SD Outlook: People looking for a much deeper pull-back in gold & silver prices are likely to be let down. Here’s why…
Editor’s Note: Mike & Half Dollar will be streaming live today at 12:00 p.m. EST on our YouTube channel.
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There are 4 things going on right now that are screaming “rally” to me.
First, there is Iran.
Something is going on in Iran/Saudi Arabia which is causing the price of oil to spike and the swamp creatures to go full Pavlovian.
I say “something” because other than the people who did it, and the people who are in on it, well, who really knows what really happened?
We are told that a massive missile strike heavily damaged the largest Saudi oil processing facility, and the US says it was Iran that launched the strike.
Needless to say, check out that gap-up in the price of crude oil last evening:
That’s a major, massive spike, and the technical picture is so neutral that crude oil has a ton of room to run to the upside, which will only add fuel to crude oil’s fire.
Not only is production of Saudi crude oil taking a hit, and in a not-unmeasurable way, but Lindsey Graham even said the U.S. should launch a strike on Iran’s oil sector in retaliation, to “break the regime’s back”.
At the most basic, fundamental level, a rising price of crude oil increases the cost of gold & silver mining, but since we’re talking about the possibility of war with Iran, this also means the fear trade continues, big time.
The possibility for continuance of the fear trade is best summed up with this Tweet from President Trump last night:
Saudi Arabia oil supply was attacked. There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!
— Donald J. Trump (@realDonaldTrump) September 15, 2019
Fundamentally speaking, the situation in the Middle East and with crude oil are bullish for gold & silver.
Secondly, the Fed meets this week and is expected to cut interest rates.
Right now there is “only” an 85% probability the Fed will cut rates:
With the Fed still maintaining radio silence through Wednesday until the FOMC statement release at 2:00 p.m. EST and Powell’s press conference at 2:30 p.m. EST, Trump will be sending out some “Hey dummy Powell, cut interest rates you buffoon” Tweets.
Side Note: We also get a bunch of housing data this week, especially midweek:
Which will offer more clues as to the state of the economy.
Fundamentally speaking, Trump’s Twitter attacks on the Fed and the Fed rate cut are bullish for gold & silver.
Thirdly, there is the trade war.
On Friday, I laid out the case why Trump eased off and went full peace, love & happiness on the Chinese Front of the Trade War, but it seems as if Trump is set to escalate the Trade War on the European front:
Fundamentally speaking, the trade war is bullish for gold & silver.
Second side note: There are secondary and tertiary effects from the trade war as well, such as competitive currency devaluations and the continued movement away from the weaponized US dollar, and the secondary and tertiary effects are bullish for gold & silver.
Fourthly, there is the yield on the 10-Year Note:
With the prior three things I just mentioned – the situation with Iran/Saudi Arabia, the Fed’s FOMC, and the trade war – it is reasonable to assume there would be a “flight to safety” into the US bond market.
OK, “Hey Half Dollar, the Fed’s rate cut will be bullish for the stock market, so you’re wrong about that one Mr. Know-It-Not-At-All, so if anything, there would be continued movement out of “risk-off” and into “risk-on”, so explain your way out of that one!”.
Good point, and a nice try.
It remains to be seen whether the rate cuts are “good for the stock market” or not, because the Fed has already begun its “easing” cycle and already cut rates once, and it’s not like the stock market took-off with monstrous, rip-your-face off daily surges from the rate cut.
Additionally, the Fed is not only not shrinking its balance sheet, but the Fed is actually back to its money printing ways by means of several weeks of US bond market purchases.
In other words, the Fed is engaged in not so covert QE.
So, yeah, whether the stock market breaks-out to new, all-time highs or not is moot – we’re in a bubble, and at a very minimum, any supposed selling of bonds because people are moving into risk-on would be more than offset buy the fear-based buying, but, there is also a consideration that it’s possible that one effect of the rate cut on the stock market could be that there are more people who recognize the stock market is in a bubble and look to sell stocks and move into bonds as a way of putting on a hedge, so I’m just not so sure the Fed rate cut is all that good for the stock market this time around.
