For some time, there has been a lot of focus on the commodity metals sector and its devaluation from Gold’s peak of $1,912. Personally, I feel nothing has changed fundamentally other than Gold just “isn’t that sexy right now.” The fundamentals that started this once in a lifetime Bull Market are still present today and suggest another Bull Market may be coming. Let me break down why I’m still bullish on precious metals and commodities in the foreseeable future.
United States National Debts
The U.S. National debt is about to exceed $17 Trillion. The debt per taxpayer is an astounding $148,266, and if you include the outstanding liabilities, it balloons to over $1,093,598 per taxpayer. Yes, folks, this is over $1,000,000 per taxpayer. Do you recall the days when our country cared about its fiscal responsibilities and its debt obligations? Increasing debt levels leads to a tightening of credit. This is just one of many factors that sparked the biggest bull market in precious metal history, and it has gotten worse not better.
Continued unrest in the Middle East seems to be increasing. Our political influence has weakened and there does not seem to be any clear vision on how to handle these uprisings. Thus the United States’ diminishing influence and credibility over the last decade has once again set up precious metals for another bull run.
“According to the Quarterly Update: The U.S. Economic Recovery in Historical Context, in the post-war era, GDP rose by 16% in just 45 months. Currently, GDP has only increased by 8% putting this rebound at half and making it one of the weakest economic recoveries we have seen. To further that point, a record number of people are receiving food stamps — 47+ Million (Walker). In my opinion, we are nowhere near a true honest recovery.
The U.S. Dollar Index should be renamed the “Credibility Index.” Looking back over the last decade, our credibility worldwide has decreased and the U.S. Dollar’s power has been in a decline. A rash of bank closings, bailouts and insolvency issues has led countries away from the U.S. Dollar. Continuing diversification will put pressure on the U.S. Dollar and may eventually lead to losing its reserve status.
I have my suspicions of the housing sector. In May 2013, housing starts are up 6.8% but mortgage applications had their biggest drop since 2009. With so much conflicting information, we try to get back on track but then fall right back off. The housing sector recovery seems to be driven by hedge funds and investors suggesting that the recovery has not trickled down to the average American. A possible artificial bubble is forming again, and if it bursts, we could see precious metals soar.
What can I say about this market other than I think it is rigged. Since 2008 and the inception of the “Trouble Asset Relief Program” (TARP), the stock market is no longer a free market. Winners and losers are chosen not by individuals investing in good companies but rather by our government. As much as I disagree with the too big to fail motto, I’d really hate to see the true damage created by the over the counter derivative scandals (OTC). The government had no choice in this matter; TARP was a necessity to keep our society orderly and calm.
The “X” Factor
In my opinion, the biggest unknown is the full implementation of ObamaCare. There is much speculation of how it will affect the economy during a time of high unemployment and shrinking household income and uncertainty. I believe it will continue to put pressure on the current economic recovery and therefore, make gold shine once again. The old mantra of “buy the rumor, sell the news” is in full force here.
Let’s Get Technical
Market Comments: Gold is currently trading at $1,240, with support (S1) coming in at $1,200, then $1,100 (S2), then $900 (S3). Due to the leveraged aspect of futures, I always tell my clients that these markets will often go where you least expect it. If you have been looking to purchase, you better be ready.
Market Comments: Silver is currently trading at $18.89, and this particular market is even harder to predict. Right now, it looks like $15.00 might be its target. I do know we are setting up for a terrific buying opportunity! A once in a lifetime buying opportunity may be coming soon.
Market Comments: Will Palladium see $570 again? I’m not 100% sure. However, for you bargain shoppers we are really setting up for a terrific entry at these lower prices. Be prepared to buy soon!
Till, next time “Have a Terrific Trading Day”!
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The Rath Overlay - Authored by senior broker, Drew Rathgeber, The Rath Overlay uses timeless methods to clearly identify market opportunities and guides the confident execution of your focused trading plan.
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