Chris sits down with Craig Hemke of Sprott Money to talk about recent moves in precious metals, crude oil, and the US dollar. It’s been a tough year so far with money flowing out of stocks. Will the overall downtrend trend continue or is a big market shift coming? And is now the time to buy physical gold and silver vs investing in or trading ETFs such as GDX and SILJ?
The Stock Market
The stock market is very oversold meaning that most stocks are down dramatically which puts pressure on precious metals. As money moves back into growth stocks it goes out of traditional defensive plays such as gold, silver, miners, and bonds.
The S&P500 is back at the March 2021 lows and remains in a clear downtrend. However, certain sectors are starting to come back to life. Biotech, Solar, and Ark are building bull flags, carving out bottoms and thus gaining strength for a possible run to the upside.
As a technical analyst, I look at relative strength opposite to most people. When RSI goes below 30 it’s confirmation that the trend is down and is thus a bearish sign. When the RSI goes above 70 it’s a power zone indication that the asset or sector is gaining strength. Rather than trimming positions, it’s actually time to hold a position as it may rip to the upside.
The US Dollar Index
The US Dollar Index long-term monthly chart shows that we are just starting to break out after a consolidation that has lasted several years. A lot of downward pressure will be placed on precious metals until the US Dollar hits the 120 level. Should the dollar reach 120 and then begin to move sideways for an extended time, precious metals will potentially have a big rally.
With high inflation, most people are very focused on the price of gas. When the price of crude oil falls below $100 per barrel, the purse strings are loosened a bit. Spending money can be reallocated toward products and services.
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Disclaimer: None of this material is meant to be construed as investment advice. It is for education and entertainment purposes only. The video is accurate as of the posting date but may not be accurate in the future.