SD Outlook: The dollar is surging, the lira is crashing, and gold & silver are clinging for dear life to whole number support…
Depending on where one looks online at the tickers depends on the real time price for the underlying.
Some website’s show the bid, some show the ask, some show different contract months, some show the last price, some prices don’t sync but every few minutes, etc.
Trading platform ThinkorSwim right now, by default, shows the gold December contract (GCZ8) and silver September contract (SIU8).
In other words, it’s a penny here or a penny there, and some have called “spot price” of gold below $1200 as of this morning. Regardless, there was a bounce this morning after the spike low, but the trend is clearly in a downtrend.
Here’s a “last price” with both metals falling below whole number support at 12:50 p.m. EST.
END OF UPDATE
We have been talking about the currency crisis and currency wars that have been gripping various parts of the world.
Namely the South American countries of Argentina and Venezuela have seen their share of currency turmoil.
Well now, we’re not just isolated to South America as the currency crisis spreads.
First, not necessarily “crisis”, but devaluation, is the Chinese yuan.
The overwhelming belief is that the Chinese are devaluing the yuan as a weapon in the trade war:
There has also been plenty of talk about the yuan peg to gold, as in gold in dollars is moving with the dollar price of the yuan, tick for tick.
The yuan is taking a backseat, at least for now, however.
That is because Turkey is the latest nation to see its currency in utter crisis.
The move is rather parabolic:
That’s nearly 200 points in the move since last Thursday to Monday morning, from 5.27 to 7.12.
Said differently, on the ‘official’ exchange rate, where just two days ago it took 5.27 Turkish lira to buy one US dollar, at its peak in overnight trading it took 7.12 Turkish lira to buy one US dollar,
To bring the point home, we can say it two different ways as well –
- The dollar just became 35% more expensive to buy in Turkish lira
- The Turkish lira has lost 35% of ifs purchasing power in dollars.
That is a huge move, considering that is just over the last two-and-a-half days.
It’s really much worse than that, however, if we look in terms of purchasing power over the last year.
The low print from September of last year was 3.38, and taking the high print of 7.12 overnight, we’re talking about a move of 110%.
The crashing of the Turkish lira is, in part, causing a flight to the US dollar.
We can see that clearly in yet another surge of the dollar:
Notice the erratic move overnight on the last candle of the chart?
Here’s what it looked like as we break it down to the 1-minute timeframe:
It will be interesting to see if there is any kind of comments from President Trump about the dollar.
Remember, the dollar index was about 135 points lower when President Trump not only expressed his concern for the strong dollar, but doubled-down on that expression the very next day.
And remember, he specifically named Europe in one of those Tweets:
China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day – taking away our big competitive edge. As usual, not a level playing field…
— Donald J. Trump (@realDonaldTrump) July 20, 2018
And what happened to the Euro overnight?
It has carried the momentum from last week and just put in another 52-week low against the dollar:
What is the point of all of this?
To keep on top of the shifts and turmoil in currencies as that will be the hot topic of the week.
It is likely that talk about the trade wars will take a backseat this week to talk about the currencies.
By extension, talk about the currencies will also include talk about sanctions and the bond market.
There is an obvious flight to “safety” in the US dollar, so too there will likely be a continued flight into the US Bond market.
Which means yields on the 10-Year Note would continue to fall:
So long to 3.0%, at least for now.
Interestingly, with all the chaos in the currencies around globe, we are not seeing a flight to “safety” in the tech stocks:
Remember, as part of the mainstream financial press bashing of gold & silver, they like to talk about tech stocks being the new “safe haven” assets, but the Nasdaq in general is not bid.
In fact, so far the moves in the US stock market have been minimal, which helps explain why the VIX is barely at 14:
Sure, there’s a blip, but so far complacency rules the day.
We’re about to find out if copper is going to start crashing again:
If copper loses that intra-day low of $2.67 that chart will look very bearish, even more so than it does now.
Crude oil is still digesting what all of this means:
There has already been geo-political risk that could make its way through the oil market, specifically in the form of sanctions affecting supply and/or increasing geo-political tensions, and now there is currency risk with the crude oil market as well.
And these fundamental shifts in the crude oil market are on top of rapid decline rates in US shale oil and a plummeting production in Venezuela.
The take-away is that it seems like we are at a point in the global economy where there cheerleaders of the economy flip the script and finally begin talking about an economic downturn in earnest, because there are serious problems that can’t be papered over or swept under the rug right now.
Though they will likely try to spin it that the US is immune from all the global turmoil, which the US is not.
Palladium has dropped in the overnight/morning session:
Just like with copper, break down below that intra-day low and the chart will be looking very bearish.
Platinum has also dropped in the overnight/morning session:
I’ve been talking about the importance of that first higher-high, but now, platinum seems to be reversing and turning down yet again.
Of course, with commodities turning down and with the precious metals turning down, palladium and platinum, being industrial commodities that are precious metals, we would expect to see weakness right now.
Moving on to gold & silver.
I zoomed out of the gold to silver ratio to show that we were under 65 in the 2016 run-up in price:
The ratio also shows how we’ere at pretty much an extreme right now, and when it starts falling, it can fall pretty fast. For example, the ratio fell from around 85 to under 65 between March and July of 2016.
Now I get it: Sentiment is in the gutter, and the last thing on anybody’s mind is the ratio falling from 80 to 60 between now and February of next year (that’s not my call, just an example).
But the point is that when the pivots finally take hold and the metals get moving, they can move rather quickly and catch people off guard, so right now, we can enjoy the gift the GSR is affording us with awesome arbitrage potential.
We can see on the 1-minute chart how gold is clinging on to $1200 for dear life:
That’s just a constant grind lower overnight and into the morning with the spike low taking place at 7:39 a.m. EST.
On Friday I said how the bottom had held in gold & silver when the top in the dollar did not.
Well, we can stop saying that now because the President Trump forced dollar top couldn’t hold last week, and by extension, his forced bottom in gold & silver has not held as of today in the pre-market action.
I had mentioned a bid around $1,212 in gold:
Instead we get a lower-low, and a fresh new 52-week low on the gold chart.
The chart looks like we will fall below $1200, and we know for a fact that with all the currency and sanctions turmoil around the world, the cartel would love nothing more than for gold & silver to fall below whole number support and actually stay there (as in no bounce), so I’m looking for it.
At sub-$1200 and sub-$15 in late 2018, in my book, that’s “back-up the truck time” as I said on Friday.
Silver traded as low as $15.08 this morning and looks equally downright bearish:
Additionally, the lighter trading volume over the past few weeks and the fact that silver can run some more before screaming “oversold”, I’m looking for silver to lose whole number support of $15.
There have been analysts who have said we would never see silver drop below $15 again.
I was not one of them.
Whenever the word “never” is used, the opposite is usually the case.
Bottom line: The start of the next rally in gold & silver is about one of the hardest calls to make right now. From the amateur to the most respected traders, the worst and the best alike have been unable to call the bottom, and we have seen many a failed call for the rally.
I think it is going to be more of the same this week, with the cartel attempting to get gold and silver below whole number support for as long as they can hold it there.
If that happens, we’ll zoom out and look for downside targets.
The one thing that is absolutely certain is that when the rally finally does start, nobody will believe it, and it will be the most epic of climbing the wall of worry.
– 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.