Inflection Point for Precious Metals

6 Mar 2021

GDXJ shows flag and support developing at bottom of flag. Similar indications for XAU, and XAG has a penant formation. Critical for precious metals to form a base here to move higher. This correlates with US T-Bond Yields - they have been rising from August 2020 which is correlated to PM's falling since then. The economy cannot deal with higher rates, even if there is inflation. Yellen will be forced into Yield Curve Compression (YCC), with the Fed having to buy (cap yield rising) the longer end - this will be DXY bearish. DXY chart shows correction to underside of bullish channel from which DXY broke down - YCC will be DXY bearish. If the Fed does not do YCC the equity markets will crash as Yield continue to rise, Treasuries yield will then fall as the equities crash further - the Fed does not want this so will print to stop it. The Fed does not worry about inflation in the short term - they want it and they cannot raise rates - they will say the inflation is temporary as Covid lockdowns ease....but it will continue, but with real rates well behind - bullish for XAU. So the charts are aligned for the next wave upwards in XAU/XAG - if the current levels do not hold however this would be very bearish, so risk management is key and should not be too long - the big long trade occurs if/when we break north of the flag channel.