Today, we may have gotten a glimpse of what could be the impending dilemma for the market as we end 2018 and begin 2019.
For us, this is not a new conversation.
Rather, the difference now is that although the conversation may be old, the evidence to support that conversation is relatively new.
The dollar, after making a new multi-year high this week, fell considerably over the last two days.
Interest rates, in reaction to the market sell-off, eased to a degree.
I say to a degree for two reasons.
First, the Federal Reserve understands a change in policy from raising the rates to one of easing will potentially spark inflation.
Secondly, although they may not raise in December, no action will also be interpreted as dovish.
Given the issues we are seeing globally, a declining dollar makes more sense to us than a rising one.
Furthermore, although economists are starting to predict a recession coming in the next two years, I still see the chance for stagflation.
The difference?
The economy stagnates while inflation grows.
All these factors affect the metals.
Hence, with the rally in gold, silver and the miners, is this the start of something bigger?
The Silver chart SLV, is on a daily timeframe.
The Gold chart GLD, is on a weekly timeframe.
The Gold Miners GDX, is on a monthly timeframe.
I did that purposely to give you perspective.
On the SLV chart, on 9/11 the low was 13.11. Yesterday, SLV made the same low.
In 2015, the low was 13.04. So as support levels, seems safe to say 13.00 is a great line in the sand.
Today, SLV confirmed a reversal pattern on huge volume. Still in a bearish phase, that could be the start of a bigger rally.
GLD, in better shape than SLV, have first to confirm the Recovery phase or two closes over the 50 Daily Moving Average.
On the weekly chart, 112 is its wall of support. And a move back over 115-115.50 should attract new buyers.
The Miners GDX, also in better shape than SLV, has made higher lows the last three months.
