Advance renewal imminent as banks create more cash to support debt :: InvestMacro

source: Clive Mound 07/18/2022

Expert Cliff Mound examines the confluence of rising debt and the precious metals sector and predicts how the European Central Bank’s plan to engage in “unlimited bond buying” will affect the market.

The debt market has been dangerously close to closing in recent months which will quickly lead to a freeze in the entire financial system, banks closing their doors, ATMs not working, etc. This is the reason for the massive selling across the markets which also affected commodities and drove the USD higher.

So Friday’s announcement that the European Central Bank (ECB) would engage in “unlimited bond buying” to stabilize the debt market was a huge positive development for the markets because other central banks, including and in particular the Federal Reserve, are expected to follow suit, Likewise, which will follow suit. Getting the markets out of trouble in the short to medium term.

However, this action will only buy time because the debt beast is now so large that the amounts of money required to feed it are huge and because this demand has grown exponentially it is now vertical which means we are at the end of the game so after this blow The last great one that will lead to hyperinflation, the credit markets will disintegrate anyway as this last monetary experiment collapses into a smoldering pile of rubble. At this point, they will roll out their new digital money system, which will include a Chinese-style social credit score system, digital passport, etc., and if you don’t abide by their rules, like a full “vaccination” you will be disqualified from it.

This will be the means by which they enforce compliance with their system so that they can achieve the goals of population reduction and control. With money formation now rising vertically to feed the beast and stop the system from confining, we may still be only months away from this happening, and it must be kept in mind that this is not accidental – it all happens by design.

Given how inflation has ballooned in the recent past, it’s surprising how much gold has fallen in recent weeks as we can see in the latest six-month chart, but this is largely due to the prevailing risk aversion environment and correlated margin calls.

However, Friday’s ECB announcement should trigger a quick reversal in sentiment leading to a rally, and as we can see on the chart, it is well positioned to rise, having reached the lower boundary of the intermediate downtrend channel in an oversold condition. .

The three-year chart for gold makes two important points. One is that since gold’s recent downtrend has pushed it to a strong support level near the lower bound of the large rectangular trading range that has formed since the August 2020 peak, there is a higher probability of it reversing to the upside here.

The other is that, since it has not broken out of this trading range, it is not in a bear market, and if we move towards hyperinflation, this large range could turn into a consolidation pattern in an ongoing bull market. Additionally, we can see that he is oversold on his MACD, so this is a good point for him to turn higher.

On the 15-year long-term chart of gold, we can see that the rectangular trading range that has formed since mid-2020 can be either a consolidation pattern or a top. What happened in the chart on Friday promises a rise from the support level at the bottom border of the range to at least its top.

However, support should continue below this range, if it fails later as a result of a general market crash due to a severe credit crunch, it is likely that gold will fall along with everything else, however, the risk of this was reduced at the time current through imminent renewed central bank intervention. If central banks are now pumping in the direction of hyperinflation, gold should fly from the top of this chart.

The latest COT chart for gold is encouraging as it shows that the usually wrong big specs have reduced their long positions to at least one-year lows, making a reversal to the upside likely, and here we should note. Net gold hasn’t been short for many years…

It’s worth taking a side look at copper here because copper is often a leading indicator of the economy, hence its nickname Dr. Cooper, and these days it’s a barometer of the Chinese economy because China uses a lot of it.

As we can see in the last six-month chart, copper has already moved into lumber storage in recent weeks, where it suffered a sharp drop after the failure of a major support level. This means an economic downturn in the future.

However, it has so far fallen so fast that it is now oversold – it has reached the third largest selling point in the last 20 years – in a sharp decline in late 2011, it has increased slightly oversold and is much more at peak Selling on only one occasion, at the end of a sharp drop in late 2008 caused by the general market crash at the time. It is oversold on its RSI and very oversold relative to the 200-day moving average, so taking all these factors into consideration, it certainly has a right to a bounce.

On copper’s three-year chart, we can see why technically copper has fallen so hard in recent months – it broke off from the large trading range it’s been stuck in for about a year from mid-2021, and of course, support is at the limit. The bottom of this range is now a resistance level.

The oversold condition coupled with the fact that it is now in a very strong support zone originating from the trading in late 2018 and early 2019 combined with a potential shift to risky conditions, makes it more likely that a rebound quick recovery will likely take it. Resistance support at the lower side of the trading range.

Another important factor increasing the chances of a copper rebound is the fact that the usually false large spec, after being spectacularly mistaken for being long copper again in the spring, has now turned into being very short, indicating a near high, as can be seen on the latest COT chart for copper.

This of course begs the question “If big specs keep losing money, how do they keep going?” – The answer is that it does not, but when it falls it is replaced more like British soldiers marching in rows towards machine guns at the Battle of the Somme.

The risk aversion environment that has led to significant drops in metal prices in recent months has also contributed to the flight to the safe-haven dollar along with emerging markets struggling to service their dollar debt. Now we will take a quick look at the latest dollar index charts.

On the 6-month chart of the dollar index, we can see that further declines in gold and silver this month were partially or entirely due to the strong gains in the index this month. However, we can also see that a bearish “shooting star” candle formed in the dollar index on Thursday, indicating an imminent reversal that was followed by the next day – Friday – another bearish candle that completed the “bearish engulfing pattern” at the time of the ECB announcement.

Candles in the dollar index late last week indicate that it is heading lower.

Thus, it is interesting to note on the long-term nine-year chart of the dollar index that it has been accelerating higher in a parabolic slingshot which, since turning vertical, indicates that it is making a breakout high now.

If it collapses from this parabolic uptrend soon, it could fall sharply – which is not surprising given how much money the Fed is likely to allocate to bailing out the debt market – and obviously, if it does, that would be very good news for precious metals and metals prices. basic as well.

Originally published on on July 17, 2022.

Clive Mond He has been Head of, a successful resource industry website, since its inception in 2003. He has 30 years of experience in technical analysis and has worked for Banks, Commodity Brokers and Stock Exchange brokers in the City of London. He holds a Diploma in Technical Analysis from the Society of Technical Analysts in the UK. Disclosures

The above represents the opinion and analysis of Mr. Maund, based on the data available to him, at the time of writing. Mr. Maund’s opinions are his own, and are not a recommendation or offer to buy or sell securities. Mr. Mond is an independent analyst who receives no compensation of any kind from any groups, individuals or companies mentioned in his reports.

Since trading and investing in any financial markets may involve significant risk of loss, Mr. Mound recommends consulting with a qualified investment advisor, licensed by the appropriate regulatory agencies in your jurisdiction and undertaking due diligence and research when undertaking any type of transaction with financial implications. Despite being a qualified stock market analyst and expert, Clive Mound is not a registered securities advisor. Maund’s views on the market and stocks can therefore only be construed as an invitation to buy and sell securities when they are subject to the prior approval and endorsement of a registered securities advisor operating in accordance with the appropriate regulations in your jurisdiction.


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