Markets

Goals achieved – correction is slowly coming to an end – columns

Current market commentary by Markus Blaschzok for GoldSilberShop.de

In the thin holiday trade late last week, gold fell below the support at $ 1,800 to $ 1,774, while silver was relatively strong against gold with a low of $ 22.34. The minimum price target of 1,800 US dollars, which we announced above 2,000 US dollars, was achieved, as well as the target of 280 points for the HUI gold mining index. This was surprisingly strong on Friday and was able to show a slight plus despite the price decline in gold. All traders in the USA are on holiday over Thanksgiving and usually only return to their trading desks on Tuesday, which is why this holiday and the time between Christmas and New Year is one of the weakest trading days of the year. In this low-revenue environment, it had been easy for the Plunge Protection Team and the central banks to hit the gold price. The annual Thanksgiving festival commemorates the victory of the market economy over the planned economy, the history of which is unknown to many in this country. You can find my article from last year here: Thanksgiving – victory of the market economy over the planned economy.

The Dow Jones closed above 30,000 points for the first time and the Nasdaq Composite also reached a new all-time high. The new vaccines, which should be available in the near future, are fueling hopes for a further recovery in the global economy. The risk appetite of investors is increasing again, which is why there have recently been strong outflows from the physically deposited gold products and the stock market was able to benefit from them.

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Stock markets and Bitcoin at all-time highs, while precious metals and mines are still in correction

The US dollar fell well below 92 points in the USD index last week of trading, which is its lowest level in two and a half years. The minutes of the last central bank meeting, published last Wednesday, were unspectacular. The next US Federal Reserve meeting will take place on December 16, and this could bring new impetus to the gold and silver markets. Biden’s announcement, however, was bullish that Janett Yellen, the former deaf head of the US Federal Reserve, would become finance minister under his presidency. In her role as Fed chief she had said that there would be no more financial crisis during her lifetime, thus proving her economic incompetence, whereby she is now to become finance minister in the midst of the greatest post-war economic crisis. Yellen hiked interest rates only once during her tenure in an economic boom and a stock market bull market and represents an ultra-loose monetary policy, making her the perfect choice for the Democrats, who are known for spending taxpayers’ money without hesitation.

The euro, which was able to rise to an exchange rate of almost 1.20 US dollars due to the weak US dollar, is currently on its long-term downward trend. Both the Fed and the ECB have already announced interventions at this exchange rate level, which means that this may represent a good countercyclical trading opportunity or a good level to hedge the portfolio against a depreciation of the euro.

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The euro is on a downward trend – will the central banks intervene?

The US election has not yet been decided, but one can be sure that the US government will approve new stimuli in the trillions-euro range next year. These debts are financed directly by the US Federal Reserve, because this is the only way to keep market interest rates low. In Germany and Europe, too, they will agree on new economic aid and the European Central Bank will appear on the market as the buyer of these debts or create incentives for commercial banks to purchase these debt instruments.

Politicians are also aware of the continuation of the self-induced economic crisis in Germany, which is why a new federal budget of EUR 500 billion has been passed on credit, of which EUR 180 billion is financed through new borrowing on the capital market. However, this is only a euphemism of the real situation, because ultimately the ECB will devalue the debt through further quantitative easing. In its history, the Federal Republic has never repaid any significant debts, but has only ever been able to lower the debt ratio to GDP due to inflation or devaluation of the currency, whereby the citizens’ savings were expropriated via this hidden tax.

The devaluation race continues worldwide and the reset is progressing. We expect further QE measures in the coming years and a few years with very high inflation. If you don’t want to lose your savings to the inflation tax during this time, you have to act and invest in gold and silver as the ultimate safe haven.

Bitcoin crashes by 15%

Bitcoin almost reached its all-time high on Wednesday at $ 19,450 after the FOMO (Fear of Mission Out) attracted more buyers and at the same time only a few were ready to sell in the recent steep rise. Only very close to the resistance of the all-time high of 2017 were there sellers, whereupon the price plummeted 15% to $ 16,400. A correction at the all-time high is a common mass psychological phenomenon, which is why I informed my subscribers a few days beforehand about the strong setback that was now possible. In the last bull market, such a correction lasted 4-12 weeks, with the time span gradually reducing as the bull market progressed.

The high volatility of Bitcoin is explained by the highly speculative character of this asset class. The majority of transactions on the blockchain are purely speculative and only a tiny fraction of transactions are due to the exchange of goods and services. The fact that speculation represents a large part of the trading volume may be the case with most asset classes, but Bitcoin has played an increasingly insignificant role as a means of payment for years. Most recently, the price for a transaction in the system was briefly back at $ 15, which shows how unsuitable it is still to carry out transactions at the checkout or in online trading.

If you are not ready to pay these high fees, it can happen that a transfer takes days or weeks to be confirmed or, in the worst case, even returned, as no miner is willing to integrate it into the blockchain for lower fees. Bitcoin is not very attractive due to the high transaction costs, the sometimes long transaction times and the complete transparency and cannot compete with other online payment methods.

There are alternative cryptocurrencies that are anonymous, fast, inexpensive and scalable and are therefore used far more frequently than Bitcoin in online trading. Nevertheless, Bitcoin has a market capitalization 350 times higher than these privacy coins with real application benefits. Justifying the high price of Bitcoin solely with its scarcity, which is also present with these Alt-Coins, seems adventurous and the price difference is based solely on the hype and speculation in Bitcoin.

With the new and completely superfluous CBDC cryptocurrencies of the central banks and further regulations of this market, it could become increasingly unprofitable and even risky for companies and consumers to use these alternative cryptocurrencies due to rising costs. Bitcoin has already failed as a medium of exchange and cannot fulfill any of the originally marketed properties, which is why it is only held and bought for speculative reasons in order to later sell it to someone else at a higher price.

Markets can be irrational longer than shortsellers solvent and you should never sell a bubble before it bursts. On the contrary, you can benefit from it and try to ride the bull. Good money risk management and the placing of stop-loss orders are essential in the highly volatile crypto markets. Cryptocurrencies are not a replacement or competition for gold and silver, which have maintained their purchasing power for thousands of years.

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