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Summary

  • U.S./Russia relations deteriorate.
  • Is the U.S. petrodollar at risk?
  • Gold and Silver bottoms completed.

In my most recent interview I asked Sprott's John Embry, how can the Fed's current monetary policies regarding tapering help the U.S. economy and the dollar?

And he remarked:

"In the long run, it can't. I mean, right now their greatest fear is that the dollar is going to break down particularly at the time of the Russian Crimean crisis, and if you looked at a chart of the dollar, the trade-weighted dollar, it looked hideous, and so consequently, I think a lot of this right now is focused on the dollar, and they're trying to maintain the fiction that the U.S economy is staging a relatively robust recovery. I do not see that in the numbers. I think that the policy will change again as the economy becomes a problem."

David Stockman, former director of the Office of Management and Budget, made the following statement regarding world instability in a recently published article in Seeking Alpha:

"I think there's a lot of insanity loose in the world, and particularly on the Ukraine." He soundly criticized the US and Western European governments for their response to the Russian seizure of the Crimea, calling their response "stupid and dangerous." He stressed that the Crimea is not strategically important to the West and that the Crimea has long been a part of Russia, which annexed Crimea in 1783, before California even became a part of the United States. He believes the crisis is the result of the decisions taken in the 1990s to expand NATO eastward at a time when the Cold War was over and the alliance's reason for being had disappeared. NATO should have been dissolved and the United States should have demobilized." Stockman argues.

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The U.S. dollar index closed below the 80 level of support for the second time since March 10, 2014. This is a very significant development as the market might be anticipating additional selling pressure as the U.S and Russia relations deteriorate due to Russia's annexation of Crimea. This puts into jeopardy the role of U.S petrodollars and the potential risk it runs if the U.S/Russia relations continue to deteriorate. One of the risks is that Russia could potentially retaliate by simply changing the SWIFT system of payment and transferring funds in U.S. petrodollars to any other form of trade settlement instrument (potentially explosive for gold and silver!). I explored this very same issue back in early January of this year.

This could initiate the momentum for the BRIC nations to join Russia and not only retaliate against the U. S. for its weak economic monetary policies and fiscal crisis which have affected exponentially the growth prospects for these emerging economies - but to begin to export the inflation risk and potentially hyperinflation back to the U.S. economy - thus threatening a deeper and more serious economic crisis than the great recession of 2008 on global scale with major long-term consequences.

The gold and silver markets

In my most recent report, I looked into detail at the price action and sentiment developing in the silver and gold markets since December of last year. While technical pundits were looking for new lows in gold and silver and the likes of Goldman Sachs calling for gold to be a sure bet it's going down to $1000 an ounce and silver to $14, the price of gold and silver did nothing but rally into the middle of March.

As we anticipated and documented, our cyclical expectations for a bottom in late December were fulfilled with silver reaching 22.20 in late February and gold 1392 on March 17, 2014. Looking back to a previous report published in Seeking Alpha, I made the following comments:

"With the high of 1392.60 made on March 17, the market has fulfilled and completed the first leg of the 2014 bull market for the yellow metal. As profit taking developed at these levels it brought the market down to a low of 1328.10 in 3 days under fast market conditions."

Echoing my comments I said, "If long, use the 1360 level as a Stop Close Only and Good Till Cancelled order. Look to take some profits on longs, as we reach the 1391 and 1400 levels during the week."

The low in gold of 1277 made on April 1, fulfills and completes the projected multi-year cyclical drop at these major key levels of support made towards the end of 2013, a rally into the end of February or early March and a drop from the March 17 period into the end of the month. This window of opportunity most likely will be looked at as a precursor of what is about to come.

The Equity Management Academy has been recommending its subscribers to pay close attention at the price of precious metals like gold and silver recently and use it to dollar average the cost of putting on long-term strategies. From a long-term perspective, it doesn't get any better than this to accumulate and build a non-hedged bullish position of physical precious metals and other derivatives down here, while the price is at production costs or below.

In particular the silver market seems to be offering historical opportunities from a real risk/reward ratio. Any intelligent analyst or advisor that is in touch with reality would be able to see the historic fundamental intrinsic value at present levels.

Additionally, the silver market completed secondary downside objectives into the 19.60 levels and sets up the stage for an important multi-year bottom. With the market closing above 20 on Friday, it triggered a weekly Buy swing trade signal for the July futures silver contract. Use the 20 level as a weekly stop close only. Look to take some profits in the 20.41-20.82 levels next week. Add to your long position on corrections to the 19.65 area if presented with the opportunity.

Let's take a look at the weekly technical picture for a chosen few precious metals derivatives and see what trading or investing opportunities we can identify for next week.

GOLD

The June gold futures contract closed at 1318. The market closing below the 9 MA (1327) is confirmation that the trend momentum is bearish. A close above the 9 MA would negate the weekly bearish short-term trend to neutral.

With the market closing above the VC Weekly Price Momentum Indicator of 1313, it confirms that the price momentum is bullish. A close below the VC Weekly, it would negate the bullish signal to neutral.

Cover short on corrections at the 1301-1284 levels and go long on a weekly reversal stop. If long, use the 1284 level as a Stop Close Only and Good Till Cancelled order. Look to take some profits on longs, as we reach the 1330-1342 levels during the week.

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GLD

The contract closed at 126.93. The market closing below the 9 day MA (127.79) is confirmation that the trend momentum is bearish. A close above the 9 MA would negate the weekly bearish short-term trend to neutral.

With the market closing above the VC Weekly Price Momentum Indicator of 126.38, it confirms that the price momentum is bullish. A close below the VC Weekly, would negate the bullish signal to neutral.

Cover short on corrections at 125.39-123.85 and reverse to go long on a weekly reversal stop. If long, use the 123.85 as a Stop Close Only and Good Till Cancelled order. Look to take some profits on longs, as we reach the 127.92-128.91 levels during the week.

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GDX

The contract closed at 24.22. The market closing below the 9 day MA (25.64) is confirmation that the trend momentum is bearish. A close above the 9 MA would negate the weekly bearish short-term trend to neutral.

With the market closing below the VC Weekly Price Momentum Indicator of 24.54, it confirms that the price momentum is bearish. A close above the VC Weekly, would negate the bearish signal to neutral.

Cover short on corrections at 23.74-23.26 and reverse to go long on a weekly reversal stop. If long, use the 23.26 level as a Stop Close Only and Good Till Cancelled order. Look to take some profits on longs, as we reach the 25.02-25.82 levels during the week.

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SLV

The contract closed at 19.19. The market closing below the 9 day MA (19.96) is confirmation that the trend momentum is bearish. A close above the 9 MA would negate the weekly bearish short-term trend to neutral.

With the market closing at the VC Weekly Price Momentum Indicator of 19.19, it confirms that the price momentum is neutral. A close above the VC Weekly, would trigger a buy signal. A close below the VC weekly would trigger a short signal.

Cover short on corrections at 18.94-18.69 and reverse to go long on a weekly reversal stop. If long, use the 18.69 level as a Stop Close Only and Good Till Cancelled order. Look to take some profits on longs, as we reach the 19.44-19.70 levels during the week.

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The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.

Trading derivatives financial instruments and precious metals involves significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.

Source: Is The U.S. Dollar Top The Bottom For Gold?

Additional disclosure: AGOL, AGQ, DBS, DGL, DGLD, DGP, DGZ, DSLV, DZZ, GLD, GLDI, GLL, IAU, PHYS, SGOL, SIVR, SLV, SLVO, TBAR, UBG, UGL, UGLD, USLV, USV, ZSL

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