As we transition from August to September within the course of this trading week, we very well could have just experienced the Black Swan event over the weekend, and its name is Harvey. Gold & silver are breaking out right now, and the dollar, well, look out below…

Last week included a lot of management of perception. With the Fed Jackson Hole Symposium amounting to a whole lot of nothing, the market manipulators managed to get a gold close below $1300 and silver barely above $17. As the markets started waking up on Monday, however, as the United States was sleeping and/or bearing the brunt of mother nature, gold and silver started to get active, and there was no overnight smash.

After spending last week in “consolidation”, the metals are already making their moves.

We have been saying a move is imminent for weeks now, and while we have not seen the rises we have seen technically set-up on the charts, we have not seen big drops either. This consolidation looks exhausted considering the lack of any on the year.

The smashing of late has done little to affect the gold price and the silver price in the short term. Yes, they have been able to knock down prices, as evidenced by last Friday, but the prices have not stayed down for long.

On the daily, gold looks to be holding up and ready to punch through the stout resistance:

 

 

$1300 has acted as resistance, or the line in the sand, three times so far in 2017. The battle is not finished there, however. Going back a year, we can see that gold could have some more trouble in the $1310 – $1315 range. What we should really be hoping for is a break-out through that level, then coming back to bounce off it if we must. For this week, however, I guess we could settle for a close above $1300, but at this point, we should really be expecting more, unless the smashing will continue. There was calm overnight and no sneak attacks.

Silver is fighting resistance of its own:

 

 

Silver is having to deal with the 200-day moving average. Once we can take out the 200-day, next stop is $17.50. It seems like so long ago that we have seen that price. In fact, it was June 6 when the white metal closed at $17.70. Could we get to that level by the end of the week? Seeing as we have been “consolidating” with silver just like with gold, we will have a move, and if we set our sights on an up-week, we would be putting in another round of higher-highs, and then the technical traders would want to get in on the action, further adding to the move up. 

Moving on to the strongest performing metals of the year, copper and palladium, well, the hater-aide in both the MSM and the alternative media is strong. The two metals, however, have converged and they are moving in unison:

 

 

Granted, Texas is not even out of emergency mode. It is worth mentioning, however, that rebuilding in the aftermath of Hurricane Harvey is going to be very copper intensive. Most people don’t realize how much of the Internet relies on the base metal. Sure, there is fiber-optics and laser, but those are not cost effective, especially when we are talking about rebuilding and recovering from losses, not upgrading from normalcy. The bottom line is that based on fundamental issues, we could see continued strength in copper.

It is too early to tell the effects on crude. The technicals look ugly as crude is about to go down and test the 50-day moving average, and a close below $46.45 would put in a new lower-low, however, once damage assessment is done on the oil industry in Texas and in the Gulf, we could begin to see major movement to the upside.

 

 

RBOB (gasoline futures) traded up 7% at one point overnight, and if, for example, we see a 10% move in crude on the week, we are talking about a close above $52. If we combine a weak dollar, and increased consumption from the heavy machinery rebuilding in Texas more than offsetting any drop in consumption from personal automobiles, it is not far fetched to see much higher prices from here.

The stock market is barely clinging to life. Perhaps in an effort to keep it propped up for last week’s Fedstravaganza, but the S&P is barely holding on to the 50-day moving average:

 

 

Bullish for gold and silver is a drop in yields for US Treasury paper. The 10-year Treasury Note is dropping in yield even with all the “interest rate hiking cycle” hype:

 

 

 

In fact, the 10-year is clearly looking like the next move in yield is lower, not higher. There would be some support if indeed we find ourselves in a downward sloping channel, that would be around 2.4%, but we shall see how yields are doing by the end of the week.

Not helping the “America is great again” cause is a continued weakening dollar:

 

 

 

The last time we were below 92 on the DXY was the first week in May, 2016. Going back even further, the second half of 2014 is when the dollar started the most recent three-year strengthening move. Within a year the dollar was at 98. Now, the dollar peaked out on the weekly nearly at 104, but what has happened in the first six months of 2017? We have gone steadily down hill all year. If we see continued dollar weakness, is the next stop 82 and A full 10 points lower than where we are now? Finally, notice that red dotted line on the DXY. That is not the 200-day, but the 200-week moving average. Not that there is any reason to be a dollar bull, but if we cross that line, that would be very bearish.

On the calendar this week, this one is going to be action packed. There will be no time to prepare for the Non-farms Payrolls which comes out this Friday, so closing out monthly positions or setting up for a move based on the report will have to be considered well in advance for the traders in the “markets”.

