SD Midweek: It’s summer vacation, and gold & silver are going to the amusement park, also known as a price rally. Here’s how the road trip is going…
With each passing day we are seeing more confirmation that the dollar rally is done:
While there could be some support at 93.50, the technicals are starting to break down.
As such, over the past couple of days gold and silver have held up:
I’ve been expecting higher prices this week, as I called on Monday, and I still expect them, and that 3-minute chart above is showing the price action does look to be up.
I also wouldn’t be surprised to get a decent little rally here too in gold & silver.
Plus, if the dollar is indeed rolling, we would expect that to be good for the precious metals here.
And while the dollar has been on an impressive bear rally, the metals haven’t suffered completely, they’ve been more in a daily grind.
We can see this zooming out on silver:
And while it may not feel like it as we’re stuck in the “sideways channel of pure agony”, looking to the right of the chart does show that silver is wanting to rally here with a series of three higher-lows.
Which makes me want to throw up this throw-back chart of silver vs the stock market:
Here’s a question: With all the massive liquidity sloshing around the world that everybody is so quick to point out, “looking for a place to go” (as long as the mainstream financial advisers and pundits don’t steer them to gold & silver, heaven forbid), is it possible that we’ve seen silver do it’s “crash first, before the stock market”, only except that instead of a price crash, silver has had a time crash?
Silver has been in this sideways channel of pure agony for nearly six months now, but remember, markets correct over price and/or time.
And notice that very few people are bullish about silver right now with perhaps the exception of Half Dollar and a few others.
We can see that while gold lost $1300 a few weeks back, the yellow metal is in the daily grind as well:
I called for gold to begin rallying on he 21st of May, and I was one trading day late. The bottom, should it hold, was May 17th, and technically speaking, the rally began on May 18th, but what’s a day in the grand scheme of things?
So far my call is holding up, albeit slowly, but what is promising is that the technicals are starting to confirm the bottom with each passing day.
And we’re still set-up with the gold to silver ratio for some exciting times ahead:
So while things may seem bleak on a daily basis, the charts aren’t lying to us. That’s a clear downtrend in the gold to silver ratio, and once the rally draws interest in earnest, that’s exactly when silver’s turbo charger will kick in.
There’s fun and exciting times ahead, and while it may not seem like it, they’ve already begun.
Since we’re in summer, think of it like this – Taking a trip to an amusement park. You’re on vacation (bottoming metals), and you know when you get there, it’s going to be awesome (surging price rally in the metals). But what about the drive? The drive can either suck, as in mom & dad yelling at the kids to be quiet, four different songs playing through three phones and the car radio, and a spilled coca-cola and potato chip crumbs all over the place, or it can be a fun car trip, because getting to and from the amusement part is all part of the vacation.
I know, “Half Dollar, you’re supposed to eat the Cheeze Whiz not inhale it”, and for the record, I’m not inhaling it, even if I do seem cheesy with the analogy, but let’s strip out all the chatter and put it in perspective one more time.
- We’re on vacation now – meaning the metals have bottomed.
- We’re going to an amusement park – meaning we’re about to have a fun and exciting price rally.
- And the road trip there can either be fun or a drag – so let’s make the best out of “climbing this wall of worry” and not lose sight of the bigger picture.
Because that’s exactly where we are in the grand scheme of things. Stripping out the vacation analogy:
- Gold & silver have bottomed.
- Gold & silver are rallying.
- The daily price action gets us from the bottom to the end of the rally.
And remember, on Monday, I showed that when silver began to rally last summer, the white metal gained over 20% from bottom to top!
Imagine the excitement if the next rally takes us to $20?
All the haters and trolls would come out saying, “ah, another suckers rally”, but I’d be grinning from ear to ear knowing I was able to add just a few more ASEs to my stack for under $20, and that included the premium!
If it seems like I’m making a desperate plea or something, that’s not my intention.
I remember reading in the comments somewhere that a person who bought in 2011 “was done”, and when silver gets to $20, they “just want out”.
But were right there, right now, and to have held on through seven years of bear market agony (which technically ended in December of 2015) only to give up now?
Talk about being so close.
It’s like that show where the elite soldiers are competing to become Army Rangers ( think it is? Don’t watch TV so I don’t remember), but there is this bell they can ring to say “I’m done”, and at times, it was a shame to watch, because they came so close to the end goal but just couldn’t take it anymore.
Now if you need the money, for whatever reason, or you have no family or agency to donate your stack to if you’re about to kick the bucket, well, by all means, but if not, then realize that just like in running: It’s a mind game that’s all in the head.
But I digress.
Back on track.
Palladium is looking like its back on its uptrend:
And palladium is back above both major moving averages.
And seeing palladium grinding higher is exactly what we want to see right now because it’s “do or die” time for platinum:
I think platinum will ultimately “do” and not “die”, partly because the fundamentals for platinum are strong as explained many times now over the last couple of weeks including in this post.
Curiously, crude oil has fallen on US dollar weakness:
But look at how far crude has come since last summer.
And furthermore, the US dollar rally has been so strong, as has the move up in crude since the start of the year (until just a couple weeks ago), that these kids of pull-backs are to be expected.
It’s really traders moving into and out of their positions, consolidating, covering, adding, closing, and all of those things that sort themselves out over price and time.
And crude has a little hook forming on the far right of that chart doesn’t it?
For those who like to watch the tick-by-tick, as I do, look for 10:30 a.m. EST today for a move one way or another in crude. That’s when the EIA releases their weekly data on crude inventories.
But what is not waiting on confirmation that the dollar rally is over is copper:
The surge of the last couple days has let copper break-out through the sideways channel we had been following which was $3.05 to $3.10.
Geez, Dr. Copper is nearly at $3.25. That’s the type of surge we need to see in silver to break the sideways channel of pure agony.
And I know I’m round tripping here, but I forgot to mention it – I still feel that once we break-out in silver and close above $17.50, that we will be above $18 in a matter of days, and not a whole lot of days either.
This chart probably looks like doo-doo but I wanted to show two things with the Nasdaq:
It’s a chart within a chart!
If it looks like doo-doo, I’ll separate them in the future, but hey, I’m a stock market bear, so if I’m putting effort into multiple charts, it’s gonna be the metals!
But I wanted to show you the power of trends. Look at the Nasdaq on the daily and notice how powerful a series of three higher-lows and three higher-highs can be.
Because on the inner chart of the Nasdaq futures, we look to be opening at new all-time record highs today.
It’s to say this – technicals do matter, even in manipulated markets.
See, the stock market is the President’s and the Fed’s Frankenbaby (not Al Franken but Frankenstein).
If they can paint the chart to look bullish, as in a run to new all-time highs, that impacts investor psychology and sure enough, investors power in and pile in with their fiat sending it to, yup, new all-time highs.
So the ESF and the Fed don’t need to do as much direct intervention because the traders and the HFT algos working off the charts can do the heavy lifting for them.
That, and it also helps when you neuter volatility:
Imagine that – The Euro and Italy were both doomed last week, and there’s war drums beating on the trade war front again this week, yet all you get from the VIX is a cricket.
Not a bunch of crickets either – but one single cricket.
Finishing up this week let’s look at the yield on the 10-Year Note:
After that massive move last week because of a flight to safety to U.S. Bonds, we’ve got yield grinding higher again, the week before the Fed will most likely increase the rate on the Fed Funds Rate too.
My point is that we don’t want to keep our eyes off the bond market, because yields matter.
Yield is, after all, the price of “money”.
Or at least what bankers and politicians call money.
Which is what we call debt-based fiat currency.
And it’s getting more expensive.
– 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.