SD Midweek: The cartel can’t have it both ways, and now, the cartel may be losing its grip…
Overnight and into the morning gold and silver have surged:
Likewise, the dollar took a dump:
The word coming down the pike is Steve Mnuchin dropped the “we want a weak dollar” bomb in Davos.
The technicals in the dollar were already looking downright bearish:
And now we have the dollar index printing an 80 handle.
The significance of this dollar move can be seen in the following chart:
That’s a weekly chart, meaning that each candle represents one week of trading action.
It is significant if you will notice where the support levels are, or better said, notice the lack of support.
There is very weak support on the weekly, no pun intended, at possibly 88 or 85, but the major support isn’t even until dropping all the way down to 80.
So now the cartel has their work cut out for them, because, generally speaking, you can’t have it both ways.
You can’t have a weak dollar and low gold & silver prices. The dollar and the precious metals generally, but not always, run in the inverse of each other.
In this case, we are talking about the inverse, because gold and silver are coming out of their bear markets (with their new bull markets confirmed in 2016), and the dollar is coming off of is recent bull market (which lasted from mid-2014 until January 2017).
Said differently, while the dollar, gold and silver can move together in price, this time, they will not.
The dollar is going down and gold & silver are going up.
You see, as every other country in the world can measure their worthless debt-based fiat currency against a worthless U.S. dollar, the only thing the worthless U.S. debt-based currency can measure itself against is gold (and silver).
So a weaker dollar naturally spells out higher gold and silver prices.
I’ve been talking about this $16.90 to $17.10 range in silver that has developed over the last several trading days.
Here you can see the “allowable range” clearly:
Notice the smash yesterday.
It seemed like the cartel wanted silver kept in that range through options expiration.
They’re losing their grip now with this break-out and will have their work cut out for them if they are to keep silver range-bound.
The cartel nearly succeeded in smashing silver down below its 50-day moving average yesterday:
Of course, if Stevie wants a weaker dollar, and if Stevie gets a weaker dollar, then it stands to reason that we’re gonna get higher prices in the white metal.
Gold has been performing much better than silver:
Gold is now squarely battling $1350 and setting up to challenge the highs of last September at $1362.
The gold to silver ratio is presenting what looks like a top and the peak opportunity to make an arbitrage play:
If this break-out in the precious metals is real and we get another up-leg from here, then silver will have to play catch-up, so we would see a falling ratio in the number of ounces of silver it takes to buy one single ounce of gold.
Palladium is still just doing its thing:
As the precious metals, the base metals, and the commodities in general rally, we could see the current palladium pullback very short lived without a test of the 50-day.
Platinum is showing the metals are set to rally:
Although we don’t mention it much, platinum is 10x more rare than gold, and, historically speaking, the platinum price has been higher than gold.
For example, in March of 2008, the platinum price was $2300.
There is the possibility of arbitrage in platinum as well if the metals revert to their historical means.
As for my personal preference, I favor the yellow and the white metal, because those are the two metals specifically required by the U.S. Constitution in Article 1 Section 10.
Although now, the U.S. Mint is minting American Eagles in all four of the precious metals now, so arguably, they are all four monetary metals now.
Which brings up a point I like to talk about from time to time for perspective.
Current approximate prices:
- Gold: $1350
- Palladium: $1100
- Platinum: $1020
- Silver $17.30
What is the average price for the first three precious metals?
If you said approximately $1,150 then you are correct.
What is the average for a precious metal when calculating all four (gold, palladium, platinum, and silver)?
If you said approximately $870 then you are correct.
What is the price of silver?
If you said approximately seventeen bucks then you are correct.
Is it now clear what the cartel literally hates more than anything in the entire world?
If you said silver then you are correct.
The price of silver may be $17, but that is not the value, and sooner or later, the true price of silver will prevail.
Copper has tested the 50-day just as expected:
I’m not ready to call Dr Copper down for the count.
Crude oil also looks to be finishing up the latest dip:
Crude oil has been running hot for quite some time, but to remedy that there also does not have to be a crash in the price of oil, there simply be a basing and consolidation over time, at some price level, that brings the technicals back to a more neutral level.
It looks like that may even be happening around this $65 price.
However, the weakness in the dollar is not to be underestimated. Even though crude is overbought here, if the dollar keeps dropping like a sack of potatoes, then crude could launch to another price level higher even from here.
Get ready to pay more for everything as this crude price works its way through the financial system and then into end products and services offered to Main Street.
The ViX is oblivious to all of this:
Of course, one of the key factors in manipulating markets is alleviating any “fear” or “uncertainty” in the marketplace, and as such, low volatility keeps up the illusion of blue skies as far as the eye can see.
So another farce, in the midst of all of this, is a new record high stock market:
Why is it a farce?
Well, we have rising gold & silver prices and we have a falling dollar, both of which would be bearish for the stock market.
And we have rising interest rates:
Which is also bearish for the stock market.
Granted, the interest rate market has been manipulated hardcore for the last ten years, but, generally speaking, if you have rising interest rates, you can get a better “return” on your money with the “safety” of U.S. bills, notes and bonds than you can if you “invested” your money in the “risky” stock market.
Finally, Goldbugs and Silverbugs know this pain:
Because some have even lived it since January 1, 1974 when the futures market began suppressing the prices of gold & silver.
But the cartel is losing it’s grip, and sooner or later, gold and silver will break away from their bondage.
– Half Dollar