Monday, March 20th, if nothing eccentric happens in excess of what’s already occurring, gold is set to upgrade its zip code to +$2,000/oz for the third time in its post-1971 era.
When we analyze this period in 10 or 20 years, I think that the one crucial takeaway will be that the collapse of SVB (along with the other banks that are under duress) marked the end of tech dominance.
The tech sector has made the dollar incredibly relevant since 2011.
Silicon Valley offered investors a glimpse into the world of dreams and growth; and the flood of capital into the United States, even in the face of zero interest rates, was spectacular.
The book of Silicon Valley growth stocks is closed. Investors want results and they want companies to show their business model is practical now – at this moment, not years into the future – and that is why trillions of dollars are leaving equities and entering cash and bonds.
Investors want full control and minimal market exposure. I got to tell you that this chart never fails to amaze me. In fact, I had it printed, framed and sent as a gift to my hedge fund manager.
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The death of Silicon Valley dream investing means that the disproportionate flow of capital to the dollar and to the U.S. will now flip.
This flip has already started. All you have to do is look at the regime change in interest rate expectations and you’ll realize the markets have entirely moved on from the idea of FED tightening.
The highest priority of the FED is not fighting inflation, as much as it is ensuring that it isn’t the author of a severe credit event and a recession.
Therefore, this Wednesday, The FED is more than likely to still show its resolve in fighting inflation and sending a message that the economy is strong and can take additional hikes – in all likelihood, it will raise rates by 0.25%.
Gold has SURGED like Usain Bolt out of the blocks, because the market is 100% convinced the Federal Reserve has, essentially, reached its limit.
The U.S. banking system and shadow banking (pension funds, insurance companies, financial institutions and the FED itself) are sitting on a POWDER KEG of long-duration Treasury bonds, and if those need to be liquidated in the face of mass withdrawals, just as we have seen last week, this entire house of cards could be derailed into a full-blown credit crunch of epic proportions.
The May meeting has already priced in a PAUSE.
If in two months from now, the FED has put its final stamp of approval on the effectiveness of further hikes, gold is beginning to price the cuts!
If you’re like me, it’s time to think about your strategy for the bull market, because gold’s consolidation channel is OVER; the bull is back.
The June meeting prices in a CUT.
Why is this an earthquake?
Just 14 days ago, the June meeting priced in a HIKE.
The projection was that the FED would end 2023 with the Funds Rate at 5.00% just 14 days ago, and today, the projection is 3.75%, LOWER than its current stance.
The king is back. The dollar might undergo a violent and sharp move down when the cut is announced. I expect gold to rally to $2,300 and am very confident that silver will see $30/ounce in short order.
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