October 2022
Where do we go from here? It was a pretty brutal summer for the markets, including gold and silver. Not to mention one of the hottest on record for much of the United States. It seems as though the transition trends are accelerating as the corner that Federal Reserve painted itself into over the last decade finally becomes evident.
Low interest rates are great - until they no longer can be maintained through QE and whatever other methods the financial powers that be dream up. It has been a long held belief here that once the markets took the ten-year treasury above 3% and the Fed was powerless to bring it back down, the financial system would come under extreme stress. Well, here we are.
Rising interest rates along with war in Europe have caused a global flight of capital to the US dollar. A strong dollar has always created headwinds for the price of gold, and this time is no exception. What happens though when everyone finds themselves on the same side of the boat? And the boat starts listing badly? That is the hour when gold and silver will shine.
The world is moving toward a new global financial system. There is a lot of speculation about Central Bank Digital Currencies (CBDCs) and whether or not sovereign nations will allow anything else, including cryptos, to survive. We happen to believe that the free market will eventually find a way to escape that fate. Exactly how that will happen nobody knows for certain. However, we do know that gold will maintain its 5000 year historical position as a store of wealth no matter what else happens.
Until next time,
The OWNx Team
Gold and Silver
What Do the Charts Say?
Here we are, looking at the four-year charts for gold and silver. Both metals are fighting to break out of a rather nasty downward channel that began this spring. The good news is that the last thrust downward in the channel did not make it to the lower support line. Instead, both gold and silver were supported by a longer term area of support. Gold in the $1,650 range, and silver in the $18 range. Both metals have now risen to the top line of the downward channel. A decisive break above it would indicate that the odds are in favor that an intermediate term bottom has been put in. With all the volatility in the markets, it is difficult to say anything with certainty. However, this type of chart action is encouraging. We certainly will know more by the time the next newsletter comes out.
Housing and UK Bonds.
In our last newsletter, we asked the question, "Has housing peaked?" With the ten-year treasuring hitting multi-year highs and 30 year mortgage rates in the sixes, it is no surprise that housing is under pressure. Generally, when housing goes into recession, the rest of the economy is not far behind. Add to that the UK entering its sovereign bond market to buy bonds to halt a collapse, and we have the making of something very serious in the global financial markets.
Housing is a major driver of the western economy. Sovereign debt is orders of magnitude more serious. Both coming into a crisis simultaneously would mark the beginning of something very serious. As much as we like to see our gold and silver investments rise in value, these are not the reasons we would like to see driving them higher.
The Bank of England is urgently buying bonds to stabilize markets and stop a financial disaster.
"A weaker pound makes imported goods more expensive, while higher gilt yields raise the cost of government borrowing. "Were dysfunction in this market to continue or worsen, there would be a material risk to financial stability," the BoE said Wednesday."
A US housing recession has arrived
"Mortgage applications are down about 30% year-to-date and home sale transactions are beginning to show signs of slowing down. At the same time, supply for new homes for sale is likely to rise as housing starts and building permits surged to 16-year highs at the start of the year. The combination of falling demand and rising supply means home prices are likely to turn considerably lower. In fact, the most recent data from the Case-Shiller Index showed that yearly home price growth decelerated at the fastest pace on record in July, with some of the hottest markets seeing month-over-month declines."
OWNx offices will be closed for Thanksgiving on November 24th and 25th, however, our platform is always open!