**Precious Metals trade into the red as the market scrambles for liquidity. But longer term, if the central banks are keen to print, PM’s are well positioned to gain.**
We’re seeing some interesting movement between stocks and precious metals today.
Equities opened the session sharply lower on a serious flare up in the Euro zone. All the sudden, with the market acting like it came out of nowhere, the entire Euro zone looks like it’s going to collapse as bond yields jump higher.
So if the Euro zone is once again looking like a deflationary black hole, that means the central banks are going to need to be out in force, doing what they do best; print. That has essentially been the paradigm since the financial implosion of 2008. The central banks can sit on the sidelines and let the financial system and global economy collapse or they can print more money to fill the deflationary black hole. The options and outcomes are actually fairly obvious on this macro level.
Precious Metals in the Red
But that’s not showing up in precious metals today, with both SPDR Gold Trust (GLD) and Double Silver (AGQ) trading in the red. That means liquidity has taken precedence for now, a signal of how thirsty the market is for cash and collateral.
But longer-term, with the central banks up against the wall to support the economy, printing is the only way out. That creates inflation, which in turn puts the bid into hard assets. The short-term action on the 1-year chart looks a little bearish, but the 2, 3 and 5-yr chart still look pretty bullish.
GLD 12-Month Chart
GLD 2-Yr. Chart
GLD 3. Yr. Chart
GLD 5-Yr. Chart
Author
Michael Vodicka is the president and founder of the Vodicka Group, Inc., a Registered Investment Advisor (RIA). He specialized in trading fixed-income derivatives at the Chicago Board of Trade before spending five years managing equity portfolios for a private investment research company.
Michael graduated from the University of Kansas with a degree in business communications and is registered with the State of Illinois and the SEC (Securities and Exchange Commission) as a Licensed Investment Advisor (Series 65).
