Gold has just broken all its historical records, but we will certainly experience a consolidation phase before the real takeoff. I recommend that you read this article to the end.
First, let's talk about the most prominent American index: the S&P 500.
It too is at its all-time high, not because the American economy is at its best in the last 50 or 100 years, but rather because the performance of the stock markets depends on the money supply injected by central banks. Since 2009, the S&P 500 has risen in parallel with monetary injections from the Federal Reserve. Hyperinflation of the money supply generated a rapid rise in stock market indices. In recent months, speeches discussing the Fed's monetary policy have repeatedly suggested that interest rates would fall in March. This implied that companies would once again be able to borrow cheaply to refinance their debts and continue to buy back their own shares, hence the continued bullish rally of the S&P 500.
Graphically, it is undeniable that prices are rising in a wedge, stuck between resistance and support. Statistically, the exit from the wedge is usually from the bottom, leading to more or less strong consolidation. Friday March 15 will take place on “4 Witches Day”, the expiration day of monthly options on stocks and quarterly options on futures. These options allow you to play with leverage. On that day, speculators either close their positions or repurchase the contracts in their entirety. Big movements are therefore to be expected on the markets.
We can expect big profit taking on Thursday and Friday. That said, the drop in prices should be brief. Some speculators will undoubtedly seek to buy the low points, hoping for a lot from the next FOMC meeting.
On Wednesday March 20, Jérome Powell, the governor of the Fed, will present monetary policy for the coming weeks. The difficulty of its mission lies in the need to defend the dollar, which part of the world is trying to get rid of. To achieve this, it would be necessary to increase rates in order to attract buyers to American debt. But if he raises rates, it will lower the value of US Treasury bonds, triggering a banking crisis in the United States and a probable fall in the stock markets. At the same time, the US government continues to massively increase debt, especially since we are in an election year, at a time when traditional buyers of US debt have turned sellers, notably China, Japan and oil-producing countries.
To complicate the task, a very large part of the US debt (8,9 trillion $) matures in 2024.
Unless it defaults on the debt, the Fed will be forced to launch a massive money creation program in the coming months, which should cause the dollar to fall.
I tend to think that the Fed will disappoint the markets on March 20 and that it will announce new QE around May, triggering the fall of the dollar and a surge in precious metals.
While rising in a wedge, the price of gold broke its support and hit the target of €2,000 per ounce by making its pull-back towards the old support. Gold could be a few days ahead of the S&P 500 in consolidating.
The consolidation could last until the end of April, before taking off in early May and start of bullish rally that promises to be historic.
The M2 money supply currently stands at 20 trillion $. With 10 trillion $ of debt maturing this year, the Fed will probably have to print 10 trillion $, i.e. 50% of the current M2 money supply and twice as much as the 2020 QE.
Just imagine how high the price of gold could go...
The price of silver lags behind gold. Graphically, silver should make a small bullish push towards $25, before consolidating.
As with gold, silver will really takeoff beyond historic highs in May. This first leg of this rally will last May-June-July before taking a break of around 3 months:
The price of oil seems to have formed a “Diamond Top Formation”.
On Friday, the barrel broke its support. At the start of the week, oil could rise again to make a pull-back towards support, before starting a downward phase, which could bring it back towards $77.
If this period of consolidation materializes, it could extend over a period of six weeks, followed by a significant rise in oil prices in May, June and July.
I have presented to you my theoretical schedule of precious metal prices. Take advantage of the month of April to invest your savings in physical gold and silver. Remember to fill your fuel tank before the increase, which will in reality only be a sharp drop in the purchasing power of fiat currencies.
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The information contained in this article is for information purposes only and does not constitute investment advice or a recommendation to buy or sell.
