The mainstream narrative that gold/silver moves inversely with stocks because the metals are a “risk off” trade has imploded. Since late January, when the S&P 500 began to “recover” from its 11% New Year’s plunge, the precious metals and the stock market have been rising in correlation, with the precious metals significantly outperforming the stock market since mid-February:
As you can see, the move in the metals accelerated since the BREXIT vote. The latest Central Bank induced market spike has pierced the boundaries of absurdity:
The immediate “snap-back” in the stock market after a two-day post BREXIT vote 5.3% plunge in the S&P 500 has violated the sensibilities of all but the most idiotically apologetic stock market perma-bulls (Mark Zandi, Cramer, Suze Orman, Liz Sonders etc).
It’s clear that the Central Banks are desperate to keep the stock markets from plunging, despite the fact that the deterioration of economic and financial fundamentals globally – including and especially in the U.S. – has begun to accelerate.
Smart investors smell Central Bank blood and the latest market intervention just reeks of desperation. This is the dynamic that is propelling gold and silver higher, despite the preponderance of bearish calls from all corners of the market, including many precious metals market analysts.
The Central Banks went overboard with the latest round of stock market intervention. The recent increased movement of investment funds from fiat-based “assets” into gold/silver reflects the more widespread perception that the Central Banks are trapped by long series of bad policy decisions. The obvious conclusion is that Central Banks are now forced to hyperinflate the money supply or face a total stock market collapse.
Of course, the hyperinflation of currencies will do nothing to stimulate real economic growth or fix the completely unmanageable global debt and derivatives problem.
Perhaps the poster-child example of the damage done to the markets by radical Central Bank intervention and manipulation is Tesla (TSLA). If not Amazon, TSLA is perhaps the greatest stock Ponzi scheme in U.S. history. Aside being riddled with total accounting fraud, TSLA is technically insolvent and overloaded with debt that it will eventually impale itself on. It was reported today that the test driver in a TESLA self-driving car was killed when the car crashed into tractor-trailer at high speed. The test-driver was watching a movie in the car. At least he didn’t know what hit him.
TSLA stock in a freely trading market would have been decimated today on that news. But today it’s trading unchanged from yesterday’s close. The only bigger tragedy than this fact is the death of someone who put their faith in Tesla.
Tesla would not exist in its present form if it weren’t for the extreme Central Bank intervention and manipulation of the capital markets. It certainly would not have had the capital to work on an auto-piloted car given that its core business model lost nearly a billion dollars last year. This is the type of “blood” in the streets to which the price of gold/silver is responding.
If you review a long term graph of gold/silver vs. the S&P 500 (on your own), you will note that best price performance periods for the precious metals have been preceded by a short period of time in which the metals are highly correlated to the upside with the stock market…
MSJ is a great resource!!! – Johnny – You can subscribe to my Mining Stock Journal here: LINK – or my Short Seller’s Journal here: LINK. I am currently offering new MSJ subscribers all of the back-issues (March 4th debut). I also offer a 50% discount on the second subscription to anyone who subscribes to both (email me for the discount link).
I must say that Tesla is a perfect example of how screwed up the stockmarket is. Only bad news for the company like the purchase of the bankrupt company, Solar City. Wheels falling of the cars and bad suspension on cars that are almost new. Death accidents with malfunctioning auto pilots. Risks of lawsuits due to this. And the stock goes up- how retarded is this? No fundamentals matter at all. I´m really enjoying the silver rally and I bet you do as well. All the best from the negative interest rate Sweden.
Disaster after disaster and TSLA keeps going to the moon! Its bailout of bankrupt SCTY is as brazen as it gets but still the cult of Elon is alive and well. And now this fatal accident. A name change might be a good idea – Teflon Musk sounds appropriate because no amount of bad news affects TSLA. Now, his cultists will say shorts are evil and betting against TSLA is unpatriotic but running a ponzi scheme, making promises that you know you are not going to keep, diluting existing shareholders with frequent secondaries, making claims of profitability with fudged up non gaap numbers, etc are all neither noble nor patriotic acts.
Yes, I think we will soon be entering the final phase of unanchored, counterfeit money, if we haven’t already. Not that they’re going to throw in the towel – I believe that they’re quite prepared to destroy it in an attempt to save the status quo.
As Richard Russell use to say “INFLATE OR DIE”.
Powerful set-ups in PM T/A indicators ….
I said on this site several times that the price manipulation will never stop. It looks like I was wrong. I’m glad.
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