The tech sector is slowing down and the broader market is stalling somewhat.
Precious metals continue to outperform and are currently going straight through the roof.
Here is why and how it could go on.
It shouldn't be forgotten that we are currently still in a state of a global pandemic.
The case numbers run in the wrong direction. The economic data that is reported weekly and Wall Street's earnings estimates are all beaten, but this is because expectations were so low that it was almost easy to beat them. So we are still in uncertain times. And in uncertain times, precious metals have always played a major role, since they generally stand for a safer form of investment, in contrast to stocks, bonds and other asset classes.
Investors also fear that inflation will rise too sharply, after the economy gets back to normal.
Any action by central banks providing liquidity and governments helping with different kinds of stimulus could still have a major impact on overall price levels.
However, this will only become apparent and will only be the case when the consumer is back in full shape and does his usual expenses.
And this is where precious metals come into play again, as they stand for value preservation and value preservation in the event of excessive inflation.
What does the market cycle say?
The cycle is currently doing wild things. As you can see in the pictures, we should still be in a weaker market phase. However, if we look at the current price increases, we can see that the market decoupled from it in the short term, which does not mean that it will continue to do so in the long term. We can also see that this decoupling process is stronger in gold rather than in silver.
Another phenomenon that we can currently observe is the change in the ratio between gold and silver. Here it currently looks as if silver has broken a very important support mark.
This suggests that silver should continue to outperform gold if the resistance now holds until the end of July, when the monthly candle closes.
In order to benefit from these facts, I will definitely consider a spread trade between gold and silver.
However, we have seen disproportionately high price increases in the past few weeks and even more in the past few days, related to precious metals.
In my opinion, it wouldn't be surprising if gold and silver declined somewhat in the short term before continuing their medium to long-term upward trend.
In the long term, however, I assume that precious metals will continue to strengthen.
Accordingly, I also position myself and will perceive price weaknesses, especially with gold, as opportunities to buy.