QE, the government stimulus printed money is aimed at waylaid small business owners and low/modest income workers.
That’s going to produce what I call MSI, main street inflation. That’s because the money will be used to buy products that main street uses rather than investment assets.
All the Fed claimed to be trying to do, is exactly what the US government’s debt and fiat photocopier oriented universal basic welfare is about to do now.
Please click here now. Double-click to enlarge this GDX chart. A move above $1925 gold should see GDX push above $40 and end the reaction defined by lower highs and lower lows.
Please click here now. Double-click to enlarge. Silver looks “decent” on this daily chart. During periods of inflation, silver can outperform gold, but my suggestion is that the decision to own gold or silver needs to be a personal one.
With silver, there’s more volatility, the price is cheaper, and silver bugs should feel an emotional affinity to this great metal.
Gold investors should also consider owning a modest amount of silver, for diversification purposes.
Please click here now. Double-click to enlarge this SIL silver stocks ETF. China’s Golden Week holiday ends tomorrow. Still, whether the current reaction low is in or not is unknown.
A final dip to gold $1788 (and likely the support zone of $37.50 for SIL) is possible, but fresh trillions of printed welfare dollars will be the next pillar in the foundation for main street inflation.
The transition from creep state asset inflation to main street product inflation is going to be a game changer. That’s because it’s going to bring an astounding amount of both institutional and retail investor money into the entire precious metal asset class.
The bottom line: There’s only one thing for the gold bugs of the world to do right now and that is… smile!
Oct 6th, 2020
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