Said differently, I do not see a big move from risk-off (selling bonds) to risk-on (buying stocks) just because of a rate cut.
Recall that last week I showed how the cartel was ramping yield on the 10-Year Note to smash gold & silver prices.
If there is a rush into the US bond market his week because of the fear trade, the cartel will have one heck of a problem on their hands containing gold & silver, and all of that hard work from last week (really the yield ramp-job has taken place over 2+ weeks) to suppress gold & silver prices by means of selling bonds will be for naught.
I just mentioned four reasons, and side notes, as to why we are likely to see the next rally in gold & silver beginning this week.
Those four things are what is known going into this week, which has barely started, and those four things do not include any “black swans”.
If there is an unexpected shock in the markets, in the economy, with politics or with geo-politics, that black swan would only serve to put a turbo charger on the next rally.
Silver poked its head above $18 last night:
The chart huggers will say silver needs to come back down and test support somewhere between $16.90 and $17, but if the fundamentals actually matter, it could be more like testing resistance at $19.50.
One of the points I’ve been making over the past couple of months has been how the fundamentals are finally re-asserting themselves into these “markets” and affecting the prices of gold & silver.
Going into this week, the fundamentals for gold & silver are as bullish as ever.
Is it any wonder now, why John Bolton was “fired” last week?
Now that the evil warmongering Deep Stater is out, any war with Iran would not just be justified, but it would be the right thing to do.
Would it not?
We saw the fear trade in gold as soon as the markets opened on Sunday:
I still have concern the cartel ramps gold to $1525 to paint a right-side shoulder on the daily chart, followed by the cartel selling as much paper as possible to beat price back down, but if the developments over the weekend are any indication, the cartel will need to come up with a “plan B”, and they’ll need to come up with that plan on-the-fly.
The gold-to-silver ratio has moved more favorably to silver and for the right reasons:
That is to say, this once in a cycle opportunity just got even sweeter due to the “pullback” in the silver price.
Palladium is starting the week at all-time highs:
I think we could get a quick break-out above $1700 and beyond, but I really want to see palladium’s 50-day turning north again.
Platinum is an interesting wild-card this week:
I think sub-$1,000 is a great price to begin staking out a position in platinum, but if we drop down into the $800s, that, in my opinion, would be a “back up the truck” moment.
I’m really liking copper’s break-out:
I do not think it is a “break-out, fake-out” at this point, and I don’t think we are heading back down to sub-$2.50.
Please accept my apologies in advance for being all over the board with the charts today.
It happens, especially when there is so much going on with market & geo-political cross-currents.
That said, with everything going on, and with all of it leading to heightened market uncertainty at a bare minimum if not flat out war with Iran, well, this:
We have a Hershey squirt sized gap-up in the VIX, but while the week may be starting off with only a minor pop, I think we could see the VIX spiking at one point this week, and that would be yet another bullish factor for gold & silver.
The US stock market still has a few points to go to pat itself on the back:
On second thought, President Trump only needs a few more points to go to pat himself on the back.
It is, after all, his stock market.
Even if we get a rush into the US bond market based on a “flight to safety”, I don’t think we get the same flight to safety into the US dollar:
The dollar’s been held at the high end of its allowable range, and, fundamentally speaking, this Fed rate cut is essentially dollar bearish.
There’s been so much going on lately, so Mike & I will be live-streaming today at noon (EST) on our YouTube Channel.
We hope you come join us and help us sort it all out in the chat, or even by calling-in to the show, live!
What’s the bottom line as we find ourselves here this beautiful Monday in September?
It’s clear the fundamentals are indeed taking over these “markets”.
And four things happening this week are bullish.
And after last week’s smash?
Gold & silver are?
A real steal?
– 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.