Flat Tire, Overheated, And Out-Of-Gas: An Honest Look At Gold & Silver Moving Into The End of 2018

SD Outlook: With three factors standing in gold and silver’s way, we just might not rally into year’s end. Here are the details…

For those who say it in the comments, something to the effect of, “that Half Dollar is a great contrarian indicator!”, any and all gold bugs, silver bugs and people who generally want to see the prices of gold and silver rising will surely like this post.

Why?

Because I’m starting to think we won’t see any significant rally into year’s end.

That said, let me preface it by saying we could get an anticipatory rally in the end of December, a kind of front-running of the January rally, so to say, but other than that, I don’t think the outlook is good.

On the bright side, if I am not a contrarian indicator (that’s what I think), this is good news because it affords us the opportunity to focus on our stacks a bargain basement, fire sale prices.

Why does ‘Ol Half Dollar think we won’t see any meaningful rally until next year?

Three main reasons, in no particular order:

  • A rising dollar (due to a devaluing China and a dysfunctional Europe)
  • A falling price of crude oil
  • A stock market rally

Now, any two of those things reversing, and yeah, I would say it could be “rally on!”, but here’s something to think about: All the “politics” and political change in Washington still won’t start to make their presence felt in a meaningful way until next year when the make-up of the congress changes. So in the meantime, we have the recipe for weaker gold & silver prices.

How weak?

It depends on the three factors above. If those three factors stay true to form and substance, that is, if those three factors continue their short-term trends, then I’m looking for a retest of the December, 2015 lows.

I also think gold will fall more than silver.

Why?

Simple. The GSR. Are we really going above 90, or even 100 on the gold to silver ratio?

Imagine this popping above 90:

I mean, I guess we could, but I would be looking to buy silver hand-over-fist at that point, and as much as I could afford. At today’s prices, if gold holds at $1200, a GSR at 90 would put silver basically at $13.33.

We’ll see.

Again, it has to do with my three main factors going into the end of the year.

Gold looks to gap-open below its 50-day moving average:

So if I’m right about gold being weaker than silver here, we could see the gold to silver ratio falling, but for the wrong reasons.

Either way, I think if these metals go any lower there will be real supply concerns, and as such, we may just get a glimpse of exactly how full those coffers really are. I’m talking about the private mints, the wholesalers, sovereign mint back stock, etc. Basically I’m not talking COMEX or LBMA, because they and their numbers can’t be trusted anyway. I’m talking about catching a glimpse if there are any real supply issues at the retail level with gold & silver bars, coins and rounds.

Things could get very interesting.

Silver looks marginally better than gold:

But silver is just already so darn cheap right now, that it is hard to imagine mid-$13s or even $12s. At this point, as brutal of a year as it has been, I say “bring it”.

Does the cartel really want to run the risk of a 2015 style supply shortage?.

Palladium continued its pullback overnight and into this morning:

On Friday I called it consolidation around whole number support of $1100, but if palladium keeps falling, I’m going to have to reassess that call.

Platinum is showing indecision overnight and this morning:

The stealth bull trend is still in tact, however.

Moving on to the commodities, the overnight results are somewhat mixed.

Copper is hanging in there to the positive side:

The chart still looks pitiful, and copper did begin its fall long before crude oil.

With crude oil, we see some (for the moment) consolidation around $60:

Those looking for clues as to which way gold and silver prices are headed might wand to keep tabs on the price of crude oil. Mid-$55s is the price range where I said the metals could really start falling again from here.

We’ll see.

Here’s that ‘monster mid-term elections after party rally” in the stock market:

Sure, we pulled back on Friday, but just like the S&P 500, the Dow is also a favored child that gets to bounce perfectly off of its major moving average (the 50-day).

The stock market is one of my factors in thinking we won’t get that really in gold and silver to finish out the year, and supporting my theory is no shortage of Fed Heads yappin’ their pie holes this week.

Every. Single. Day.

Monday through Wednesday reaches a crescendo with Chief Fed Head Powell:

The is an audience Q&A following Powell’s speech, but we all know what questions will not be asked, and if they are, what questions will be avoided.

And Kashkari is getting around this week with not only a Tuesday speech but a late week speech as well:

Rounding out the week notice the Friday speech, oh so convenient to sweet talk the markets at mid-day to close out the week.

What a sham.

Now, look back above at the calendars again, because mixed within all those Fed Heads, we also get a bunch of critical data point – CPI, Retail Sales, Industrial Production – those are all important releases for the “markets” to digest.

Of course, if the VIX spikes again, things could get interesting:

That could be a kink in the stock market’s armor.

If yield on the 10-Year Note spike things could get interesting as well:

We pulled back in yield on Friday, and we know the Fed (not admitting it publicly, but in all reality), the President, and “market participants” all want lower interest rates, so if they spike again, the stock market might start to feel sick and could even get to puking again.

Finishing up with the dollar hitting fresh 52-week highs overnight and into this morning:

If this year has been marked by emerging markets turmoil, especially with emerging markets currency and emerging markets debt, on a macro-level, things could get worse before they get better for the emerging markets. Furthermore, this renewed surge in the dollar can’t be helping out the President’s trade war, so are we at the point where Stevie’s ESF steps in and walks the dollar down by selling dollars into the market?

Maybe we are.

What is the bottom line this week?

I’m looking at three trends acting as hindrances for gold and silver right now.

In no particular order they are:

  • A rising dollar (due to a devaluing China and a dysfunctional Europe)
  • A falling price of crude oil
  • A stock market rally

If one of those trends reverses, I would still be looking for gold and silver to either be treading water, or quite possibly going ‘lower for longer’.

If two of those trends reverse, I would start to think we could get our rally on.

If all three of those trends reverse, then yeah, it would be ‘rally time’, and that would be my call.

For now, however, I’m calling my wife and asking her if I can sell anything that’s not nailed down, so I can buy some shiny phyzz at these incredibly stupid, dirt cheap prices.

When the metals are “priced” like this, especially silver, it really makes no sense at all.

Call it ‘contrarian investing’ combined with ‘value investing’.

A doubly-good investing combo like this won’t last long.

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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