By Morris Hubbartt

The market that will be most damaged by QE bond purchases is the US dollar. The destructive action of quantitative easing is somewhat hidden, because other central banks are also damaging their own currencies.  Technically, the US dollar is somewhat overbought, and the counter-trend rally is failing. The key number is 80.50 and an additional monthly close below that key level sets the stage for a substantial downside move.

Right now, the normally-volatile silver mining stocks are the star of the precious metals show.  The incredible resiliency of silver stocks during this correction, implies that they could run like the wind once the bull trend resumes.   A move higher in silver stocks also sets up the underlying metal, for a solid move to the upside.  Please note the position of the MACD indicator, as well as the very bullish volume pattern.  Silver stocks, and silver, may be about to soar!

US Dollar Monthly Bar Failure Chart

 

  • In the past, an increase in liquidity simply meant lowering interest rates. Since 2008, it has meant quantitative easing.

 

  • The market that is most supported in this venture is US treasury bonds. By purchasing government debt, the US central bank keeps bond prices high.  Interest rates are already at rock bottom lows.

 

  • The market that will be most damaged by these bond purchases is the US dollar. The destructive action of quantitative easing is somewhat hidden, because other central banks are also damaging their own “contra dollar” currencies.

 

  • Technically, the US dollar is somewhat overbought, and the countertrend rally is failing.  Note the slow Stochastic on the chart. The key number is 80.50 and an additional monthly close below that key level sets the stage for a substantial downside move.

 

Global Liquidity Boom Chart

  • This chart, from Bloomberg News, demonstrates how bullish the current environment is for gold.  Gold is a limited resource.  Fiat currencies are based upon government promises. As central banks continue to print money, and add it to the banking system, much higher gold prices are very likely.

 

Gold Stokes Chart

 

  • My slow Stochastics indicator is now flashing a solid buy signal. I never use it alone, but it is providing powerful confirmation of my other technical work.

 

  • Note the size of the previous rallies with the Stokes in a similar position to where it is now.

 

Gold Arc Chart

 

  • Seasonal analysis suggests that gold is due to rally, until the end of the year.  The current position of gold on the Fibonacci arc chart supports this thesis.

 

  • The rising CCI indicator is also predicting a solid move to the upside.

 

  • My targets are $1850 and $2015 for gold, and timeline analysis suggested that $1850 would be achieved by mid-November. Due to the US election, the natural flow of the market has been interrupted.

 

  • The good news is that I only see the move to $1850 being delayed by about two weeks.

 

  • Once the $1800 area is penetrated, new highs could be captured within days or hours. The market may have one more quick punch lower, but the next major move is to the upside.

 

GDX Arc Repetition Chart

 

  • This chart is a broader approach to Fibonacci Arc analysis. Note the similarity of the blue buy zone circles.

 

  • My target for GDX is $66. When gold rises beyond the $1800 area, the entire sector could move with great velocity. If that is the case, then GDX could rise to $72, before the end of the year.

 

GDX Swing Trader Chart

  • Please note the gap on this chart at the base of the black arrow, near $51.40.  I expect any spike lower to halt there.

 

  • Short term traders should place buy orders there, with an upside target of $53.40.

 

GDXJ Pennant Breakout Chart

  • GDXJ is breaking out to the upside, from the pennant formation that I highlighted last week. I want to see this breakout hold, for a minimum of two days, on strong volume.

 

  • Volume will be lighter than normal, due to the recent storm that hit New York, which makes interpretation difficult.  Regardless, I need to see volume start to trend higher, to be sure that we’ve seen the lows of this correction.

 

Silver Volume-Based Support Chart

  • One key tool I use to determine viable support areas is volume based support (VBS). Silver has just pulled back towards one such key VBS zone, which is good news.  The current band of support extends down to $31.   

 

Silver Stocks Lead Horse Chart

  • Right now, the normally-volatile silver mining stocks are the star of the precious metals show.  The incredible resiliency of silver stocks during this correction, implies that they could run like the wind once the bull trend resumes.

 

  • A move higher in silver stocks also sets up the underlying metal, for a solid move to the upside.

