SD Outlook: The storm is brewing. Will the relative calm last all week, or are those fast moving storm clouds? Here’s some insight…
There is a flurry of activity on the events calendar this week.
We start the week with some housing data and Fed speeches:
Granted, those are lesser of the Fed Heads.
But come Wednesday, the data really starts getting important with the hot topic of the year – trade. Of course, there will be no trade surplus.
The question on everybody’s mind: Is the trade deficit shrinking, growing, or staying the same?
I think Wednesday’s trade data will be more important than most, especially since the trade wars have been such an intense issue in 2018.
Understand this caveat: With all the statistics, we have seen trends where the numbers are massaged to paint a rosier picture than what should be, and that’s giving them the benefit of this doubt. Many would argue the official statistics are outright statistical lies.
That will be something to think about when the Bureau of Economic
Lies Analysis releases the May 2018 PCE report on Friday:
On Friday, we will be getting that all important wage and inflation data.
In fact, PCE, Personal Consumption and Expenditures, is the Fed’s inflation gauge for when they spew out their 2% nonsense.
Now, the Fed strips out the costs of food and energy and use the “core” PCE statistic.
The consensus is calling for 1.9% growth in Core PCE, year over year.
How bout that?
Close to, but not quite at the Fed’s inflation goal.
Call it inflation bliss.
Bottom line, there’s market moving events all week.
I didn’t even go over Durable Goods or GDP, but here’s the point: Where traders parse the data as if it were valid, looking for clues as to the direction of the economy and the markets, the cartel will use the cover of the data dumps to strong arm the markets.
So be prepared for it.
The gold to silver ratio looks to be pointing down again:
The sideways downside action all year in gold and silver has been agonizing, and while we’re still seeing a drop in the ratio for the wrong reasons, once these rallies take off in earnest, the number of ounces of silver it takes to buy one single ounce of gold could really start dropping.
There are fun and exciting times ahead for gold and silver investors, but we’ve first got to get through this week.
Call this week in gold “A Tale of Two Gold Rallies”.
Now, I could be way off on the direction this week, and my latest call is still a time call, looking for the rally to begin in earnest on July 9th..
Additionally, we could simply go sideways this week, which is highly likely as it is as the cartel can strong arm the “market” on low volume.
But the cartel not only is interested in suppressing the price of gold and silver, but they also make money off of it, which is why I think the first type of rally will be the likely scenario this week.
The first type of rally, which I think will be the case in gold this week, is called a “relief rally”.
If we get a relief rally, I would be looking for gold to get back into the $1290 – $1300 range.
I consider this the likely scenario because it will give the false impression that we’re making progress, and that will allow the cartel to come in and not just whack the price but also the sentiment week after next.
The second type of rally, which is still possible, is a “break-out rally” in gold.
To have this type of rally, there needs to be some major economical or geo-political event that would cause people to come rushing into gold.
I don’t think this scenario is likely, because we’d really need to be staring down $1350 by the end of this week, and I don’t see that happening.
Because, well, this:
As another day is rolled-off the Death Cross is already plain as day for all to see.
Now, I am looking for sideways to slightly higher in gold this week, with a possible relief rally, but the cartel can work off the death cross momentum and just give us a continuation of the smashings.
The only problem with that scenario is that gold has already been “oversold” and if the cartel goes down that path, gold will really be oversold.
Regardless, the low trading volume in gold says the cartel is eatin’ at Burger King this week and they’re gonna have it their way.
So we’ll see.
In the overnight session, both gold and silver were worked down until 2:00 a.m. EST:
The metals have come back since bottoming overnight, but they are still looking to open lower than Friday’s close.
We’ll have to watch the action over the next two days very closely.
If it looks like they’re gonna smash anyway, then I think the saying “things can be “oversold” much longer than what seems possible” applies.
Silver is where it’s always been of late:
The sideways channel of pure agony runs from $16.20 to $16.80. We’re near the bottom of that range, and we tapped the bottom of it last week, so keeping to my theory of a “relief rally”, if this is the case, we would be going back to the upper end of the range, which means the cartel still has $.40 to give plus another $.20 before finding whole number resistance at $17.
Watching silver’s performance this week will show us just how strong the cartel is right now.
They have been very strong during the last two weeks, basically post-FOMC, and I’m thinking their strength carries over into the first full week of July before having to allow price rise.
Palladium has some support at $940:
Palladium is also in a sideways channel, call it $960 to $1000, and since we’ve dipped under the channel, and if there’s going to be a relief rally in gold & silver, I would think palladium would go along for the ride and therefore approach $1000 this week.
Moves like that have been more common in palladium (and platinum) over the last two years, in part because the cartel doesn’t want attention on gold & silver, so we see big moves in gold & silver capped and beaten back down, while with palladium and platinum just gyrate.
Although there’s been no gyration in platinum all year:
Since topping out intra-day on January 25th, platinum has been like the down-escalator that never ends.
Copper is still clinging to support above $3.00:
From there first of the year, however, smoothing out the swings shows that copper has been fading all year.
Is the story of copper this year a story of two halves of the year?
We’ll see soon enough.
Recall that crude oil surged through the 50-day moving average last Friday:
That surge was even after OPEC agreed to increase output.
But now rumors are coming in about the deal breaking down.
Between sanction bound Venezuela and State Sponsor of Terror Numero Uno Iran, to Saudi Arabia cutting off the border of Qatar with canals and nuclear waste sites, it appears that coherence and stability within OPEC itself are becoming issues.
The VIX has worked its way up to 15 to start the week:
The early February “Volpocalypse” did not benefit the metals, but that won’t be the case in the future, especially as the integrity and assumptions of sovereign debt comes into question, and yes, even US Treasuries.
So at a point, when we get spiking volatility, the cartel will have their hands full picking which battles to fight and which ones not to fight, and gold and silver should thrive in that environment with all things considered.
The yield on the 10-Year is perfectly squatted on 2.9%:
Not 2.893%, and not 2.915%, but 2.9%.
Will be interesting to watch yields this week, especially if volatility starts picking up again.
Here’s what I call the “Heartbeat of America”:
That’s the small cap index of American companies that for some reason investors and traders think is immune from trade wars.
Nobody in America and those who use dollars are not outside of the consequences of the trade war, and certainly American-centric companies (as opposed to the multi-national corporations).
Is this the start of the roll-over with a drop I’ve been looking for?
Closing today with the U.S. dollar:
Additional rumors are speculating that China has done a “stealth” yuan devaluation by allowing the dollar to keep rising, as a way of fighting in the trade war.
That is because a “weak yuan” is seen as giving them a competitive advantage with their exports.
Rumors aside, watching the dollar this week will also be very interesting.
The dollar could be the wild card that changes the look of the current “markets”.
So to recap: I’m looking for slightly up to perhaps a “relief rally” (not a break-out rally) this week.
I don’t think the cartel wants to get the technicals looking too extreme because I think they want firepower for next week when they will really dominate gold and silver.
That said, with the death cross is now clear on the gold chart, the cartel may not have a choice, so we’ll especially have to be keen on the price action today and tomorrow.
If the cartel goes full-smash, we will want to see if there is increasing volume with dip-buying and outside reversals.
Hang in there this week, and don’t get too excited one way or another.
There is a storm coming.
There are storm clouds forming overhead
Now is the calm before the storm.
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.