SD Outlook: Technically speaking, things don’t look so great, but fundamentally, we have the upper hand…
On the surface, the week does not look good for the home team.
Silver gapped-down overnight:
Gold gapped-down overnight:
And platinum gapped-down overnight:
Which brings us to the point of having to face reality in the eye and engage in an epic showdown.
Who is more likely to blink first?
The stackers are the strong hands. As everything else has either gone up in price or skyrocketed in price, there’s gold & silver. When the stackers hold the upper hand, sure, the cartel can bring down the hammer of brute force, but we know and they know it’s a losing effort.
So when we look at the technicals, things seem dire, but understanding the fundamentals show that gold and silver are still primed for a nice rise.
First and foremost, there is the tax cuts elation. The markets are taking this a bullish. Sure, whenever we print money out of thin air in the form of Uncle Sam’s limitless credit card, it will be bullish for the markets in the sense that people will spend that currency. But this is inflationary. More currency in the pocket means the same number of fiat dollars are competing for the same amount of good and services. This could turn out to be a dagger into the heart of the cartel.
We know how this movie ends. Sooner or later the gold and silver markets will force the hand of the cartel and either break it outright, or cause the cartel to flinch pull back. Because it is safe to say that while sentiment is terrible, and it is terrible in the West, the real die-hard goldbugs and silverbugs will be using free money and a year long suppressed market to buy the un-naturally low prices.
Buying with this freshly printed fiat is compounded by the make up of the stackers. Let me explain:
It is not the 1% using their tax cuts to buy up ounces. It is arguably the middle and lower classes. That is a much larger investor base than the one-percenters putting their currency into paper wealth. So if just some of that “free money” is used to buy into this weakness as all good value investors and contrarians may want to do (I know I will), we could deplete the year-long stockpile build in no time!
Something else that could cause the cartel to blink is North Korea. The rhetoric is getting even louder. Just a sampling of the headlines today show the U.S. is lining the West Coast with THAAD batteries to protect against the North Korean missile threat, and the U.S. military along with South Korea is holding some of the largest military “war games” ever. If the world suddenly realizes that thermo-nuclear Armageddon really is no joke, there could be a flight to the true safety, the safety that is not just a “promise to pay” or one that is dependent on the grid or internet, but the safety of the two traditional monies: gold & silver.
Another issue that could cause the cartel to blink would be the developments with President Trump. So far the Flynn charges are turning out to be minimal at best, and an epic MSM debacle as well, but there are those who still want to remove the President from office by whatever means necessary, even if he has added some new swamp creatures for the Deep State to hang out with there in D.C. But if there would be such a political shock, such as increased impeachment rhetoric, and once again, people could seek out the safety of gold and silver to weather the political storm.
Another issue still that could cause the cartel to blink is the whole debt ceiling debacle. Recall that the Debt ceiling was suspended until this Friday, December 8th, 2017. On December 9th, the debt will be readjusted to reflect the current cumulative borrowing through the period of the of the suspension. Now this week the spotlight will be on the biggest most-bestest tax cuts ever, but if the MSM and the democrats are looking for fuel to their fire that was put out last week, the debt ceiling might be it. Again, problems with the debt ceiling could cause a flight to safety because any negative issues are not priced in. Everybody just assumes the government can and will kick the can forever.
The bottom line is that in only naming four issues above, Tax Cuts, North Korea, President Trump scrutiny, and the Debt Ceiling, there is very little wiggle room for the cartel at this point.
We won’t even go down the path of the government getting heavy-handed on Bitcoin. Suffice to say sooner or later those holding currency will come to realize the difference between currency and money. The same could be said for “paper” or “digital” stores of value and real stores of value.
Supporting the fact that the cartel has very little room and basically no margin of error is the price of oil:
The price of oil has climbed from the summer low of $42.05 to even breaching the $59 just a few trading days ago. The price of oil is acting as a price floor for the precious metals because diesel is the significant input cost into mining gold & silver.
Copper is up three days in a row:
Which is also supporting the narrative that the commodities are going up in price, not down.
And palladium, well, it’s just not submitting to the cartel’s heavy-handed attacks:
The dollar is now banging around either side of 93:
It is by no means getting stronger from here. The tax cuts and rate hike are already priced in by now. There may be some bullishness as the markets move higher and the illusion continues in the MSM with the whole “everything is awesome” meme, but it’s hard see how it would be anything more than a bear rally.
The 10-year yield, however, is about into crunch time on which direction it’s going to move:
There’s not a lot of data points before the Fed decides whether it will raise interest rates on December 13th or not, but this is non-farm payrolls week, so a bullish number on jobs, as in coming in line with or beating expectations, would pretty much solidify the case for a rate hike.
After nearly putting in a significant one-day drop, the S&P recovered late Friday and came within spitting distance of new all-time highs:
Most likely this momentum will continue because the tax cut bill wasn’t passed until the wee hours of Saturday, so there is pent-up “elation” to be priced into these
The VIX also looks like it will be taking a trip back down:
But “fear” is not starting from under 10 today, it’s starting from over 11. Something to keep an eye on.
Finally, the gold to silver ratio is nearly screaming again:
The number of ounces of silver which can be purchased with one single ounce of gold has only been higher a few times this year.
– Half Dollar