SD Outlook: Gold & silver are going to be fighting for every inch on the charts this week. Here’s why…
Looking at the calendar this week, we’ve got some good old-fashioned Fed jawboning most days:
A double dose of Kashkari starts the week, but come Hump Day we’ve got Bullard and Mester on deck.
The big event, however, happens this Friday:
On Friday, the Bureau of
Lies Labor Statistics releases the March BLS Jobs Report, also known as Nonfarm Payrolls.
Wednesday we will get a taste of March job creation with the private sector compilation in the jobs situation, known as ADP, so we must be on guard on come Wednesday and especially Friday because Jobs Friday is one of the favorite times the cartel loves to smash. Especially since the data release comes out a whole hour before the market opens.
The cartel can really muscle a thinly traded market at that time.
The point of the fundamental factors this week is this: The cartel will look to chip away here and there where it can.
Helping the cartel, for at least one more day, is the fact that while the U.S. is back open for business, much of the world in all hemispheres is still closed in celebration of Easter.
However, helping the case of the goldbugs and silverbugs, is that in the United States, sector rotation could be on, and if so, gold was a top performer last quarter, so we could see increased demand this week before the rally. Said differently, investors, especially institutional investors, my finally be coming on board with a stock market that was down for the quarter, and if those institutional investors are coming on board, they will want to be on board before the rally.
Sorry for the long-winded run around there.
Looking at the action in the pre-market, however, things are looking good to start the morning:
We’ve been so beat up that it’s hard to get excited a bout strength in the pre-market hours, but I’ll take that strength because we’re every inch of ground made this week is going to be hard fought.
On the gold to silver ratio we can see we’re still above 81 across the board:
Many people have been questioning whether we will be going back down, but I don’t even think it’s a question. The gold to silver ratio has to come down.
The natural ratio is 15-20 to 1, and the “out-of-the-ground” ratio is about 9 or 10 to 1.
On the daily, we can see that gold has been chipping away at the 50-day overnight and into the morning:
The cartel has been unable to get the break-down in gold they’ve wanted, and gold was one of the top performing assets of the quarter, so what the cartel has been able to force is a correction over time instead of price.
That said, if there is a break-out this week, I would say the break-out is coming to the upside.
The rally was denied last week after I called the bottom two weeks ago, in a way so the cartel and their agents could paint the tape to close out the quarter, but interestingly, last Thursday, gold held and refused to go lower.
Very bullish, as if it was putting in a reversal, and by the bullish showing overnight and this morning, it does look like the break-out case is strong this week.
Silver still has some work cut out of it before the white metal can get above its 50-day:
Although same thing with silver, silver held on and refused to go any lower last Thursday, and today silver is looking bullish to open the week.
And we do know, at some point, silver will catch up to gold in terms of performance and overtake it.
That will be a sight to see when it happens.
Here’s the chart of silver’s under-performance I put up last Friday for those who missed it:
With the tight “allowable” trading range the cartel has forced on us, between $16.20 and $16.80, it’s not hard to see how silver’s under-performance painfully agonizing.
Palladium has its own problems to worry about:
Palladium held on for so long before finally losing the support of the 200-day moving average.
We really want to see the 50-day start turning up again so as not to put in a death cross.
Platinum is right in the same boat:
Platinum has got to get above its 200-day, and start working on reversing that nasty, confirmed bearish trend.
Like I said, it will be a hard fought week, chipping away at the moving averages is what we should be rooting for, in addition to the break-out we’ve been looking for over several weeks.
Let’s just call it what it is: These are not freely traded markets.
Just remember, the issue is that the cartel can smash as much as they want, but gold & silver are real, and it takes massive amounts of energy and work to get them out of the ground and smelted into a purity to be used either in industry, jewelry, coin or bar form, so there are limits to the smashing.
It’s not just like dollars that can simply be printed up or double clicked into existence at will.
So the smashings will go on until the cost of production (supply side) forces the price to rise, or because of constraints in they physical market (demand side) where the dreaded “s” word becomes a factor (the “s” word being “shortages).
Speaking about cost of production, crude looks to be setting up to test its recent high from back at the end of January:
If the price of crude oil goes to $70, which I think it could do in short order, then it will become blatantly obvious to all the mainstream financial pundits and the central bankers that inflation is actually a thing.
When crude oil passes $80, there will be no denying the inflation story.
Copper is also grinding it out keeping in theme this week with chipping away for every inch of chart it can:
After spending over a week below the 200-day moving average, copper looks like it could be above the 50-day in short order if it gap-opens on additional days this week.
Speaking of weak (the other kind of week):
The U.S. dollar index has been basically range bound between 89 and 90 for several months now. It has been at the upper end of the range for longer, but today will be a test.
We’re looking like we’re set-up for a bounce off of the upper resistance, which would put the dollar headed back down to the lower end of the range.
Since riding the upper end of the range for so long and failing to really break-out, I think the more likely scenario from here is a break-down in the dollar. Looking at the sideways channel, we can see that if the dollar breaks-down, that would be bullish for the metals, and by the swings in the foreign exchange markets on a regular basis, moving from 90 to an 88 handle could happen by this week.
The wild card, as always, is the Exchange Stabilization Fund (ESF). We don’t know when they’re trying to support the dollar and when they are going to let it fall.
If President Trump is looking to at least rock the boat on international trade, then it stands to reason that the ESF would want a weaker dollar to give the U.S. a competitive edge on exports. Just know that this is the theory. In reality, what we see is a competitive “race to the bottom”.
Here’s the drop in yield over the last week which was notable:
We’ll have to keep an eye on yield.
Rates should be going up because, oh, let’s see here:
- US deficit spending
- Tax cuts causing lower tax revenue
- $1.3T Omnibus Spending Bill
- Fed not purchasing U.S. paper
- Fed rolling over/unwinding U.S. paper
- China, Japan, et. al selling U.S. paper
So a flight to “safety” lowers rates because of the bid it creates on the demand side.
But there’s a problem with that flight:
The market bounced on Friday.
So we’ll be watching the interactions of the bond market and the stock market closely.
The VIX has settled down somewhat, where 20 is the new 10:
We haven’t seen a spike in volatility like we did in early February.
Here’s a question: With the quarter over and 2nd quarter rotations beginning, but with U.S. markets closed on Friday and many world markets closed today, is it possible that some investors, especially big investors, are caught off guard on their rotation strategies?
I think that’s possible, and if it is, we could see another spike in the VIX this week if I’m right.
Finally, the technical analysis looks terrible on Bitcoin:
We’ve got three lower-highs and two lower-lows, looking to confirm the bearish trend, definitively, with one more lower-low. I wouldn’t touch Bitcoin with a ten foot pole here, even though I couldn’t, because it’s digital nothing.
But the point is the technicals look terrible for everybody’s favorite crypto.
And there are no fundamentals for it.
– Half Dollar