Weekly Update
‘I went to the crossroad, fell down on my knees,
I went to the crossroad, fell down on my knees,
Asked the Lord above, “have mercy, now save poor Bob, if you please”
– Robert Johnson, 1936
Could we have reached an important crossroads in history with the announcement from President Trump that they are moving the U. S. embassy to Jerusalem? The move has been widely condemned even as it has been praised in some quarters. The move has already triggered protests, riots, and violence. Some view it as a declaration of war as rockets have been fired from Gaza. The move comes against the backdrop of ongoing Israeli bombing into Syria against military installations of Syria, Iran and Hezbollah even as there has been no formal declaration of war.
What all of this is doing is setting up the potential for a wider war in the Mid-East, a region of the world already aflame, particularly in Syria and Yemen. A wider war could eventually bring in the global powers USA (NATO), Russia, and China, all of who have military in the region and are aligned on different sides in the conflicts. Any outbreak of war could have serious ramifications for global markets. We have seen this happen before as stock markets fell on the outbreak of WW1, WW2 and the events surrounding 9/11.
Nevertheless, do markets care? It seems not. The U. S. economy is growing, 3.3% in the 3rdquarter and 2.3% year over year to the 3rd quarter. The job market continues to grow: 1.7 million new jobs according to the monthly nonfarm payrolls in the past year including 228 thousand in November, which was above expectations. The official unemployment rate, currently at 4.1%, is at a 17-year low. The stock markets are at record highs, and, while interest rates have been rising they are still lower than they have been at any point before 2008.
The markets appear to be ignoring potential war drums, political investigations, and record high debt. Some are calling what is happening in markets a melt-up (especially Bitcoin). But not everyone has joined the party. The one sector that has been missing the boat is precious metals, led by gold. Given that one sector has been on a tear and almost consistently in overbought territory now for some time while the other has been falling and is approaching oversold territory, could the two be close to changing places? Could the stock markets be approaching their zenith even as the gold and precious metals market approaches a potential nadir? In other words, a crossroads.
This post was published at GoldSeek on 10 December 2017.