 

  • Please note the position of the MACD indicator, as well as the very bullish volume pattern.  Silvers stocks, and silver, may be about to soar!

 

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    • Yup, that’s true! Once the US dollar reaches the bottom, all fiat currencies along will be dragged with it at the same time because the US dollar is the reserve currency in this world so all fiat currencies are related to it.

  1. LMAO some others are talking about Silver heading back to $30 or $29 some are saying the resistance mark will be $32 on up to another resistance of $35. What the heck just keep stacking and enjoy life with a laugh or two. Lol
    O! and I forgot, QE4 is on the way. Lol

     

    • What is so funny about QE4 getting ready to happen? I must not see the humor in everything like you do. I enjoy a laugh or two every now and then, but it is usually at something that is truly funny.

    • Keep on stacking is always a good idea.
      I’m with ya M45, gotta stop and smell the roses along the way as much as ya can!
      I’m with you too Crissy—not need to hurry anything along; There’s nothing funny about whats coming.
      I’ve said a zillion times and will keep right on saying…..kicking the can down the road is just fine with me….more power to ‘em…..and picking up Silver at this level or even a little lower would be a great way to spend a lifetime…..

    • Here is a picture of Bernanke after the collapse of the US dollar. Angry people who lost all their savings decided to capture Bernanke and put him inside a small room. Then, these people are going to fill up the room with the worthless US dollar bills so that Bernanke can die due to suffocation.

  2. While I’m out of the paper markets, a person with an eye to the stats could pinch some nice short term profits.  Before I exited paper i would pinch profits from some trades, including covered calls, allowed me to convert to silver from the cash flow spin off.

    • I have bullion dealers by me not to mention pawn shops. Im sure the scrap gold places will by your silver to but I wouldn’t go to them for anything.

    • I strongly believe that those Cash for Gold Shops like to play in the Mud and get their hands dirty
      especially with Gold. But Heck, that’s just my opinion?

    • Yeah that’s true! I’ve only seen one shop in my city that does the “Cash for Gold” and the “Cash for Silver” thing. But their buy-back price is very bad. They buy one gram of silver for 0.50$! The only places worth selling your silver is at coin shops or at Craigslist.

  3. What I don’t understand is how people have been fooled into buying treasury bonds? how can you look at bonds and not look at the fact that that bond will always be paid with ever depriciating currency. the yeild will never out pace real inflation and By buying bonds you encourage government deficit spending and devaluation of all currency. why has this been missed by our parents and grandparents. our life savings, all our labor is reprsented by debt, paper, and now digital blips on a far off computer. when the dollar is destroyed, it will be a beautiful thing. Our panic and ignorance will make it ugly. We must not accept any new fiat currency unless it is a debt free treasury note good for the purchase of federal and state land, elimination of property taxes & fractional reserve banking, reinstitute glass steagal and allow gold and siler to float freely because it’s the only thing foregn countries will take to settle trade inbalences very soon. We need a reset button and it will be forced on us. the question is which way do we go,

    • I think most are bought into by institutions, like pension funds. And it’s more like being forced into bonds. One of our countries biggest pension funds for govment employees was forced to sell their gold holdings a decade or so ago. Wasn’t considered a “safe-return” investment. Such funds and institutions and large investment funds run by the big banks aren’t really meant to make a good return anyway. There’s never an about-to-burst bubble they don’t like. They’re meant to be the sucker.

    • Maybe the way people got tricked is that banking institutions told them that treasury bonds are good investments. So, people think banking institutions are good advisers so they’ll listen to them. There are also propaganda on the mainstream medias that tell others to buy treasury bonds.

