Gold is attempting to hold its current support line as the dollar shoots higher toward a resistance line. Gold and the dollar typically have an inverse relationship, meaning when the dollar rises, gold often falls—and vice versa.
The dollar is rising as more oil is traded in dollars amid the Iran war. Once the market believes the war is nearing an end, the dollar will likely fall, and gold should resume its uptrend.
Congress will likely be forced to pass additional spending bills to finance and replenish our weapons of war. As more money is spent, the Fed may monetize the debt by creating money and buying Treasuries to finance excess government spending. As more money is created out of thin air, inflation can rise, and the cost of goods can increase. Rising prices do not cause inflation—rather, inflation causes prices to rise.
If oil demand exceeds oil supply, oil prices will rise, and we will all feel the impact because oil is embedded in nearly everything we consume.
Emerging markets had been performing well, but they broke their trend lines two weeks ago, so I sold those positions and reduced our gold exposure. We now hold a small position in gold and a larger position in the high-yielding money-market like ETF, PIMCO Enhanced Short Maturity Active ETF (MINT).
Treasury yields are rising as bond prices fall, signaling that the market may be anticipating higher inflation ahead. The S&P 500 Index and the NASDAQ‑100 Index are down about 3–5% year to date, while our portfolios are up by similar amounts.
We could be entering a stagflationary environment where economic growth slows while inflation rises. Historically, the only way out of stagflation has been a prolonged recession.
President Donald Trump will likely do everything possible to avoid a weak economy and stock market ahead of the November elections. Still, the market is far bigger than any single politician.
Price ultimately trumps everything, which is why I follow price trends. When I do not have an edge—when there is no clear trend—I wait patiently in cash until a tradable opportunity appears.
Remember: the trend is your friend… until it bends in the wind.
The LORD’s blessing brings wealth, and he adds no trouble to it. Proverbs 10:22