The much awaited Jackson Hole speech by the Fed Chair Janet Yellen and the
subsequent nonfarm payrolls data failed to "ignite" the prospects of a rate
hike this September of 2016. The market now forecasts only a 21% probability
of a rate hike in this month, according to the CME FedWatch
Tool. The probability of a rate hike in December of 2016 stands at just
above 50%, however, my readers know that we have been ahead of the market since
the start of the year.
Time and again I have explained why the FED cannot hike rates in 2016. Contrary
to all the market experts, my view has stood the test of time and has come
to fruition. According to my research, the chances of a rate hike in December
of 2016 are also very bleak, nonetheless, the FED speakers will continue to
"jawbone" the dollar, the way they have been doing for the whole year.
The coming week has a number of Central Banks competing with each other to
unleash their monetary easing plan, as if, that is the only solution to all
the economic problems plaguing the world. Even the failure of the past seven
years has not deterred them from printing more money from thin air.
$180 billion of bond buying, which is even larger than 2009:
The European Central Bank and the Bank of Japan, both combined, are purchasing
a whopping $180 billion of bonds monthly, as shown in the chart below. Add
to it, the new bond buying program announced by the Bank of England and the
number rises even higher. All three are expected to recommend either adding
to their existing bond purchases or extend their duration in their next policy
meetings.
This has led the Bond King, Bill Gross, to warn investors of the dangerous
consequences. In a letter to clients, he wrote: "Investors should know that
they are treading on thin ice".
"This watch is ticking because of high global debt and out-of-date monetary/fiscal
policies that hurt rather than heal real economies. Sooner rather than later,
Yellen's smooth shot from the fairway will find the deep rough," reports CNBC.
Silver is on the cusp of a massive rally:
As and when the investors realize that they are holding worthless currencies,
the big money will rush into the precious metals. Consider this, the total
world's investment holdings in silver are a paltry $50.8 billion, compared
to $3.04 trillion in gold, as shown in the chart below.
Did you know that the hedge funds alone manage around $2.7 trillion, according
to Barclay Hedge data? Even if a small portion of the trillions sloshing around
out there, decides to enter into silver, the white metal will shoot through
the roof.
Traders are finally recognizing the importance of silver:
Following the poor jobs report last Friday September 2nd 2016, the traders
jumped into silver, taking it higher, as shown in the chart below.
As explained in our earlier articles, investors should not only look to buy
into the "white metal", they should also explore options of investing in the
silver miners.
What are the silver's technicals suggesting?
Silver had a massive run from the lows of $15.83 to $21.22. No markets rise
vertically, a 50% Fibonacci correction is a healthy and accepted norm. As seen
in the charts below, silver too has corrected 50% of the recent rise.
The weaker hands are out of silver, whereas, the stronger hands have bought
the "white metal" at lower levels. Silver is currently trading above both the
20 - day and the 50-day exponential moving average. This is a sign that it
has resumed its uptrend and is set to rally higher.
Silver will reach its target of $25/oz. once it crosses above the highs of
$21/oz.
Conclusion:
As Bill Gross says, the world markets are being manipulated by the Central
Banks and investing is becoming a difficult proposition. You need the help
and support of an expert with an edge, to invest at the right time and to be
positioned propertly for when high volatility strikes. Until volatility picks
up we can only focus
on short-term extreme oversol/overbought markets for opportunities. Keep
watching this space and subscribe
our services to get the maximum benefit of timely advice to buy and sell
silver and various other asset classes.
