Stock Market Risks Haven’t Left, Gold and Silver Price Predictions Stay Bullish
Over the past few days, gold and silver have lost momentum. Yes, gold prices are still comfortably above $1300 per ounce and silver is still at the highest price of the past three months. But stock peddlers have succeeded in persuading investors that Wall Street is still where they might find the best investment opportunities. Yet stock market risks have only been swept under the carpet. Thus, gold and silver price predictions for October remain bullish.
Even the U.S. dollar showed some renewed signs of life. In fact, should gold fall below the support range of about $1,320 per ounce, it could fall back below the $1,300 threshold. Likewise, silver could fall below $17.00 per ounce. Investors, it would seem, have lost all inhibitions. If you showed them the word risk in the dictionary they would fail to recognize it.
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The combination of the strengthening dollar and the Dow closing consistently above 22,000 for four straight sessions has investors ignoring gold, silver, and precious metals. But, logic and analysis of the kinds of risks that the overall economy—rather than a myopic focus on the opportunities of individual stocks—points to bullish October gold and silver price trends.
Gold Prices Were Climbing Based on a Correct Perception of Risks
In the last weeks of August and the first one of September, we have seen gold and silver price futures climbing. Stocks on Wall Street, meanwhile, were showing signs of a correction. It was all due to the perception of increased risk from North Korea. This weakened the dollar and stock market performance. But, notice how quickly investors turned on their beloved stocks.
That suggests confidence is weak and herd mentality persists. This is the very kind of market attitude that has inflated bubbles from the Tulip bulbs of the late 17th century to the 2008 financial crash. As proof of the precarious nature of gains on Wall Street now, try to imagine what would happen if Kim Jong-un decided to test a nuclear device tomorrow or the next day. The stock markets would likely see a correction.
Somehow, investors have decided that everything is alright with North Korea and that nothing will happen. But, something will happen because Kim is determined to preserve his dictatorship and his state. He needs to develop and prove he has nuclear capability to force the United States to come to terms and recognize North Korea as a nuclear-armed country; Kim does not want to end up like Saddam Hussein or Gaddafi.
North Korea Won’t Give Up Nuclear Arms Ambitions
Like a persistent mosquito or fly, Pyongyang will continue to harass Washington. In show business, the saying goes that a show is not over “until the fat lady sings.” In the North Korean crisis, it’s not over until the fat man gets his nuclear power status. Or, he gets Trump to order the evacuation of all U.S. military personnel from the Demilitarized Zone (DMZ).
Kim is going to push Trump. If Trump decides to launch a military strike—considering the potentially nuclear nature of the response—the bull market is going to be one of the victims. Mind you, this crude scenario doesn’t even include what reactions Russia or China might have. Neither one of these countries, both of which share borders with North Korea, want a war on their doorstep. Nor do they want more excuses to draw the United States into their regional sphere of influence.
Russia and China are already planning to reduce their reliance—and that of many other countries—on the U.S. dollar. An exacerbation of tensions between the U.S. and North Korea would merely accelerate this process. As for the dollar, it has hinted a recovery because Trump has reached out to the Democrats in the House and the Senate to normalize the Dreamers and move to get the DACA bill into law quickly.
This encouraged currency speculators to make larger purchases of dollars. This is why gold and silver prices have fallen. But, these are reasons that make little financial or economic sense. This may have satisfied Democrats and social justice warriors for now. But it has done nothing for the economy.
Presumably, investors bought more dollars as a sign that the passing of DACA and other concessions to Democrats from Trump would improve the dangerous social tensions in the United States. In fact, whatever short-term goals were achieved in this sense, by doing so, Trump has alienated his own supporters. It has made them angrier and disappointed.
Trump has more to fear from them than Kim Jong-un. Indeed, America is becoming more divided than at any time since the Civil War. When investors start paying attention to what’s really going on around them, they will reconsider their bullish bets on the stock market. All that glitters is not gold, but when the going gets rough, gold is the only thing that shines.
