SD Midweek: Precious metals are mixed, but there’s some interesting anomalies developing that won’t last long. Here’s the details…
Gold tried to break-out above $1300 shortly before 6:00 a.m. this morning:
Since then, the move has faded.
We can see that gold has gone nowhere over the last several days:
In its purist form, that’s called “consolidation”, and we would look to either break-out or break-down following the consolidating period.
Overnight and into the morning session we see the attempt to break-out.
Of course, this is what we are expecting: Nothing fundamentally has changed.
Technically, due to cartel price suppression and fraudulent paper markets, well, sure, things look bleak, but fundamentally speaking, gold is going higher, not lower.
So we see gold wanting to break out.
As if $1280 is acting as a floor.
I would have liked to see one nice flush under $1280, call it to $1275, to really flush out and shake out the longs, but if we’re going to rally this week, I’ll take where we are as the starting point, because if not, then we’ll most likely see that flushing to $1275 next week as the cartel will have both economic data points and the shortened holiday week on its side.
Further evidence of the floor in gold is that both gold and the dollar moved higher in the overnight session:
This is telling us that the demand for gold is there, because despite a rallying dollar, gold is still holding on, basically in a slightly downward grind, but holding on nonetheless.
And now, gold is wanting to break-out.
That said, silver doesn’t look so hot after the overnight session:
The chart above is misleading.
I’ve basically set-up most of the charts today to show the action since the start of the year, so while it is true that before the overnight session that silver has moved higher for five trading days in a row, we are basically talking about a painful $16.20 to $16.50 range.
But the same goes for silver as it does for gold: Nothing fundamentally has changed.
Technically, one could even argue that, not in the best interest of the cartel, unless their interest is to bank on rising prices, the technicals in general and the COT Report in particular are pointing to higher prices for silver as well.
So while the range-bound channel of agony absolutely sucks, its a clear sign that there is a floor under these metals.
And hey, we’re above the 50-day moving average. For now.
If the cartel could smash price lower, they would. Never let a good blow to sentiment go to waste, right?
But they can’t smash lower, because $16 is the floor, and it’s really more like $16.20.
The gold to silver ratio is confirming the top with each passing day:
We now have a 77-handle on the number of ounces of silver it takes to buy one single ounce of gold.
Bottom line: If silver finally starts to outperform gold when the next really begins in earnest, then these will be some of the last opportunities to purchase at a ratio in the high 70s.
Do I think the rally has begun?
I think the metals want to rally, especially as evidenced in gold and the price action I was showing earlier, in comparison with the dollar index.
But we are barely just getting started with the important economic events of the week:
On that note, this is going to be a tough day to get through as we have three data points which could provide light cover fire for the cartel, and we round out the afternoon with the Fed minutes and a Kashkari speech.
Bottom line: Today will set the pace moving in to the rest of the week.
And things don’t look bad with gold & silver:
- Gold is wanting to rally even with a rallying dollar
- Silver is above its 50-day moving average
Closing the week above $1305 to $1315 in gold and closing the week above $17 in silver would be very promising.
If not, then it’s going to be another month of pain with all that’s coming down the pike in the next few weeks.
Platinum is up $25+ off its recent lows:
Platinum really needs to get above $930 before a pullback, and with what platinum has done over the last two days, its not asking for much.
We just really need to see the bearish trend of many lower-highs and lower-lows turned around.
Palladium is banging around between its 50-day moving average and its 200-day moving average:
We really need to see palladium surge through the 200-day to get the 50-day pointing north again, so we can start the rally higher.
So we see the picture for the four precious metals right now is mixed.
Which is actually good news.
You see, if this is the start of the rally, it makes sense to see a mixed picture- some of the metals have bottomed already and are moving higher (silver & platinum), and some of them are still in the process of bottoming (gold & palladium). Plus, we have gold wanting to rally even as the dollar continues its bear market rally of ultimate carnage.
So let’s look at that carnage on the chart:
Just when it looked like the dollar was rolling over, BAM!
Overnight and into the morning the dollar is now working on breaking out above 94.
The dollar just keeps going and going and going and going.
Much of the dollar move is starting to be attributed to the chaos in Italy and their threats to launch a parallel currency (which would be euro negative).
And in that same vain, the smarter money is finally starting to move not to the dollar but to gold, which is why both rose in the overnight session.
But geez, how long is the greenback going to remain “overbought”.
One slip of the tongue, like, oh Steve Mnuchin or President Trump saying something about the dollar getting too strong, or some que in the Fed minutes that the markets don’t like this afternoon at 2:00 p.m. EST, and the dollar could turn around and start dropping in a hurry.
So think about this: The metals have, relatively speaking, held on to their support levels, which I’m calling their floors, even as the dollar continues to surge higher.
When the dollar reverses, what does that mean for the metals?
The metals should start surging like the dollar as the dollar begins to fall.
And we’re just one tweet, one interview, or one policy error away from that happening.
And there’s plenty of opportunity that a mistake could be made today. And make no mistake about it – this dollar rally is wreaking havoc on the emerging markets.
For example, the dollar index has rallied about 5.15% since beginning the move on April 17th.
But the dollar has rallied over 11% against the Mexican peso:
This is not going to bode well for President Trump’s trade deficit no matter how you slice it.
We have a classic “bearish engulfing” candle that has formed on the stock market:
Generally, this would mean the market would be set up for a drop, but whereas the cartel suppresses the price of gold & silver, they conversely prop-up and inflate the price of the stock market, so we’ll see.
Technically speaking, however, it doesn’t look good for the Dow.
And the VIX has caught on:
That last candle is the overnight/pre-market action, and where it is usually quite tame, the slight pop is notable.
Even if the yield on the 10-year is clearly range-bound:
I started adding that channel last week, and I said it could be too early to tell if we were stair-stepping with rates, but as the days grind on, it is beginning to look that way.
Its looking as if the cartel is moving in to take more control of the bond market now too. Range-bound between a 100 basis point float, then let the markets digest it, then move up to the next step, and range-bound the rates in the 100 basis point float to let the markets digest again. Repeat as necessary or until the markets blow up.
The latter is what will happen, because the markets can’t handle higher rates of interest, and neither can governments or individuals.
For now, however, they keep the illusion going.
Copper is looking all sorts of ugly:
Overnight and into the morning copper ran the entire range of the last month of price action.
But crude oil on the other hand just put in another multi-year high yesterday:
Here’s a question: What is going to happen to the price of crude when the dollar starts falling again?
Don’t worry, here’s a cheat sheet:
That’s a daily chart going back five years, showing the generally inverse relationship of crude oil and the U.S. dollar.
You see, these markets are at major inflection points, right here, right now.
What has been over the last four years is quickly turning into what is going be over the next four years.
The tide is changing.
What has been is not what will be.
But I digress.
We have a bonus chart this morning:
The Niagara Falls of Silver.
And now we have a bonus bonus chart:
Gold didn’t want to feel left out.
And refer back to your calendar for today –
We’ve got gold & silver wanting to go over the Niagara Falls in barrels potentially at 9:45 a.m., 10:00 a.m., 10:30 a.m., 2:00 p.m. and 2:15 p.m.
So if you’re into the tick-by-tick, grab some popcorn and grab some Pepto because things could get interesting today – call it turbulence.
Return to your seats and fasten seat belts.
If there is disappointing data, a policy error, or a slip of the tongue, which would all be bullish for gold & silver, then things could get very interesting today indeed.
Call it, say, “make or break day in the make or break week”?
– 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.