SD Outlook: Gold & silver look strong coming out of the latest turn. Here’s why…
On the surface, things look calm.
Not much going on through hump day:
We have a Kashkari speech on Tuesday and a plethora of housing data.
Thursday and Friday are equally full of meh:
We don’t have any Fed speakers to worry about, unless of course, they are trotted out on CNBC. If that is the case, there is something wrong in the markets that the Fed will try to fix with some good old fashioned jaw-boning.
We do get more economic data releases in the latter half of the week, but we can rest assured knowing that nearly every single piece of statistical economic data is crafted in a manner to fit whatever narrative that the bankers and the government want to portend.
What we have this week is crunch time for government. And we get a double-shot.
Whereas economic data points and Fed Heads are one thing, the government often does make policy errors, and a policy error could move the markets one way or another.
Specifically this week, there are two major issues big gov will be tackling.
First, there are the tax cuts, which nearly everybody accepts as a foregone conclusion. If for whatever reason the tax cuts are not passed, there would most likely be violent reactions in all markets because at this point everything is priced in on a “yes” vote. A “no” vote is not priced in.
The second thing which culminates on a hard date (Friday) is the debt ceiling debacle.
In the current government’s quest to punish future generations with cumbersome debt by always kicking the can, by now we are all trained to assume that disaster in the form of a government shutdown will be averted again. One day disaster won’t be averted, but with the stock market euphoria and the promise of extra fiat in our pockets come next year, I would be thinking the government will effectively kick the can.
So while on the surface everything is calm, collected, and optimistic, under the surface we see signs that say “not so fast”.
Just like the Dow, the S&P 500 hit a new record high last Friday:
The dollar is in suspended animation:
The yield on the 10-year is in suspended animation:
And not only is the VIX not in suspended animation, but volatility is passed-out and unconscious:
And all of those things are pointing to a quadrouple-calm before the storm.
That is the problem.
If there’s one key take-away that can be learned in the market – nothing can last forever. So far, it seems like it’s blue skies as far as the eye can see. But prices are either going up, consolidating, or going down. All year long we have seen the stock market only going up, the yield on the 10-year in an average range-bound consolidation between 2.3% and 2.4%, and the VIX only going down.
And we don’t even know if a cohort within government or banking is planning on pulling the plug to catch everybody off-guard and front run the sea change.
Market manipulation is real, and precious metals price suppression is real, so it is not only not a stretch to say that the market manipulators are setting up for a massive reversal to the status quo, but they are going about it just when every last person is set in their market outlook.
Which brings us to the precious metals.
What is the outlook everybody shares?
Gold and silver are only going down.
Well, that’s the mainstream outlook anyway. It is even the outlook of many in the alternative media and the alternative investing community.
And that’s precisely what makes is more bullish than ever.
We can see that silver looks to have turned:
So far that bottom call of last Tuesday is holding.
And the silver COT Report is finally looking more bullish
Silver is now slightly up on the year, and we do mean only slightly, but the latest flush does look complete now.
And since everybody knows the price action for the last three years going into the end of the year, is it possible that we are starting to see front-running of the price rise?
In other words, silver could break-out beginning this week and not after this week like silver did in 2016.
And while the GSR is also in suspended animation:
If we have indeed turned (as evidenced last Tuesday) than the number of ounces it takes to buy one single ounce of gold is going to come down in a hurry.
Speaking of gold, right now the yellow metal needs to get above its 50-day moving average:
And the COT Report is indicating the flush is complete in gold as well:
Sure, its not as bullish as we’ve seen before, but that may be all the cartel is able to muster.
If that is all the cartel is able to get out of the CoT, the floor has been raised, and if the commercial short interest is going to keep declining, then we could be looking at a short squeeze which would force the cartel to buy back the paper they sold short at even higher prices.
That’s part of how the manipulation works. There’s lots of manipulation but the way COMEX gold and silver is sold deserves extra attention from time to time to get any new readers up to speed.
Here’s a recap:
Bank “A” is in line to smash the price under the cartel’s orders. They sell a bunch of “paper” gold (or silver) into the market.
Granted, this paper is for gold and silver that doesn’t exist in physical form. The bullion banking cartel is just selling it because they can just print up the contracts as they go along. If they sell short enough paper precious metals, which they can, because the ESF and the Fed are complicit in the price suppression schemes, then they can ultimately out-wait any “speculator” who is long, meaning a person who bought the precious metal contract to hold thinking it was going to rise in price.
They also know where the stops of the speculators are placed, meaning the cartel knows what price they need to smash to in order to get the specs to sell, but that’s a trading lesson for a different day.
So what about these speculators?
The “speculators”, such as hedge funds, people with deep pockets, and others, do not have unlimited currency. But the bullion banking cartel can and does have unlimited paper gold and paper silver to sell into the market. So it becomes a waiting game, which was very painful to see play out since early September in the latest match.
The problem, and our saving grace, is that some quantity of metal does have to be delivered into the market. That is to say, there are legitimate groups who go into the market to buy precious metals, and they need those precious metals for actual use, so while in theory the cartel has unlimited paper to throw at gold and silver to keep the price down, in reality, if they throw too much and over-extend themselves, they could get to the point where they are physically unable to supply the market.
We already see evidence of this. For example, contracts are moved off of the COMEX and sent to London to be “settled”.
But what happens when the suppression can no longer be maintained in London?
Furthermore, in the physical market, if everybody who was holding gold and silver before has given up and no longer want anything to do with gold or silver, then there are more buyers in the market right now than sellers, and since the new buyers in the market are those who got in after 2011, then the price will have to rise, big-time, before this “scrap” metal returns to the market to be delivered. And that doesn’t’ even count an increase in investment demand, such as the demand from us stackers.
Platinum is now the only precious metal that is still down on the year:
But it we have indeed turned then platinum could get back into the green as early as today.
Palladium is going through as healthy pullback:
Which is exactly what we see in healthy, bull markets.
Copper is back above it’s 50-day moving average:
And while crude is consolidating:
Any price rises in crude oil from here could really only serve to raise the floor in the precious metals (and everything else for that matter).
So what is the bottom line this week?
Don’t be surprised if the rally begins not next week, or next month, but this week.
That would catch everybody off-guard, and may send a year-end scramble to buy precious metals.
We have not seen the big moves in gold or silver this year like we did last year. In 2016 there was a $100 price move on Brexit, and silver had multiple days with over a $1 move in price. If we see moves like that now into the end of the year, those price moves could set the stage for an exciting two weeks in the metals, and it might even raise an eyebrow or two.
– Half Dollar