The CPI Report: Rally Time for Gold?
The comments below are an edited and abridged synopsis of an article by Stewart Thomson
Oil is the world’s biggest medium-term driver of inflation. If western governments started pumping oil today, the millions of barrels that they have sanctioned off the market would take years to replace with freshly drilled supply.
Rather than piping oil from Canada, the US government has aggressively pumped oil out of its strategic reserve.
The market has not priced in the fact that the government must replenish these reserves.
Western governments are promoting green energy and are trying to make a 30-year transition into a 3-year deal that features the bonus of ruining the citizens of Ukraine and much of Europe.
US citizens grumbled as oil soared to $130 but they never experienced the ‘fuelflation’ pain that Europeans did.
That could change if oil begins a new leg higher. If it does, the US elections in November could see the Democrats retain control and stop the strategic reserves drain because they would have time get US citizens accustomed to higher prices.
If the Republicans win, they will likely continue sanctions on Russia. This will lead to thousands of Eurozone citizens suffering through a potentially deadly winter.
Gold tends to rally against the US dollar when disasters occur. Technically, gold is in a superb position; there’s a buy signal in the oversold zone, commercial traders have added Comex longs, and a powerful rally is poised to begin.
Silver rallied last week, and now there is a bullish flag-like pattern in play. The latest COT report is positive. Commercial traders are now net long on silver. Miners surged about 30% last week.
In the next phase of the 2021-2025 war cycle, Eurozone hunger, lack of heating and infighting over sanctions are likely to be key themes, as is mayhem following the US election. As the situation deteriorates, the stock market rally could end while the gold/silver rally intensifies.
Investors are focused on the Eurozone’s GDP meltdown, and not paying attention to the ECB. In coming months, the Fed is likely to keep hiking (destroying the stock market) while the ECB becomes more aggressive. Gold, silver and oil are on the move. The euro is next, and that is a ‘go’ signal for the miners.