Craig Hemke – We’ve Only Seen A Hint Of What Is To Come When The Fed Finally Pivots
Craig Hemke, Editor of TF Metals Report, joins us to review the rally we’ve seen over the last week as the Bank of England pivot last Wednesday, emboldened market participants to assume the Fed will be forced to do a similar pivot at one point when something domestic breaks. He mentioned that this trading action we’ve seen in gold, silver, mining stocks, and general equities is only a hint of what is to come when the US central bank finally is forced to backstop a large enough economic situation.
The nuance about the pivot is that, for now, the Fed must continue on with hiking and tightening their balance sheet, as they’ve repeatedly messaged their plan to still keep fighting inflation by reducing demand. However, when the pressure becomes too great to ignore, like it did in Japan, then Great Britain, and then Australia, then they’ll be forced to adjust this policy. Many believe that will be a large catalyst for rolling over the US dollar, and rise in the precious metals, and the action since the BOE pivot indicates that is a high probability outcome. We just saw the recent outperformance of silver over gold, when the shorts got squeezed, which was foreshadowed by the bullish contrarian reading in the COT reports for silver. In addition, silver and even the mining stocks stabilized this week, despite the US dollar rebounding out of its downturn to move back higher again. Gold also has reversed quickly after a brief dip below the key $1675 support, so all things considered, Craig feels we may have seen the lows for the year in the PM sector.
We wrap up with a look forward to tomorrow Jobs Report, and dive into how this number is essentially guesstimated using surveys and the “birth-death adjustment” of how many businesses were started or closed based on long-term averages. Based on the negative birth-death adjustment seen last year in September, Craig believes there is high likelihood tomorrow’s number could disappoint to the downside, and that there may be some interesting market responses if that is the case.
Cory and I are attending the upcoming New Orleans Investment Conference on October 12-15. We’d love to see you there! It’s a great way to meet company management and spend some time in New Orleans. Click the link below to register and please let us know if you will be there so we can meet up.