Now It’s Getting Interesting June 21st, 2019 by John Gross
Over the past few weeks we pondered whether support would hold for copper and other nonferrous metals, and also if gold and silver would be able to get through their respective lines of resistance.
Well, the answer is yes, and yes.
Gold was particularly fascinating as it just sort of tipped toed around the previous high at about $1,345, but after getting over that hurdle, it was as if someone pushed the ‘afterburner button’ and the Big Guy just took off like a rocket.
Indeed, it was like the 4th of July in June.
But the question we are wrestling with, and always seem to be wrestling with, is ‘What are the markets telling us’?
Are markets responding to a slightly weaker dollar? Or is the dollar going to fall further, and provide more support to the markets?
Despite a generally weaker outlook for global economic growth, equities tell us, ‘nothing to worry about here’ as the S&P 500 closed at a new record high on Friday.
Interest rates remain at historically low levels, yet many believe they should be cut further. Who can explain that one?
Looking back in time for answers isn’t of much help at the moment either.
Ten years ago we were just beginning to recover from the financial crisis, but it was not obvious at the time. Nevertheless, commodity prices soared, as trillions of dollars were injected into the global financial system to prevent it from collapsing.
Twenty years ago, in 1999, the dot com bubble was building up with equity prices soaring on the hope / expectation that tech companies would see profits in the distant future. Sounds similar to some new stocks being offered today.
Thirty years ago, Tiananmen Square was the center of global attention. Today it is Hong Kong where citizens want to be in control of their destiny.
Forty years ago, in 1979, the Middle East was a powder keg when Americans were held hostage in Iran. Today, Iran remains a threat in the Middle East, and by extension, global oil markets are also threatened.
1979 also saw raging inflation, with record high prices for copper, silver, gold, oil, and other commodities, and in an effort to get things under control, already high interest rates were on their way to record high levels.
So what is coming down the road? Who knows – but as Mark Twain observed, "History does not repeat, but it often rhymes".
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