Fed’s Fall Festival: Will Gold & Silver Investors And Traders “Sell The Rumor And Buy The News”?

SD Outlook: Rate “hike” week has finally come, after nearly two months of waiting. Will investors “sell the rumor and buy the news”? Here’s some insight…

All eyes will be on the Fed this week as the Fed apologists and cheer-leaders come out of the woodwork to armchair quarterback the September FOMC meeting, which begins on Tuesday and ends with Fed Head Powell’s press conference at 2:30 p.m. EST on Wednesday.

Don’t expect any real questions for Powell, because there rarely ever are, and when there are real questions, we notice those reporters do not make it back to further Fed press conferences. Do, however, expect market movement Wednesday afternoon.

A Fed rate “hike” is not just baked in the cake on Wednesday, it’s baked in the cake and then some.

In fact, CME Group calculates a probability of 92% that the Fed will raise 25 basis points:

More amazing about their calculation, however, is that there is also an 8% chance the Fed hikes 50 basis points. Currently, the Fed Funds Rate floats between 1.75% and 2.0%, call it 1.87%, but with a new Fed Funds Rate of 2.0 – 2.25%, this will mark the first time the actual rate has been above 2.0% since August of 2008.

See just how pathetically low rates still are:

That is why I like to put the word “hike” in quotes, because the current interest rates really are a sham and a scam. In fact, when factoring in inflation, real interest rates are negative. This means that for every dollar a person has in a bank or a savings account, that dollar is losing purchasing power over time. A way to combat this loss of purchasing power is by converting dollars in the bank or savings account into physical gold and silver, and now is a great time to do that as the prices of metal have been artificially suppressed for decades, and prices have been suppressed to the fullest since 2011. Plus, in addition to keeping up with inflation (once the rally actually begins), there is also the possibility of making profits on the metals as well.

Here’s the thing – on Wednesday, listen for Powell to say, several times, they have a “2.0% inflation objective”. This really means the Fed’s plan is to devalue the purchasing power of the dollar by 2% per year. Compounded too! What this really means is that there is a mathematical certainty that the US dollar will die.

Can it go to absolute zero?

No, because there are an infinite amount of percentages between zero and one, but the dollar will lose value close enough to an intrinsic value of zero that the people will just give up on the dollar, and something new will take its place.

Take Venezuela for example – their currency did not go to absolute zero, theoretically, but it didn’t need to. In practice, the bolivar went worthless enough that the government slashed five zeros off of the the banknotes and issued brand new currency recently.

We are not immune to this fate, but don’t take Ol’ Half Dollar’s word for it.  Listen to the gut-wrenching, vomit inducing Powell press conference and hear him say it for himself.

Bottom line: Another way of saying “we have a 2.0% inflation objective” is “we plan on killing the US dollar”.

They will succeed, because it is backed by nothing more than a tired military that the world is tired of.

The FOMC meeting is not the only event this week. It’s actually a pretty jam-packed week.

We get a bunch of housing data in the first half of the week:

Remember – in theory, as the Fed is “hiking” rates, that would push up the rates of everything, not just the rate that banks lend to each other at, and as such, mortgage rates will keep on rising. One of the serious headwinds for the housing market are rising interest rates. As the interest on mortgages rises, people become priced-out of homes because their monthly payments are no longer affordable. This means people either have to buy a smaller house, or home prices have to come down.

With each release of housing data points, we are starting to see signs of the latter.

The data keeps on coming to end the week with the Fed’s own preferred inflation data point:

Remember, the Fed likes PCE over PCI for many reasons, including the inputs of what is measured change annually with PCE, and therefore it is much easier for inflation to be understated, meaning the Fed and the government can claim that prices aren’t really rising that much when we all know their stats are phony.

It will be an event driven week for sure.

Look for key words “rumors” and “news”, and how they are put together.

For example, when talking about gold, we could see a “sell the rumor and buy the news”. That means the rumor is they are going to raise rates, which would be “good” for the dollar and “bad” for gold (it’s not, but that’s what the Fed and the MSM attempt to brainwash the masses with). Regardless, to the point, if traders “sell the rumor and buy the news”, that would mean that gold is sold (on the rumor of the rate hike) going into Wednesday, meaning prices come down somewhat. Once the “news” hits, that is, one we get confirmation that the Fed has hiked rates, traders would “buy the news”, meaning the price of gold would rise after the announcement.

There are many derivatives of the saying:

  • Buy the rumor, sell the news
  • Sell the rumor, buy the news
  • Buy the rumor, buy the news
  • Sell the rumor, sell the news

I think this could be a “buy the rumor, buy the news” because I really think downside is limited here.

So let’s dive into the charts to see why.

First off, the GSR looks more and more like it is rolling over with every passing day:

We want to see silver starting to outperform gold.

Overnight and into the morning, silver did just that:

In the grad scheme of things, one night and morning of trading action does not change the over all dynamics, but the point I’m trying to make is that as gold bottomed first, and turned, assuming the metals have bottomed, then silver will catch gold and overtake gold in terms of performance.

