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Will US Dollar Weakness Finally Cause Gold And Silver To Breakout? – Mike Swanson (12/16/2020)

Today we have a Federal Reserve FOMC statement on tap this afternoon and when it is released it will grab the attention of the financial media for an hour or two and there is a lot of anticipation that they will make an even more dovish tilt in it, but for months now the US dollar index has been fading as a consequence of the policies it began this spring and the growing US deficits.

Take a look at this chart of the US dollar index.

It made a new low yesterday. Gold and silver tend to trade opposite to the US dollar index and both soared into the August temporarily low and then began a consolidation phase.

But now both gold and silver are in a position to breakout.

Gold gave up half its gains during this consolidation correction from its March low and August peak. Now it is position to break this simple resistance trendline, all it has to do is close above $1880.

Silver is in an even simpler consolidation pattern with $25 as the key resistance point to watch.

Many silver stocks are lined up nicely just as this silver chart is, such as my top stock pick of October, Silverdollar Resources, and Aftermath Silver (which I bought last year and still own), which had big news yesterday.

But mining stocks remain unloved among Robinhood traders where it is mostly fad technology stocks that draw the attention of the masses. Last week it was the Door Dash IPO that opened up at a sky high price that made all the headlines and has been drooping ever since.

It isn’t the stock action that makes DoorDash so crazy. The stock is a complete bubble with a market cap of $60 billion. It has revenue of $1.9 billion and profits of only $23 million. That’s a joke for valuations.

In comparison GM has a market cap of $59 billion and yields a 3.65% dividend. GM also has made a profit of over $10 billion in 2019.

Doordash is a complete bubble that will one day implode, but so much of the stock market is a bubble dependent on corporate bonds at record low yields, with Fed action forcing 10-year Treasury bonds yields at less than 1%.

When will the bubble pop?

Not today as the Fed is going to pledge to continue it in its statement with dovish policies.

But I can only look out six months with my charts and I see no sign it is ending.

Commodities are getting a bid and in the past week we have seen energy stocks come alive. One I own that is in a good buy position is EQNR.

EQNR is a petroleum refining company paying a 5.73% dividend. It also has a market cap of $55 billion. It made $11 billion in the last quarter.

I’d rather own it than DoorDash. Remember it only made $23 million so far.

It’s a joke at this price!

I like EQNR and how gold and silver are positioned now. I don’t know if they will breakout today, but they look like will very soon to trigger an end of the year rally. That should really help my top small cap stock pick for this month too.

Today Amazon is running a special deep discount my two ebooks.

It’s time limited so go here to take advantage of it

Strategic Stock Trading

The War State: The Cold War Origins of The Military-Industrial Complex and The Power Elite, 1945-1963

-Mike

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