The upcoming Mid-Term Election Cycle appears to be drawing money into the gold' market as early larger institutions and traders position themselves for uncertainty. Gold' is a pure sentimental play, and when people are uncertain about the economy or political system gold' tends to rise, as investors hedge against the unknown. This was clear in the past election cycle where we have a clear pattern tracking timely events, and what was more emotional or sentimental to most Americans then the past election?
Of the 34 seats up for election in the senate, 17 of these are up for grab of which 12 are held by democrats and 1 is an independent. This leaves only 4 Republican seats that are considered up for grabs which will require the democrats to hold all 12 seats and win 2 of the 5 up for grabs. Assuming Ted Cruz wins Texas, this puts the task of gaining 2 seats by the Democrats unlikely.
In the house things are not so clear. 19 seats are up for grabs of which 11 are held by Republicans. The Republicans can only afford to lose 3 seats before giving up control. Now they are still likely to retain a majority, but having a majority and a controlling majority are two different things when it comes to passing bills'.
With that said we have a booming economy right now, people are spending money, consumer confidence is high, the housing and construction market is still strong. IF an infrastructure bill passes then I believe it is likely we see Republicans retain control of the House and Senate but that is a BIG IF. It is still a long way to Kansas, and that IF will likely see some volatility in the markets which will be good for gold' in the short term. Stay away from VIX' type ETN's!
Since the low following the 2016 election gold' has slowly trended to the upside twice topping out at the critical resistance level of 1360 recently. As we approach the 2nd quarter of earnings I believe gold' continues to trend towards the bottom of the channel disbarring a political or geo-political event that can change sentiment quickly. Second quarter earnings will be our first insight into the affect the tax break has to the bottom line. We get good earnings gold' retests the lower channel and even possibly the 1215 level going into summer.
If there is uncertainty going into the summer midterm campaign elections, expect gold' to recover forming a higher low, and finally breaking the 1360 resistance level, targeting the 1400-1450 levels and a higher high. I believe we get this uncertainty not in the form of reality, but in the form of fake news. We saw this in the past election cycle where gold' whip sawed up and down before settling around the 1125 level after the election hype dwindled.
Sentiment drives markets in the end, and nothing is more sentimental then gold'.
I still like silver' here over gold' as a longer term trade.
How do you stack your silver percent wise? like 10% in bars, 60% in junk, 30% in eagles etc. or do you have a percentage in gold/silver paper stocks?
thank you!, I have started stacking Kennedy halves recently in light of your suggestion and some research a few weeks back, i see how it can become addicting actually
goldbug1
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@takecare14, LOL yes it is addicting for sure, and in a good way! To be honest I do not know my breakdown but I have mostly 90% then bars and eagles. I like art bars and older rare bars. but that is the collector, and I have paid north of 50/oz for rarer bars. ;)
Deppstein
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@goldbug1, many thanks for the deep view. Do you think silver will be along for the ride, or rather will this push the -already high- gold/silver ratio even higher?
goldbug1
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@Deppstein, When gold starts to really rally silver rallies harder. So yes when gold rallies silver will take off.