It's been some weeks since I've been blogging on Steemit. I've had numerous other priorities to deal with relating to my business so I haven't had much time. As of today I'm laid up with a trapped nerve in my back so I though what better opportunity to provide a precious metals update.
My last post indicated that silver had broken down out of the wedge. This was bad news in the medium term for both metals and the only redeeming possibility was a false breakdown and a bounce. Unfortunately this didn't occur.
https://steemit.com/steemsilvergold/@unclehermit/silver-slammed-as-dollar-surges
We are therefore resigned to the fact that we will continue to see lower gold and silver prices in the near term, possibly much lower. There is little technically to provide any comfort so I won't pain you with the charts. I've enough pain as it is with my back!
Fundamentally I think what we are seeing now is risk aversion as risk assets are sold as a result of dangerous geopolitical events. Where does money go when risk assets are sold? It goes into the reserve currency, cash, the dollar. Therefore gold will continue to get slammed while people continue to cash out of risk assets and rush into the dollar. However, various talking heads and other indicators suggest that risk is ramping up in the dollar too. Once this becomes clear and the dollar begins to weaken out of devaluation fear the money will rush back into gold.
Remember that the derivatives market is highly exposed to increasing interest rates. And what do we have right now? Rising interest rates. Should the derivatives market start to experience leveraged losses then everything will fall apart. I've said it before, I'll say it again. It's the debt that is the risk. Once that starts to collapse, all currencies (which are essentially just debt) will also collapse, starting with emerging markets, moving into established currencies. When that happens we will see gold fly.
I think we are getting close, but we still have a few months to go. During this time we may even see new lows in gold and silver. It's going to be a rough ride so hold on tight.
