Hey There Income Hunter,

The West is moving quickly to isolate Russia through escalating sanctions, a ban on energy imports and, most importantly, a freeze on central bank reserves.

But these retaliatory moves and collateral damage from them have revealed serious weaknesses in the global financial structure …

Now the world will quickly move to find alternatives to the current US dollar led monetary system.

Beginning of the End 

Regular Power Income readers know that I’ve been pointing to the quickly approaching end of the long-term US debt cycle for about a year now.

It’s actually been inevitable since 1971, when the US defaulted on its promise to exchange gold for dollars.

That move put the country on an unsustainable path of money printing and debt accumulation … 

And it has weakened us to the point that we now must admit we can no longer support the dollar and need to find an alternative monetary system for the future.

Yes, I believe by freezing Russia’s central bank reserves the US is admitting it can no longer support the dollar. That is a major game changer for the global markets.

Today, we’ll look at the markets most impacted by this awakening and what these changes mean for each – and for you.

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And here’s more on the impacts for you …

I am targeting numerous massive trades that will benefit from this shift in sentiment. And they’re available now through my new Power Gains collaboration with Andrew Giovinazzi and Frank Gregory.

But there’s only about 48 hours left to take action.

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US Dollar Index (Ticker:DXY)

In the short-term, demand for dollars has risen because of the abrupt pressure put on the liquidity for dollars after the US froze Russia’s central bank reserves.

In the long run, however, the warning shot that the US has fired across the bow of every other central bank in the world has triggered an endgame for the dollar’s dominance.

All central banks will quickly look to find alternative currencies to settle transactions for goods and services with their global trading counterparts. This reallocation of reserves will put pressure on the dollar.

The volatility in DXY over the past couple of weeks, I believe, signals a topping pattern … The $99-$100 zone in DXY could ultimately be the zone where a major top in the dollar is recorded.

United States Oil Fund (Ticker: USO)

In 1971, the US pulled the dollar peg to gold and replaced it with the petrodollar system, which was a pseudo peg to oil.

The petrodollar system was billed by the US as “dollars are good as gold for oil” … However, there is a very big difference between gold and oil’s ability to provide a store of value. 

Gold has proven its ability as the greatest store of value in history. Oil, meanwhile, has only acted as a store of value during the 1980-to-2005 deflationary environment that kept the dollar strong and oil in a tight trading range between $10-$40. 

Then, in 2008, the US proved it could no longer put the world’s interest in a strong dollar ahead of its own …

The US printed trillions of dollars to bail out its banking system and watched oil shoot up to $140 per barrel as inflation spiked.

This volatility in the price of oil put a major hurt on oil importing countries, including Japan, China, India and many across Europe, and forced them to begin shifting away from dollar assets.

So, today with a US government that needs inflation to reduce its massive 130% debt-to-GDP ratio, the world has zero confidence in the once strong dollar reserve currency system. 

This means there is no stopping oil from rising further – except by global recession.

Plus, in the short-run, US sanctions will remove as much as 4 million barrels of Russian oil from the market beginning in May. 

So, I am looking to buy dips in USO over the next few weeks for a trade to new highs and possibly to a new all-time new high of $150. 

Precious Metals

Gold and silver will soar as central banks accumulate the metals in exchange for dollars to remove their national security risk of US sanctions being slapped on them. 

London Bank Manipulation

In the short-run there are 2 main factors that could cause precious metals to correct from the spike in prices recently:

1. Commercials, which represent the London banks that control non-physically backed, paper silver and gold futures markets, have been building up large short positions. Notice the net short position report down below where the commercials show a 70,000 short contract position (red circle, yellow highlight). 

The last two times the commercial short reached a similar extreme the price, iShares Silver Trust (Ticker: SLV) dropped 20% (May ‘21) and 15% (Nov. ’21).

2. SLV is currently overbought on the daily chart. If it makes a new high near $25, that would most likely establish an RSI reversal pattern, which would be a good short-term selling or hedging opportunity for longer-term positions. 

Now, there are a couple of questions surrounding a short-term correction …

How quickly will central banks rush to sell dollars to buy gold and silver in preparation for a new multi-currency monetary system?

And could real central bank buying of physical precious metals force the banks to cover their “paper” metal shorts and send the physical market to much higher levels?

SLV Charting Pattern

Bring it Home

The banks’ technical positioning in the paper market for the precious metals may not stop them from soaring much higher and here is why …

The message the US has sent central banks is loud and clear …

The US will not support the dollar and, in fact, is willing to print a lot more money if needed to support our domestic economy.

They had to be extremely tough on Russia to appear that they are dealing from strength. Without Russian sanctions, the same conclusion, – a shift to a new monetary system – would still be the result, except the US would appear weak.

The US no longer wants the pressure of being the reserve currency of the world because, by definition, without a peg to gold, that role weakens your currency over time. 

A weaker dollar, via inflation and low interest rates (held down by the Fed), will reduce our debt, albeit at the cost of a deep recession. But that will allow the US to recapture its domestic manufacturing economy and continue to be a powerful force on the global stage.

I’ll have much more on this in the days ahead, so stay tuned and as always …

Live and Trade With Passion My Friend,

Griff