SD Midweek: After two months of pain, if gold & silver can stay above these critical levels today, we could see the turn as early as this afternoon…
Once again let’s start with the gold to silver ratio:
These are looking like the last chances to play off of the ratio right now. It is very rare that it takes over 82 ounces of silver to buy one single ounce of gold.
Could the ratio go higher?
It could, but upside potential is extremely limited because everybody sees the same thing: Silver is severely undervalued.
There seems to be some debate as to whether gold leads silver or silver leads gold. Every pundit and analyst is adamant about which leads which.
Here’s the thing: It depends.
Right now, however, due to the extreme in the gold to silver ratio, it certainly seems that silver is set to lead gold.
Regardless, silver moves faster and farther than gold because it is a smaller market than gold, and when investors come into the sector, more investors come in to silver than into gold, so at one point silver will really get moving and out-perform gold.
We could be at that point right now.
First things first, however.
Silver absolutely needs to hold $16.13:
Regardless of all other indicators, a close below that level, or even perhaps an intra-day low below $16.13, and that would be very bearish. A close below that level would confirm a short-term bearish trend, and while all that it would accomplish in the long-run is more pent-up demand and an even more bullish set-up, due to the heavy handed manipulative price suppression, a move below $16.13 would likely bring even more short-term pain, just as we thought it was getting better.
But open interest has come down, big time. The technicals are also now supportive for higher prices and lots of room to run. For this reason, together with the gold to silver ratio, we may finally see silver outperform gold here.
If I were to stick my neck out and make a call, I would say silver will turn, either this afternoon or tomorrow afternoon. I would also add that since we’ve had to endure two months of cartel pain, once silver turns, we could be at $18 in a hurry. Like by the end of next week hurry.
Granted, that’s my latest short term call. We’ll see.
I nailed the short-term bottom in December, and I called the short-term top in early January, but I never thought we would have to endure nearly two months of pain, including a break-out fake-out.
Nor did anybody anticipate that in late February, silver would be red on the year.
So we’ll see.
If I had U.S. debt-based fiat currency to spend on my stack right now, I would spend it today. Waiting until tommorow might miss the bottom. But then again, what is $.25 to either side of $16.50 when the upside potential is huge.
There’s a few reasons why I think the metals could turn this afternoon. First of all, China opens this evening (Thursday session). They have been closed since last Wednesday celebrating the Lunar New Year, and traders might front run demand coming out of China.
Secondly, Fed minutes are released today at 2:00 p.m. EST:
If the Fed makes a communication error, there could be market movement which affects not just gold & silver but all markets. In addition, notice we receive PMI and Existing Home Sales this morning, so there are data releases that could move markets today.
Gold has it’s own critical support line:
Currently around $1314.40, we do not want to see gold break-down below its 50-day moving average. That would be very bearish. We’ve basically been moving sideways all year, so we’re due to rally any day now, just like with silver, but whenever gold has fallen below the 50-day moving average, even on an intra-day basis, more short-term pain was felt.
Technicals are supportive for gold to run, and if silver moves first, it would be nice to see the yellow metal playing catch up in performance to silver. That’s when things will really get exciting.
Just remember: Nothing can last forever – and that is true for this latest cartel-wash-rinse repeat cycle.
We’re close to turning.
I’m sticking to my call of this afternoon or Thursday afternoon.
Time will tell if I’m right or if I’m wrong.
If I’m right that will be three correct calls in a row (December, January, and now this).
Moving on to palladium, we see that the pesky moving average is now acting as resistance:
If gold & silver turn this week, let’s look for palladium to break-out above the 50-day moving average.
Platinum has held up, but it could test its moving average as well:
Platinum has held up better than the other three precious metals, however. Granted, last year was brutal for platinum, but like palladium, if gold & silver get moving this week, so too will platinum.
Copper is dancing around its 50-day moving average:
All last year, all we could hear from pundits and analysts was “rampant Chinese speculation” driving up the price of Dr Copper.
Come tomorrow, things could get very interesting when the Chinese speculators return.
And then there’s the whole Trade War escalation too.
If I were a betting man, I would not put my money on a crash in the price of copper, that’s for sure.
Crude is riding its 50-day average as well:
Again, China is the largest consumer of oil now, so it will be very interesting come tomorrow.
As with gold & silver, it’s possible we see some front-running of the market anticipating the bullish return of China.
The yield on the 10-year Treasury Note is range-bound:
Keeping in line with the trend, we would be looking for a break-out finally, above that all too psychological level of 3.0%.
Most likely three percent is priced in to the stock market, but then again, all markets are manipulated all the time, so it is kind of difficult to tell.
Notice how the 50-day acted as resistance yesterday for the Dow:
If the yield on the 10-year shoots above 3.0% fast enough, however, it could catch the markets off guard and usher in the next down-leg in the stock market.
The VIX does look like it wants to get out of bed again:
So we’ll have to see.
Bottom line: Look for movement in gold & silver at 2:00 p.m. EST.
This will be the last opportunity for the cartel to smash free-and clear of China, but then again, the technicals are already so bullish, especially in silver, that the cartel might be forced to allow a price rise in a managed retreat fashion.
We are very close to the turn.
I think it’s coming this afternoon or tomorrow afternoon.
I also think we could see $18 silver by the end of next week.
But then again, I’m wrong often.
So we’ll see.
– Half Dollar