Add gold and bitcoin positions
The Fed is forecasting three interest rate hikes in 2022, but that could be difficult for it, given the headwinds the economy is facing. Josh Lipsky of the Atlantic Council’s Center for Geoeconomics, said in a recent interview on Yahoo! Finance said: “It’s ambitious; three rate hikes.
If you look back 30 years, the economy has accelerated from the previous quarter when rates were raised. But in 2022, that won’t happen, Lipsky said. An increase in rates towards a slowdown from the previous year is unlikely; they can do the first, but the next two are unlikely.
Other major central banks are also considering tightening and hikes in interest rates. Lipsky believes any global tightening is going to be fractured, with Europe, for example, going much slower than the Fed. “It won’t be that unified rebound,” Lipsky said.
“Money is going virtual,” Lipsky said. Ninety central banks representing 94% of the global economy are developing central bank electronic currencies, so it’s not just about Bitcoin, it’s a central bank business. The way people interact with banks and government will change.
WeChat now supports Digital Yuan, which has 800 million users. According to Lipsky, 10% of Chinese citizens now have Yuan WeChat digital wallets. However, this is a domestic only product and can only be used in China. A big question is whether foreigners can use the digital yuan, and if so, can they take it home?
The digital yuan poses a threat to foreign companies in China, because if the government doesn’t like something they are doing, the Chinese can block all payments to that company or keep their assets hostage.
Patrick MontesDeOca, CEO of the Equity Management Academy, said interest rates appeared to rise, with the ten-year note trading above 1.80, up 2.2%.
“We saw a pretty sharp increase in interest rates,” MontesDeOca said.
The low was 0.32 in 2021. Technically, the market appears to be setting up a major double bottom on the 10-year note.
The 30-year bond is at 2.144. The lowest return in the past year was 0.70 on January 3, 2020.
“We are seeing an inversion of the yield curve,” MontesDeOca said.
Particularly in recent weeks, the 10-year bond rate has moved faster than the 30-year bond rate. Thus, the cost of silver over the 10 year is increasing faster than the 30 year. The Fed appears to be managing long-term rates to keep them low, while allowing short-term rates to rise.
Feds are declining by around $ 30 billion per month through March. The key is how quickly interest rates will rise.
Demand for goods and services continues to be very strong, but Omicron, which could be the end of this pandemic, is behind a significant number of hospitalizations. People don’t go out as much. Vaccinations are mandatory, but there is resistance to requiring vaccinations to work or go out. Shortages of supplies and goods appear to continue. The prices keep going up, and it seems that for various reasons people are starting to spend less which is not good for the economy. Crude oil is $ 80 a barrel, which is not good for the economy either.
It looks similar to the Fed’s rate hike in 2016-7, which was the bottom of the gold market. If the Fed hikes rates by a quarter of a point this year, we might see gold react in the same way. In 2016-7, the Fed then decided, when the markets were angry, to cut interest rates again. The Fed then cut rates aggressively.
More recently, as the Fed pursued massive stimulus measures, gold hit a low in April 2020 at $ 1,267, then climbed back to $ 1,704, fell again and came back above from $ 2,089 in 2020. It then came down to $ 1,673 on March 8, 2021. It seems to match Fibonacci retracements and technical predictions. Since March 2021, the bottom gold has rallied until May 24, 2021. The low set a major bottom for a big uptrend. On September 27, 2021, the seasonal low was hit at $ 1,721. Since that low, the market has traded in this major uptrend channel. Now we are coming back from another low and it looks like it could move up to the upper end of the uptrend channel above $ 2000.
For the weekly figures of the Variable Price Dynamics Indicator (VC PMI), the daily average is in a bullish price dynamic within a weekly bearish price dynamic. Gold is around the mid price, so we are not trading around the mid point. We wait for the market to reach an above or below average extreme to trade, where the odds are much higher that the market will revert to the average. $ 1786 is the daily buy level 1, just below the market and is a support level. From this level, there is a 90% probability of a mean reversion.
The goals we have this week for taking profit on our swing or position trades are $ 1826 and $ 1855. We are ready to increase our long positions to $ 1774 to $ 1752, or go long.
Bitcoin is in reversion mode starting at $ 39,470. It did not quite come down to the weekly buy 1 level of 38,943. The low of 39,470 was reached and it found buyers, so the market started to move up again. Bitcoin at 40,000 appears to be a level that offers huge support and is a great area to add to your position. There is a high probability from there that the market will recover.