Here are some of the highlights on the economic calendar to be watching for:

  • Monday: International Trade in Goods & Dallas Fed MFG Survey
  • Tuesday: Case-Shiller HPI (20 city home price index) & Consumer Confidence
  • Wednesday: MBA Mortgage Applications, ADP Employment Report & 2nd Estimate of Q2 GDP
  • Thursday: Challenger Job-Cut Report, Jobless Claims, Personal Income, Chicago PMI, Pending Home Sales, EIA Nat Gas Report
  • Friday: Motor Vehicle Sales, Nonfarm Payrolls Report, PMI Mfg Index, ISM Mfg, Consumer Sentiment, Baker-Hughes Rig Count

As we can see, in just this small sampling of data to be released this week, there is a ton of stuff going on. Analysts will also be looking to see what effects the hurricane will have on the oil rig count on Friday. We can rest assured that everybody will be scapegoating the hurricane for poor economic data. This is very valid, and not to say there is not impact on the economy, but just watch the government statisticians try to blame weak data in West Virginia on the hurricane in Texas. Either way, government statisticians will have to be on the ball more than ever if they are to produce the results of a vibrant, expanding economy.

Then again, it could all just fall apart too, and that would be the Black Swan that started it all. His name was Harvey.

 

  1. Boy….wouldn’t a surprising sharp up-spike be funny right now????

     

    all the while mindful that the spot chart doesn’t even reflect the 10% depreciation the UDS has taken…… so the $400 a guy put into silver 2 years ago….actually cost more than the $405 he puts into silver right now….. if your trackin’ with me….. 

     

     

  2. This is a planned and pre-announced devaluation of the dollar.  Don’t get carried away with the hype.  This is part of Trump’s recovery plan.  The US sets all exchange rates at will in the US controlled FOREX market.  DXY is going to around 80.  It is not crashing.  It is not imploding.  It is not going away.

    • Agreed. There’s no reason for the dollar to suddenly implode. If it did all other currencies would do the same. It may be getting managed downward as a beggar-thy-neighbor strategy.

      Does mean that the yen and gold are going up together which has not happened for years?

    • The Dollar is not going to go up.  It didn’t go up in 2009.  It isn’t going to go up now or during any crisis.  It is going to go where the Treasury wants it to go.

  3. Unfortunately just a small victory for now. We just move into a slightly higher/lower band of where PM pricing is allowed to reside and at the first sign of fatigue or hesitation a lower range will be sought.

    Now just waiting for the ‘they’ve lost control’ headlines to complete the cycle. Happy that $1,300 has been broken but really $2,300 Au and $100 Ag should be the pricing to get excited about.

     

    • @PhiPhi

       

      “… but really $2,300 Au and $100 Ag should be the pricing to get excited about.”

      How about gold prices equal to bitcoin prices?  Now THAT would be exciting.  Even at the current G/S ratio of 75/1, that would mean a silver price of at least $57 an oz.  Better yet would be a G/S ratio that was more normal at around 35:1 for a silver price of $123 per oz.

       

  4. Buying on the dips, tiny price increase is what it is, a blip on the screen. Trump maybe devaluating the US dollar against other currencies. Chinese have been for a couple of years. .

    Stacking the shiny silver phyzz till the cows come home.

    • Indeed.  Such is a fact of life when comparing manipulated vs. non-manipulated markets.

      But it IS more than a bit humorous that PMs have been price controlled so as to keep the dollar looking good, when out of the blue, along comes bitcoin doing the same thing to the US$ that TPTB were afraid that PMs would do to the US$.  Mission accomplished, folks.  Crypto currencies have shown the US$ and all other fiat currencies to be worth a LOT less than has been suggested.  Apparently, PMs were not needed for this.  So much for supporting the US$ by manipulating the gold and silver markets.

       

  5. Really only good for the septics at these levels, with dollar devaluation gains amount to zilch for the rest of the world.

    PS Septics = Septic Tank = Yank or Yankee, in this case meant as a term of affection

    • A lot of money has already flowed into the US$ via the buying of US Treasury paper.  With the US Treasury 10-year bond paying 2.3% or so in interest and many other sovereigns out there paying near zero to negative interest rates, they have priced themselves out of the bond market.  UST paper looks pretty good when seen in that light, which many foreign investors have seen.  The real kicker here is that the value of the US$ should have gone up due to this support but it didn’t, which only goes to show that the drop in the US$ would have been a MUCH bigger number than we’ve seen so far if not for this support.  Is there more to come in this regard?  Maybe.  Much depends upon whether or not foreign money will continue to flow into UST paper.  If not, then US$ losses could be substantial.

      On a somewhat related but different topic… the reduced value of the US$ could be seen as a prelude to some sort of currency reset that some have postulated over the past several months.  I can agree with that position but am thinking that any such reset would be most likely IF all of the major fiat currencies out there were to equilibrate towards some specific value before the reset occurs.  That would mean that none of them has any particular advantage or disadvantage during such a reset, which should make such an event go much more smoothly and easily.  I would think that TPTB would want any such reset to go as smoothly and easily as possible for minimal financial market and economic upset.

      Furthermore, if the result of the reset is that the SDR becomes the new world reserve currency, particularly it its use is limited to international trade settlement, then countries that cannot control their currency printing, borrowing, or profligate spending could not cause adverse effects in the economies of their trading partners.  This would be a HUGE boon to those who run large surpluses with the US and other developed countries and a HUGE problem for the countries that continue to deficit spend.  Continuing to do that would reduce the value of their currencies considerably, so some measure of spending control would be pretty much forced upon them in order to avoid having their currency become worth a lot less over time and perhaps even worthless at some point.

       

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