The stock market rally is amazing right now. NVDA soared again on Friday and the sector that went on the most, to help push the S&P 500 higher, was the semiconductor sector. Google stock actually languished, so not all of those so-called “magnificent seven” stocks are doing great. Everyone in the markets, however, is talking about NVDA and now talking about Bitcoin as it is above $62,000.
Federal Reserve Jerome Powell is scheduled to do one of his bi-annual economic talks to Congress this coming week, and people are looking for him to talk about future interest rate cuts. It’s amazing that with the market rallying like this, CPI inflation still above 3%, and no signs of economic recession, that the Federal Reserve is willing to discuss interest rate cuts. If we’re not going to have a recession this year to justify those cuts then he is setting the stage for a bubble bust, like Alan Greenspan created in the year 2000, after he lowered interest rates THREE TIMES in 1998 to bail out some giant hedge fund. The stock market does not need rate cuts, so I guess it’s all about the politics.
And the financial media doesn’t care. All they are doing is cheerleading interest rate cuts, and the so-called “alternative” media on the internet is simply cheerleading crypto and the idea of AI. People are going to keep buying and hyping until it all falls apart.
It’s like being at a party where everyone is totally drunk and out of control.
And few are talking about gold and silver, even though gold had a big day on Friday to close right below $2100 and looks poised to now breakout.
Notice on the bottom of this chart that the 200-day Bollinger Band width indicator has been flatlined for the past few months around 10.
That means long-term price volatility for gold has contracted (you know it because it has been trading in a narrow <5% range since December), and will expand for a big move.
That’s likely to be to the upside, with a breakout, with the looks of the current price chart and the fact that future interest rate cuts, instead of hikes, are on the horizon. It doesn’t matter if they come next month or next year, because all that matters is that cuts are next and not hikes.
So, the only way to protect yourself from inflationary policies is precious metals.
To show you how big this Bollinger Band contraction is you gotta look at a long-term chart to put it in perspective.
The Bollinger Band 200-day width indicator has only gotten to ten six times since 1998.
Of course, when gold goes up, silver tends to go up too, and so do mining stocks, which have been languishing the past few months.
Gold above $2100 should bring them to life and get them to play catch up.
It will be an interesting week with gold, silver, and the Jerome Powell talk to Congress.
If gold is going up now, just on the notion that interest rate cuts are coming, what will it do when they do come?
When I think out, though, past this week, and into next year, it makes sense to me for Bitcoin people to take profits on their rally and move into silver before its price performance to the upside starts to outperform Bitcoin, because the day will come when the crypto market will bust again, and when it does money will move out speculative instruments into safety plays.
-Mike
