SD Outlook: Gold & silver may be finally bottoming, but there’s a major reason we’re not out of the clear just yet…
First the good news.
The gold-to-silver ratio just keeps looking better:
Every single number on the latest daily chart is above 80, with a high above 82, and a last price of 82.52.
It’s hard to see how we are not close to the gold to silver ratio coming down. Regardless, to say the ratio is favoring silver right now is an extreme understatement. Compared to earlier in the year, you can now get over six ounces of silver for each ounce of gold, dollar for dollar.
Next, on to the wildcard:
We are coming up on the Chinese Lunar New Year.
This is the Year of the Dog.
The screenshot above is the Shanghai Stock Exchange, but it also applies to the Shanghai Gold Exchange and basically all markets in China. Beginning Wednesday night nad continuing through next Wednesday, markets in China will be closed.
Why does this matter?
The cartel may be able to strong arm the markets while China takes time away from business and focuses on celebrating the New Year.
The cartel absolutely loves smashing when China is closed. Think back to last October (Golden Week in China) and who painful Late September through Mid-December was.
The last few years have seen gold & silver rally into the Chinese Lunar New Year, and as we will see, the technicals in gold & silver do not show us out in the clear just yet, so it remains to be seen, but we need to be on guard nonetheless.
As for events in the U.S. this week, we also get a bunch of data releases, especially beginning Wednesday and continuing through the week.
Data such as the Consumer Price Index (inflation statistics), Retail Sales, Industrial Production, the Producer Price Index (inflation statistics for manufacturers), Jobless Claims, and Housing starts will all give us a glimpse of how the economy is doing in a wide angle look across major sectors. Granted, the numbers have been massaged for so long that they near the point of meaningless, but those releases do move markets, and what we will be looking for are clues to how they (govt & Fed) are trying to paint the picture of the economy. There’s also those occasions when the markets don’t “like” a specific report, and with last week’s action in the stock market, and with the resurgence of volatility, there is not a lot of room for error on the part of the
Silver shows why we’re not out of the clear just yet:
The white metal can run more to the downside before screaming “oversold”, and the Moving Averages Convergence-Divergence is still bearish. Both of those technicals are nearing the end of their current runs, and it would be nice to see open interest to come down even further, but those last three candles on the chart are showing hte signs that the bottom may be in with the reversal coming.
If we had just one or two more down days, it would be extremely bullish, but there is not denying it – Silver is very close to turning up and beginning its rally.
Gold has held up much better (which explains the GSR):
Gold never got into “oversold” status, and the MACD seems slowly but surely turning bullish, and we can look to the broader stock and bond markets for clues as to why.
Remember, for the smart money and the big money, gold is the go to hedge against uncertainty, so on a fundamental level gold, even though having dropped last week, has held up, relatively speaking.
The technicals aren’t horrible for gold, and we don’t need to absolutely return to an extreme bearishness on the technicals before the rally, so don’t be surprised with an upside surprise this week. Especially if and when silver begins to move first and outperform gold. In other words, if silver starts making a move, gold could take off from these levels.
The biggest concern with gold was not tagging its 50-day. We really do not want any break-down to the downside, even intra-day. So if anything, we need to be rooting for gold to at a minimum hold here with some distance between it and the all important moving average.
Platinum has not yet tagged its 50-day:
When compared to gold & silver, platinum does not have the look of a bottoming reversal just yet. With the golden cross just a few weeks back, it would be nice to see platinum bottom and reverse soon because looking at the last golden cross on the chart (August 2017), within a month and a half it could not hold, turned into a death cross, and we all know what happened last October through mid-December.
Palladium, on the other hand is showing signs of a bottom and reversal:
Palladium is the most “oversold” on the Relative Strength Index (RSI), so it stands to reason that it would rally first.
That said, even if the correction isn’t over, we really don’t want platinum falling through its 200-day moving average. That would be bearish no matter how the technicals look.
Speaking of a bearish sign falling through the 200-day moving average after climbing for more than a year:
That is what I’m talking about palladium not doing.
The big difference, however, is that the stock market is the ESF, the Fed, and President Trump’s baby. The question is do they want it to fall for some reason or are they stepping in to save it.
We’ll know soon enough.
The VIX has stayed up for most of the last week:
The VIX closed above 25 every day, and it looks to be opening above 25 today. Suffice to say, we could be in for more wild rides in the stock market, especially if the VIX keeps spiking higher.
The dollar looks like its bounce may be over:
A falling dollar would put more pressure on the stock market, and falling dollar would help to support gold & silver.
The yield on the 10-Year Note is still above 2.8%:
If the yield makes another surge higher, from here, then again, look for more continued volatility and pressure on the stock market.
Last week, as yield shot above 2.8%, the stock market dropped. If yield shoots up to 2.9% or the all eyes on 3.0%, then things could get interesting real quick.
Finally, let’s end this outlook with the commodities.
This really ties it all in together:
Copper has done exactly what we thought it would do:
Copper fell though its 50-day and now looks to be putting in a bottom to begin its next rally.
While crude has fallen some 10% from its recent highs:
Crude too is banging around the 50-day trying to carve out a bottom.
Both crude and copper (and gold, silver and palladium in their commodities role) seem to be putting in reversals today.
What does that mean?
That nothing has changed other than the amount of pain we’ve felt since the start of the year with the constant beatings of the metals.
But nothing has changed in that:
- Inflation is picking up (gold for gold & silver)
- The dollar is falling (gold for gold & silver)
- Yields are rising (gold for gold & silver)
- Commodities prices are climbing (gold for gold & silver)
- VIX/Volatility is rising (gold for gold & silver)
- Stock market/bond market turmoil (gold for gold & silver)
Could there be more pain?
There could, especially since the cartel doesn’t have to worry about the worlds largest consumer of gold starting Wednesday evening and continuing through next Wednesday.
And that means if they want, they could royally flush out the levels of open interest and essentially start from a clean slate, or as clean as they could get it.
But the metals are so close to bottoming, if they haven’t bottomed already, that the wave of buying with one more push down in price might give the cartel more than they bargained for.
Bottom line this week (fortune cookie style): Let gold & silver be your guide when floating down the river of uncertainty.
– Half Dollar