Global Stagflation: Does It Start Right Now?
2024.08.13 16:14
is the world’s greatest money. All the other financial markets are best viewed as simple tools that can be used to get more gold.
Currently, some tools are functioning better than others. A look at a very shaky one, the US stock market chart. There’s bear wedge action on the and Aug 1-Oct 31 crash season is in play.
The chart. I’m comfortable with commodity-oriented exposure in the stock market… and copper is rising from significant $4 support.
The Global X Copper Miners ETF (NYSE:) is bouncing from $38 support at the same time as copper rebounds from $4.
For investors who have no copper stock exposure, now could be an ideal time to consider a grub stake buy.
Gold and the stock market have been moving together for quite some time, but I’ve urged investors to watch for a decoupling event… and it could have just occurred.
has been slipping due to global growth concerns but the 2021-2025 war cycle is still a cyclical force to reckon with… and Iran-Israel tension is suddenly in play.
Surging oil is going to ring the stagflation alarm bell and that’s more bad news for stock market investors who have just lived through the incineration of their ridiculously overleveraged yen carry trade.
A look at the daily oil price chart. There’s a double bottom pattern in play. A move over the neckline at $84.52 would usher in the $96 target price.
If the rally fails, it’s going to be because global growth is falling so fast that even threats of a major mid-East war can’t keep the price up. It’s almost all bad news for the stock market, and good news for gold.
The short-term chart. There’s a loose rectangle in play and the target is about $2600.
The spectacular long-term chart. The bull flag breakout suggests the target is… $2800.
Today’s inflation report and tomorrow’s could create some short-term pullback in the gold price, but all major fundamental, cyclical, and technical traffic lights for this mighty metal are green.
The India duty cut (from 15% to 6%) is one of many such green lights, and it’s a far bigger game-changer for the gold market than most Western investors understand. I’m projecting it ultimately adds around 50 tons a month of fresh and consistent demand.
Rates? The horrifying US rates chart. A huge H&S top is in play and the neckline has broken.
Rates could be headed for the 3.2% mark, or even to 2.5%, and if that happens while oil rips to $96, the dollar could look like the remains of a rag doll, beat on by gold.
What about the miners? The key GDX (NYSE:) chart. There’s a broadening channel in play (bullish) and now there’s an important Stochastics (14,7,7 series) buy signal.
We are long both NUGT and the SHNY triple-leveraged gold bullion ETN from near the recent low… and looking good. If there is a swoon in the miners, our stoplosses have us protected.
While I think the H&S top scenario fails and the bulls prevail, navigating stock market crash season can be tricky and unnerving, especially for overallocated-to-miners gold bugs.
Put option “fire insurance” can help investors manage any crash season concerns. I suggest looking at October/November expiry GDX $32 and $34 strike price options. It’s cheap portfolio insurance that works incredibly well if there’s a crash.
Regardless, the gold stock bulls have the edge over the bears, and the edge is large. For example, individual senior miners are currently reporting blow-out earnings and incredibly low AISC (mining cost) numbers.
The BPGDM gold stocks sentiment chart. Note the green circles. Overbought situations can stay overbought and there are many examples throughout history of that occurring. A big one could be just getting started with the miners.
The stunning GDX versus gold chart. Mainstream money managers have recently tried to use “sector rotation” to move out of failing sectors and into those offering value… but that strategy has failed and here’s why:
The only sector offering what a hardcore investor would call serious value is the gold stocks… and it’s the only sector that can provide stellar performance in an era of stagflation. The PPI and CPI reports won’t show that inflation yet, but I’ll dare to suggest that most money managers will soon be ready to board a gold stocks jet.
