Gold & Silver Slammed As USD Surges Above Key Technical Level

The dollar continues to extend its recent gains, reaching near 2-month highs…

Source: Bloomberg

…and breaking above the key 50-day moving-average.

Source: Bloomberg

This has weighed on precious metals with gold futures battered back below $1900…

Gold has broken below its 50DMA…

Source: Bloomberg

And Silver Futs back below…

What is perhaps most notable amid all this volatility is that bond yields have barely budged…

Source: Bloomberg

Which is interesting as real yields surge (dragging down gold) post-Fed…

Source: Bloomberg

It seems all the worries are over? Peter Schiff does not believe so…

Even though at the September FOMC meeting, the Fed indicated it plans to hold interest rates at zero at least through 2023 and it plans to continue quantitative easing at current levels, the markets said, “That’s not enough.”

The markets need more. This bubble is so much bigger than the one that we had back then (2008) that it requires far more air coming from the Fed to keep it from deflating. So, we need more. The Fed needs to talk about negative interest rates. The Fed needs to commit to bigger quantitative easing.”

Of course, in effect, the central bank is calling for more QE as Jerome Powell eggs on Congress to pass additional fiscal stimulus.

Any additional fiscal stimulus automatically requires more monetary stimulus, because where is the government going to get the money for the fiscal stimulus? It’s going to get it from the Fed. That’s what supposedly makes it a stimulus is that the government is going to run larger deficits. It’s going to spend money it doesn’t have.”

But there is concern that if Congress and the White House can’t get some type of fiscal stimulus package passed, the Fed won’t just provide more monetary stimulus on its own.

All that monetary stimulus is going to do, absent the fiscal stimulus, is pump up the asset markets – the stock market, the real estate market, or bond market. It’s not going to do anything for the real economy. I think the Fed believes that what will help the real economy is the fiscal stimulus. Now, the Fed is wrong. That’s not going to help the real economy either.”

With all of the political turmoil, ratcheted up by the death of Ruth Bader Ginsburg, the possibility of getting a fiscal stimulus deal done appears less likely.

Peter said he thinks the stock market will continue to be shaky and the sell-off could even gain momentum unless we get a concrete commitment to more monetary stimulus from the Fed, which may require something coming from Congress in terms of fiscal stimulus.

Which again, doesn’t stimulate the economy. But it will stimulate the markets. It will provide the addicts on Wall Street the drug they need in order to bid stock prices higher.”

But Peter said he thinks even if Congress can’t get a stimulus deal done, the Fed will ultimately act on its own.

Because the Fed will see the weakness in the market as a sign that the economy is going to weaken because it realizes that it is the wealth effect that is powering whatever recovery it thinks is in progress. And so if that is in jeopardy, I think the Fed will act unilaterally.”

No matter how you get it – more stimulus is bullish for gold and silver in the long-term. This recent dip could be a nice buying opportunity.