Gold and Silver bulls were on the run yesterday as the precious metals rallied after the FOMC meeting, and this run-up was the best in a very long time. Gold hit the key psychological resistance at $1,300.
Investors are buying this precious metals as a safe-heaven amid risk aversion in the market place, a slumping dollar and strong technical buying. Buy stop orders were triggered at technical levels to accelerate the advance in gold and silver prices.
Spot gold was last quoted up $40,20, trading at $1,318, and July Comex silver is up one dollar to $20,84 an ounce. The civil war in Iraq remains a major factor and continues to prompt risk aversion among traders and investors, and in turn safe-heaven buying in gold.
Crude oil prices are rallying on worries about Iraqi crude oil exports being reduced and investors are worried that the violence in Iraq could spread to other Arab nations. Fed Chair Janet Yellen`s comments at her press conference rallied stock, bond and the precious metals markets. In addition; she said that the interest rates are not going to be raised any time soon.
But what can we expect in the future? Well, I like to take a look at Japan, because they know how to print money. Despite the significantly bigger hammer it`s using to attempt to create inflation, growth and inflation have remained muted.
Look at the inflation in Japan. It remains low, year after year after year. Nothing is happening. That`s strange because they have printed so much money. This is probably what we will se in the U.S too. Low inflation and worst of all; deflation.
ECB is on the way to print money too. It looks like this will be a deflationary world. What a trend QE is! So, what will happen if the Chinese real estate prices start to collapse? And slowing in Germany and further slowing in the real estate recovery in the U.S?
The stock market will simply continue to edge up if none of these events come to pass, because right now, there`s nowhere else for investors to go. One of the things Fed Chair Janet Yellen said after the press conference was that the stock market is at a good valuation and is not a «bubble».
Many people were listening and bought stocks with both hands. CNBC and other News channels say that Yellen has given a «green light» for stock traders to buy. Remember; we are five years into a bull market, and they are talking about «green light»?
I have seen the same things going on many times. Again and again. When we are at the top, like we are now, everyone is bullish and tell you to jump aboard and buy stocks. I my opinion, we are now at the top on the trend from 2000 and 2007, and that`s pretty scary. People tend to do the same thing; they buy on tops and get smashed on bottoms. I just want to warn you; be cautious.
This is the nature. It reminds me of the Word Cup Champion in Soccer from 2010; Spain. The winners are out of the World Cup 2014, as they goes from the top to the bottom. Many of the players hail from Real Madrid and Barcelona, which is two of the soccer`s richest clubs. Most of the players in Spain earn more in a year than a Spanish worker earns in 40 years. You couldn`t belive that when you saw they lose 2-0 against Chile. They are simply not hungry enough. The European championship from 2008 also saw a humiliation 5-1 loss to Holland earlier this week. Six year on the top is now over.
I`m watching the markets very closely right now. As you may know, bull markets come to an end, and so do bull market rallies. When the last buyer is in the game, it is over and the correction or a big bear market comes. But how can we know when that day is coming? What is the sign we should look for? I will talk about that next week. In the meantime; many soccer players are now working hard to get the GOLD!
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