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Newsletter May 2021

Well, here we are. It’s May 2021 already and we are beginning to see the impact of policy decisions made during the pandemic. These decisions are producing far-reaching consequences both economically and socially. Regardless of how you feel about lockdowns, mask mandates, and vaccinations, the decisions made surrounding those issues and more have created major stress in both the global economy and the general makeup of how society functions. In our last newsletter, we touched on the subject of inflation. We saw it creeping into the economy, and now it’s front-page news.

It may be too early to make a call yet on how serious inflation is going to be in the months and years to come. However, increasing numbers of economists are warning that this particular round of inflation is not going to go away any time soon. Supply chains, decimated by COVID lockdowns, continue to struggle to provide sufficient goods in order to meet demand. Adding insult to that injury, our politicians’ appetite for creating trillions of dollars and dumping it into the economy via “COVID relief” initiatives has caused the money supply to explode. Just one of these conditions would put upward pressure on prices. Both combined have created a very unwelcome reality.

Inflation is going to be with us for some time.

How long and how bad it will get remains to be seen. But one thing is for sure–historically, gold and silver thrive during times like these.

The OWNx Team

Gold and Silver

What Do the Charts Say?

The last nine months have been a time to try the patience of precious metals investors. Since a rapid rise last summer to a new all-time high of $2,050, the prices of gold and silver have steadily declined. This March, gold made what appears now to be a very nice, almost textbook double bottom in the $1,680 range. For those who are not familiar with chart analysis, a “double bottom” is when the price of an equity or commodity is in a downward trend, then off of a new low it rises, then falls to the low price, and then begins to climb. From a chart analysis perspective, a double bottom indicates the point at which buyers have decided the price has fallen as low as it is going to fall and the market is now oversold. A new, intermediate to long-term uptrend then begins.

Inflation has reared its ugly head again, and the geopolitical turmoil erupting worldwide has historically driven precious metals prices higher. For the last several months, precious metals investors have been asking, “Why aren’t the metals reflecting this reality?” Well, the charts finally look like reality is setting in. The price of gold has broken above both the 200-day moving average (another common chart indicator) and the upper channel of the nine-month downtrend. It hasn’t done so timidly either. The breakout is real. Silver, meanwhile, is testing the upper boundary of its nine-month sideways channel. Its strength relative to gold over this period has always been an indicator that we have been in a consolidation phase within a longer-term bull market, and not the beginning of a new bear market. Now that the gold chart is showing a breakout to the upside of the channel, one can consider being more aggressive in buying the dips.

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Here we are, nearly half way through 2021, and my, things are moving rapidly! Congratulations on keeping a steady hand on the wheel as the investing world adapts to huge global policy changes.

Dollars from governments across the globe are flowing into personal and corporate accounts, acting as a blunt spade attempting to fill the huge crater blown in the economy over the last fourteen months. After sitting on the sidelines for a period, this newly-printed currency is now making its way into the economy. Doubtless, we will see the misallocation of some of this excess currency. The result will likely be the same as it always has been: gross distortion of the underlying true market dynamics and an eventual reckoning with reality. The ensuing turmoil will bring calls by many for extreme policy changes in an attempt to bring clarity and stability to the existing system.

Meanwhile, there is a collective acceptance growing that the system we have is past the point of saving. Still, the only policies governments and their bureaucracies are likely to enact are those that serve to keep the dying beast alive for a little bit longer. It is what happened during the 2008 financial crisis, and this insanity became one of the main reasons I left the professional investing world.

In the months and years to come, as reality becomes “real” it will become evident who had eyes to see in advance what was coming, and who refused to accept it. We are thankful that those in the OWNx community (you guys) are among the people who live in reality. Continue to keep your eyes on what is real. It will serve you well in the years to come as you invest from a place of security and understanding, rather than fear.

To a bright future as we pass through the chaos,

Jeremy Brakenhoff
CEO, OWNx

OWNx Resources

Gold-related News

The Bigger Inflation Scare Is Emerging World Food

“One further problem for the developing world is that rises in commodity prices tend to be sustained, and move in waves.” This is a real problem for people who rely on agriculture and mining of metals (not just precious) to lend stability to their economies.

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The fear that haunts markets – is inflation coming back? A perspective from the UK.

This is not just a problem for North America. “Long-term problems There are several reasons why the UK and the global economy could suffer a longer-term mismatch of supply and demand, pushing up prices. A green tech revolution will demand an overhaul of most industrial processes and increase the demand for metals such as copper and cobalt. That could keep the prices of many goods, including electric cars, rising for years to come. A decline in the number of working-age adults as the population ages (if we exclude the potential for immigration) will force employers to increase pay, intensifying the pressure to charge higher prices.”

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