This was an interesting week in the financial markets as the Federal Reserve once again decided not to raise or lower interest rates. Fed Fund futures are now projecting no change in rates for the next six months. People are starting to lock in their CD rates and buy more one and two years bonds to capture the current yields, in case next year sees rate cuts. The next direction does seem to be likely to be cuts, instead of hikes, on the part of the Federal Reserve, as current GDP numbers for the fourth quarter are tracking in to be at 1.2%, according to Federal Reserve live projections. The inverted yield curve says a recession will come, but when is the question, as it’s been inverted for well over a year and half now.
The US dollar index put on a rally starting in July, but that rally ended this Friday as the index broke down.
Gold also rallied last month up to the $2000 level, which has been resistance for it for the past three years. If the US dollar index declines into the end of the year, look for gold to rally too, because gold historically goes up when the dollar falls in value.
Notice how the 200-day Bollinger Bands on gold have narrowed.
Gold has been in an $1800 – $2000 an ounce range all year and is now at the top of this range.
If the dollar continues to fall, it can finally breakout for real to have another big leg up in price, like what started in the spring of 2019 when it went from $1250 an once to make a play for $2100.
Silver also is positioning for a breakout move, with a triangle chart pattern.
Silver has short-term resistance around $24.00 an ounce.
One of the things I’ll be watching very closely for the rest of this month is this price point and looking for a close above that level for silver.
That would signal a breakout.
If these breakouts happen look for the mining stocks to come alive and run too.
The GDX mining stock ETF has a chart that basically is mimicking the price of silver.
I think the stock market can do ok going into the end of this year, but if silver closes above $24 an ounce then I expect we’ll see the metals and mining stocks outperform any stock market rally.
In case you missed it: This Jeffrey Gundlach CNBC Segment Is Worth Watching On Bonds
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-Mike