  4. When I went to the LCS I saw some people selling silver.  It was the  predominant PM in the  cases.  There was less of gold  in the display cases, mostly collector coins  and I would expect its  value would exceed that of silver by 10 to 1.  I know the owner and saw what he had in the vault when I traded gold for silver a while back.  People sell silver more often but the dollar value is less so the time involved with sales and trades grind on profits.
     By weight his silver stocks were very large; gold less so.  He did have a new sign out front that offered cash for gold but that was not his primary business since it would relegate his up scale business to that of a pawn shop.  Nothing wrong with that but his primary business was the selling and trading of PM coins and ingots. He offered fair prices for those selling or trading coins, near spot in most cases and retailing same for 8% over spot.
     Nearby were several pawn shops who’s primary business was and is direct buying of gold and silver, advertised as such, but their buy prices were wretched. 
    They seemed to be in the business of offering 50-70% below spot as the pawn end of the business is more of a means to acquire personal items, not PMs.  My friends who were visiting planned to scour Reno and Laas Vegas for the ‘dumb’ pawn broker who wanted to convert some of their phyzz to cash.  My buddy is a shrewd negotiator and usually ends up on the good side of a cash buy, coming in with his charts, daily spot prices and trading price points for PMs, often out talking and out negotiating the proprietor.  Junk bullion is his specialty.
    All things considered, he and the owner usually end up at their respective magic numbers.  He gets some good priced items and the owner gets cash he can convert back to more inventory.  Being able to buy at 50 cents on the dollar and flip the items is a better business proposition than holding a gold or silver item in the middle of price gyrations that would test the patience of a saint. I can’t say if these prices paid in my area are representative of other towns and states but our pawn shops are usually located near casinos, aka cheap eats loser terrariums. When someone is on a bad streak they will take anything to get back to the terrariums, er, I mean the tables and slots. Disclosure. I play low stakes Texas Holdem, a game of skill, sort of LOL

    • Gold is more rare to buy than silver for their bullion value at local coin shops. Right now, one of my local coin shop ran out of silver to sell, another one ran out of silver bars, the other one rarely sells silver bullion and they are overpriced and another one went bankrupt. On average, my local coin shops receive two 1/10 ounce of gold per month. Now, it has been more than one month since my local coin shops didn’t ordered some gold.

  5. Good point Chrissy.  You never see Platinum mentioned.  it’s like the Maytag repairman.  It’s a heck of a PM and only slightly less valuable that gold.  A PM dealer will pay about 3% under spot for coins or ingots but immediately gets rid of it due to its volatility.  It is also quite manipulated or so I’m told. 

  6. It seems like a great idea to have a stash of Senior Silver for the very reason as noted above.  This currency could easily be the coin of the realm if we have some serious problems with the USD the smart merchant would take silver instead of paper money.  More formal  business like those taking mortgages, utility, hospitals and the like would not be set up to take silver.  It’d be unlikely that they could wrap their heads around the notion of taking real money instead of insurance payments, credit cards, co payments, check or cash. It would work to our benefit to shed outselves of rapidly depreciation paper money.
      Banks would be deep into the brain damage of in(hyper)flation and I can’t see sending some dimes and quarters to pay the electric bill.  But grass root merchants are smart and able to think quickly.  When offered a silver coin that is destined to become more value on a daily basis, they would be much more inclined to take silver and gold for payments. In every hyperinfationery period, everyone sought precious metal coins.
    I’ve tested that theory and found 5 merchants who were quite willing to take the ‘real deal’  instead of paper or a check. They took silver as payment and stached it away.   PMs are totally untraceable and my merchants know intuitively that they are facing some serious inflation. They’ve been dealing with inflation hitting their books on a monthly basis.  
    There is something else to take into account.  Junk bullion will probably continue to be consigned to a refinery so that it can extract the .999 silver needed for industrial purposes. JB will become scarce for that reason along with some hoarding. Keeping a stash of JB could potentially be worth more in the future since it  represents real money, something that anyone recognizes as a valuable commodity that can’t be counterfeited. JB could become the top echelon of real money.
    I think that American Eagles would also be an acceptable payment.  Rounds could end up being suspect but those are what I used for payments when accepted.

  7. QE bond purchases will be destructive to the US dollar because it will add more dollars to the dollar supply. By doing that, the US dollar will lose a lot of its values so the people holding it are going to have their purchasing power stolen from the Federal Reserve. It is guaranteed that silver will continue to go up especially with QE infinity.

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