Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Welcome to My Inflation / Deflation Nightmare

Stock-Markets / Financial Markets 2010 Oct 04, 2010 - 12:58 PM GMT

By: Captain_Hook


Best Financial Markets Analysis ArticleSo what’s all the hubbub about a nightmare? The charts are now confirming we are looking at significant inflation moving forward, and the price increases to go along with this, meaning we are staring down the barrel of an inflationary depression dead ahead. And make no mistakes about it; this will be a nightmare for the average citizen, literally wiping out the middle class financially in the process. First, via completive devaluations, monetizations, and the likes, the pace at which the cost of living will continue to shoot higher, which is what breaking out precious metals are signaling; and then, volatility in asset prices will reemerge, wiping out the savings of the average investor / pensioners going the other way (what the simple minded term deflation), leaving the masses increasingly in dire straits coming from both directions.

That’s right ladies and gentlemen, you had better get a grip on the concept set that inflation and deflation occupy the same space at the same time at present (A Quantum Physics Enigma), where some asset groups, like real estate, will continue to fall (evidenced here) because of previous excesses, and others will rise primarily due to what inflation really is (money printing), leading to a desire on the part of increasing numbers to escape the currency hyperinflation a collapsing economy will necessitate. Again, this is what gold and silver are signaling right now, and why they may finally return to the inflation adjusted nominal prices seen under the crisis circumstances at the turn in 1980, which would have gold up over $2300, and silver over $100 per ounce.

Impossible. Don’t tell that to Bill Buckler, a long-time monetary historian and market(s) commentator who knows what he’s talking about. In a recent public commentary he does an excellent job of discussing money, its role in our existence, and why gold (and silver) will eventually return to their traditional roles in this regard. The scuttlebutt of all this in the end of course is that present fiat currency pricing of precious metals is ludicrously low, with it’s ‘real value’ actually in the multi-tens of thousands. Again, it’s for this reason we school the accumulation of physical gold and silver because at some point, and likely suddenly, precious metals will need to be returned to their traditional roles of stable means of exchange, where it will be advantageous for the powers that be to have it fully valued.

That’s when gold (and silver) will have its day in the sun. The only real question then is how it will get there. Will it be a gradual process, where the populace accelerates accumulation, as Eric Sprott thinks? Or will the general population maintain its wrongheaded posture until change is forced upon both them and a surprised Western bureaucracy quickly losing credibility with its trading partners. This naturally implies a backing of fiat currencies for external transactions will need be implemented at some point to facilitate trade in an increasingly hostile world – a world characterized by otherwise imploding exchange units to go along with their economies. You should know such an outcome is inevitable, and that one needs to take advantage of still low precious metals prices and physical availability to insure personal wealth against catastrophic loss that will affect the unprepared.

And in expanding on our opening comments, if the charts we are looking at are correct, one should continue to have an opportunity to accumulate precious metals on the cheap in relation to other assets for a bit longer, where for example stocks appear on the verge of breaking out against gold, as can be seen below on the month Gold / Dow Ratio plot from the Chart Room. This ratio has looked as if it was going to breakdown for some time now, which did not make any sense if gold was rising and stocks falling obviously. Now it does of course, where it’s possible gains in the Dow outstrip those of gold temporarily, just enough to convince the trend has changed before a false break reverses. Does this mean gold (and silver) will suffer extended and significant losses moving forward? Answer: No, such a development does not mean this at all, which is explained further below. (See Figure 1)

Figure 1

As mentioned above under RSI, it may need to breakdown temporarily due to wrongheaded gambler betting practices, with the thought process being something along the lines of ‘with the seasonally weak period for stocks just about over, there’s no use buying deflation insurance anymore.’ This is the best reasoning for falling put / call ratios on the precious metals ETF’s and futures options I can come up with anyway. (This will be covered in greater detail on Thursday.) Along these lines, with COMEX option expiry on gold and silver contracts coming up next Monday, and equilibrium pricing closer to $1225 than $1280 on gold, again, don’t be surprised if prices are managed lower temporarily given what’s at stake, meaning the Gold / Dow Ratio could break lower in the process.

You see the bankers who wrote some 25,000 calls this month down to the 1225 strike from here don’t wish to pay if possible, and more importantly don’t want precious metals prices to run away to the upside, so expect them to attempt toppling the market(s) (silver too) over, as is their custom as expiry approaches. And if they do get some material selling initiated today, with paper gold open interest put / call ratios on gold (and silver) low (see here), then we may see also see a material breakdown in the Gold / Dow Ratio, however again, unless a meaningful and lasting change in sentiment grips the market (think ETF open interest put / call ratios), such a break should ultimately prove false. This sentiment is supported by the observation not only is the Dow / Philadelphia Gold and Silver Index (XAU) Ratio NOT poised to break higher, open interest put / call ratios on precious metal share indexes (the GDX too) remained high post options expiry from last week (again I will cover the post expiry picture in detail on Thursday), meaning getting the shares down will prove much more difficult for the bureaucracy’s price managers. (See Figure 2)

Figure 2

Post expiry open interest put / call ratios on GLD and SLV have dropped considerably initially, meaning volatility should be expected at this point with both a Fed meeting and COMEX options expiry dead ahead, however this can change as the cycle matures. What’s more, and again, since open interest put / call ratios did not fall for precious metals share indexes (XAU & GDX), this should also support prices, especially with the broad averages are set to break higher after a consolidation, likely to occur this week timed to bring all prices down to manipulate gold and silver lower running into next Monday. Of course with POMO operations every second day this week such plans might prove difficult, however you can be sure our price managing bureaucracy will try. Again, the end result will likely involve the broad measures of stocks outperforming gold and silver for a period of time that is undeterminable, but should not prove lasting or material. Annotations below on the S&P 500 (SPX) / Gold Ratio explain what should occur technically. (See Figure 3)

Figure 3

So, the question then arises, ‘in time, is it possible gains in precious metals shares outstrip those of both the broad averages and underlying metals? Answer: Yes, in fact, as the cycle matures and progresses into the heart of the larger degree move, gains in precious metals shares should outstrip those of both the metals and the broad measures of stocks. And although no chart based analysis will be provided here today in allowing post expiry put / call ratios on the ETF’s and share indexes to mature a bit before attempting to draw any conclusions regarding sentiment (and sustainable betting practice trends moving forward), you should know that right now this is what post expiry distributions are suggesting. Now considering market participants have largely become bipolar in nature these days due to all the shenanigans in the markets, and sentiment is basically optimistic from a long-term perspective, things can change, however for now the stars appear aligned for a bull market in precious metals to be fully expressed through it’s various stages, with the shares leading at present, a sign of future gains.

Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. As you will find, our recently reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts, to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented 'key' information concerning the markets we cover.

And if you are interested in finding out more about how our advisory service would have kept you on the right side of the equity and precious metals markets these past years, please take some time to review a publicly available and extensive archive located here, where you will find our track record speaks for itself.

Naturally if you have any questions, comments, or criticisms regarding the above, please feel free to drop us a line. We very much enjoy hearing from you on these matters.

Good investing all.

By Captain Hook

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests

Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

Copyright © 2010 Inc. All rights reserved.

Unless otherwise indicated, all materials on these pages are copyrighted by Inc. No part of these pages, either text or image may be used for any purpose other than personal use. Therefore, reproduction, modification, storage in a retrieval system or retransmission, in any form or by any means, electronic, mechanical or otherwise, for reasons other than personal use, is strictly prohibited without prior written permission.

Captain Hook Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in