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With the FOMC\u2019s hawked-up SEP and Powell\u2019s inflation focus upending several risk assets, rising real interest rates continue to\u00a0weaken silver\u2019s bull thesis<\/a>. And with the Fed chief promising more of the same on Sep. 20,\u00a0higher interest rates and\/or a recession are both bullish for the USD Index.<\/strong>\u00a0Powell said:<\/p>\n \u201cThe worst thing we can do is to fail to restore price stability, because the record is clear on that. If you don\u2019t restore price stability, inflation comes back and\u2026 you can have a long period where the economy is just very uncertain, and it\u2019ll affect growth. It\u2026 can be a miserable period to have inflation come constantly coming back and the Fed coming in and having to tighten again and again.\u201d<\/p>\n<\/div>\n<\/div>\n Thus, with Powell keen on avoiding the mistakes of the 1970s, the soft landing narrative should disintegrate as the inflation fight continues. For example, the National Association of Homebuilders (NAHB) released its Housing Market Index (HMI) on Sep. 18. The report stated:<\/p>\n \u201cAll three major HMI indices posted declines in September. The HMI index gauging current sales conditions fell six points to 51, the component charting sales expectations in the next six months also declined six points to 49 and the gauge measuring traffic of prospective buyers dropped five points to 30.\u201d<\/p>\n More importantly, the drag was driven by higher long-term interest rates, which we warned were the key ingredient for a recession. And with the rate surge still ongoing, the situation should worsen and help\u00a0push gold<\/a> off the recessionary cliff.<\/p>\n Please see below:<\/p>\n<\/div>\n<\/div>\n Likewise,\u00a0while homebuilder confidence has come under pressure from higher long-term Treasury yields, there is still plenty of room to fall<\/strong>.<\/p>\n Please see below:<\/p>\n<\/div>\n<\/div>\n To explain, the green line above tracks homebuilder confidence, while the red line above tracks homebuyer confidence. If you analyze their movement, you can see that the pair were largely interconnected since the 1980s. Yet, with unaffordability pushing the red line to\/near its all-time lows, higher long-term interest rates make the situation even gloomier. As such, the data does not support a soft landing.<\/p>\n Speaking of which, RedFin \u2013 a U.S. residential real estate brokerage and mortgage origination company \u2013 revealed on Sep. 14 that \u201cthe median U.S. monthly mortgage payment hit an all-time high of $2,632 during the four weeks ending September 10<\/strong>.\u201d And again, long-term interest rates are higher now, which means even worse conditions in the weeks ahead. The report added:<\/p>\n \u201cIt\u2019s more expensive than ever to buy a home, with monthly payments at a record high due to stubbornly high rates and home prices. Although the weekly average mortgage rate has declined slightly from August\u2019s two-decade high, it\u2019s still sitting above 7%. Prices are up, too, increasing 4% year-over-year (YoY).\u201d<\/p>\n Please see below:<\/p>\n<\/div>\n<\/div>\n While some view higher oil prices<\/a> as an indicator of economic prosperity, the harsh truth is that\u00a0crude is a late-cycle darling\u00a0that only dampens the economic outlook. Remember, higher oil prices increase gasoline and heating costs for Americans. And with the colder weather poised to bite over the next 60 days, that\u2019s less disposable income to spend on S&P 500 companies\u2019 goods and services.<\/p>\n Furthermore, with the CTAs\u2019 (algorithms) momentum bets boosting prices, the unraveling should be swift when the recession scars become more obvious.<\/p>\n Please see below:<\/strong><\/p>\n<\/div>\n<\/div>\n To explain, the blue line above tracks CTAs exposure to oil. If you analyze the horizontal red line, you can see that the bulls are nearly all in, and a major liquidation is\u00a0unlikely to help the S&P 500\u00a0or the PMs. In other words, when volatility strikes and is a function of real fear, the ramifications are highly bearish for risk assets like silver and mining stocks.<\/p>\n Overall, soft landing expectations and FOMC belief helped elicit a prominent bond-market sell-off. Yet, the irony is that higher long-term interest rates only increase the chances of a recession, which negates the two catalysts that pushed them higher in the first place. But, the USD Index should be a profound winner\u00a0from the rate re-pricing, while the PMs will likely come out on the losing end.<\/p>\n To understand how to read and react in real-time,\u00a0subscribe to our premium Gold Trading Alert.\u00a0<\/a>We\u2019ve made money on 10 consecutive trades and think even more profits will blossom in the fall and winter months. Moreover, combining the technicals with the fundamentals allows you to manage risk when liquidations unfold.<\/p>\n<\/div>\n<\/div>\nWorse Conditions Ahead<\/h2>\n
Oil Is a Bad Indicator<\/h2>\n