We see overnight and into the morning, that subtle uptrend in silver continues:

It may not be pretty, but so far it’s a start.

The COT Report in silver is still “bullish” as the Specs have barely pared back their short position:

Remember, at a point, the specs will have to cover those short positions, and while we don’t know what happened last Friday, because the snapshot of the COT Report is taken on the Tuesday prior to the release three days after, this week’s COT would be of more use, if any, in seeing where things stand as far as the short/long positions go.

Because remember, gold got hit hard on Friday.

Remember those 20,000 contracts in three minutes?

So this Friday’s COT Report will be much more interesting, but then again, the snapshot will be taken on Tuesday, and before any market movement post-Fed.

It really shows just how difficult it is in using charts and reports in trying to gauge the market.

Gold’s daily chart looks the opposite of silver’s with the overnight and morning action so far:

We just all need to realize the week is only getting started. What I am not liking is the smack-down from the 50-day moving average on Friday. Let’s just see if the yellow metal can work its way back to re-take the major moving average soon.

Palladium had a good week last week and a good overnight to start this week:

I am expecting a pullback or consolidation here, however – just check out that RSI.

Platinum looks also to be starting the week in the green:

Granted, with the gold & silver dumping on Friday, platinum came under pressure of its own.

Copper has been on fire lately:

Of course, copper was in an official “bear market”, with having been down more than 20% from recent highs, however, since many think (myself included) that we are on the cusp of strong performance in the commodities, it is natural for copper to bounce off of those lows like it did. Now, if the stock markets start crashing and the global economy is in an “officially” recognized recession, we would want to look for copper to give us clues that this is indeed the case.

Crude oil is still above $70 in the overnight session:

I have been saying for months that the price of crude oil is putting a floor on the price of gold & silver, and hovering above $70, I think it certainly is. If crude oil pulls-back to $65, I still think the floor in the metals is around where it is now, but if crude really corrects, like into the $50s, then that floor would be obviously lowered. So perhaps more important than the developments on the COT report or the other technical indicators within the charts themselves, I think here in late 2018 the price of crude is a major factor. Think about it – the miners have been cutting costs for years, and the price of crude oil has been dropping for years, so the miners can barely cut more costs, but they have to pay higher costs for diesel to run all that energy intensive equipment as the price of crude has been strong over the past 18 months. If the price of crude is rising, with the minter’s cuts already as low as they can go, the price of the metals will have to rise just based on the cost of the energy input.

I have been talking about the DOW. I called for 2666X.XX. I guess we will have to see if it pulls back and lands on that number, but I am no longer looking for DOW 2666X.XX.

That said, it seems pertinent to start mixing in other charts showing how bubbly the stock market has become.

Don’t take the DOW’s all-time record high for it, check out the S&P 500:

The S&P is at all-time record highs as well.

Of course, having the farce on your side helps out big time:

Here we go again starting the week under 12.5.

Amazing.

Of course, the dollar and the yield on the 10-Year Note are going to start hurting the stock market, not helping it.

The dollar is looking like it is going lower:

Part of the appeal of the US stock market was the strength in the dollar. It’s a double-play. You see, foreigners get the profit on the currency exchange, and the stock market is priced in dollars, so they get the stock appreciation, paid in a strong dollar. If the dollar is rolling over here, the sweet currency arbitrage play that has been in effect for months becomes less of an arbitrage and more of a risk, depending on how the dollar weakens, and it could become self-reinforcing. That is to say, foreign investors sell stocks to lock-in their profits, and then sell dollars to convert back to their currencies.

Yikes!

The yield on the 10-Year Note is also about to start hurting the stock market:

Of course, I am assuming that rates keep rising when I make that statement.

Why will yield become a hindrance on the stock market?

Because as the yields move higher, the “safety” of the bond market becomes more rewarding than the “risk” of the stock market, so investors are motivated to move into bonds. Now, I don’t think the bond market or the stock market is safe, but then again, we’re talking about the sheeple and the brainwashed zombies out there who think that just because the debt-based fiat dollar-centric system is the only monetary system they’ve ever known, that it will always be the only monetary system we ever have.

“The United States will never go the rout of Venezuela” is something those people say that comes to mind.

That statement is not only so far from the truth that not only is the US dollar going the route of the Venezuelan bolivar, it’s guaranteed to happen.

And the Fed is working their hardest to make sure it happens at a rate of 2% per year.

Listen for Fed Head Powell to say they are doing so at least five times on Wednesday starting at 2:30 p.m. EST.

And listen to the sound of silence when nobody calls him or the Fed out on this scam.

President Trump is the wild-card in all of this.

Will Trump put the Fed on blast this week?

Stack accordingly…

– 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.

Paul’s free book Gold & Silver 2.0: Tales from the Crypto can be found in the usual places like Amazon, Apple iBooks & Google Play, or online at PaulEberhart.com. Paul’s Twitter is @Paul_Eberhart.

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