After two outside reversal days in a row, gold & silver still have some fight left in them, but can they keep it up? Here’s an update…
Gold, silver and the dollar have all been rising in the pre-market action:
Nice little pop there, especially with silver.
Since we’re close to turning green on the year, let’s look at some prices we need to get there.
Silver opened the year at $17.035, but closed the first trading day at $17.27.
What we really want is silver to close above $17.27, but comfortably, so let’s call it $17.30 for good measure:
That’s where I put the blue line horizontal line on the chart.
Yesterday I mentioned that gold opened the year at $1305, but what we really want is a close above $1320:
January 2nd (the first trading day of the year) gold closed at $1319.10, so that’s why I’m saying we want at least $1320.
Gold has a problem that silver doesn’t, however, and that is that gold has the 50-day moving average as resistance to deal with.
Looking at both metals on the daily chart, we can see silver’s out-performance of gold since mid-May:
We want to see is the ratio coming down as both metals are moving up in price.
That means the ratio is coming down for the right reason – rising prices.
Since we’re on the ratio, might as well throw up that chart:
That is a beautiful rounded top if I’ve ever seen one.
That chart tells us that it takes approximately 76.5 ounces of silver to buy one single ounce of gold. But, as recently as the high set in April, it had taken over 83 ounces of silver to buy one single ounce of gold.
Since the ratio is coming down, that means that silver is moving higher in price, faster than gold.
These are all important dynamics.
Now, the cartel is not just going to sit back and take it, so as we can see, w’ere getting selling pressure as the dollar continues to rise:
But remember, this is all pre-market.
There’s still a whole lot of trading day left.
One final thought.
We hear this time and time again.
I’m referring to the ‘summer doldrums’.
Here’s even a nice chart produced by Casey Research to help visualize what it means:
Basically, for average losses compared to average gains in any particular month, June is historically a weak month for gold and silver, and, overall, June ends up being a month that, on average, results in a slight loss.
Now, that all changes, on average, beginning in July, and picking up steam through the fall, and we saw exactly that last July as silver began its rally that eventually took the white metal up some 20% in price.
But here’s a question: Is it possible the rally could begin this month instead of July?
I think it’s quite possible.
Let’s see here, for reasons like –
- We have a hawkish Fed that thinks the economy is booming
- We have everything is awesome statistics on unemployment and jobs reports coming in
- We have inflation picking up
- Crude oil prices are picking up
- We have Europe that’s a mess right now
- We have shaky and sketchy peace with some countries and escalating tensions with others
- We have trade wars heating up
And that’s just off the top of my head in what is supposed to be a very boring time of year.
And not only what I just mentioned, but we have been on what I call the “slow grind higher since mid-May”.
What we really need to see is trading volume picking up.
Because, remember, the weaker the trading volume, the easier it is to strong arm the markets.
Regardless, this week is turning out to be an exciting one.
And like I said on Monday, we want to see quick recoveries the beat-downs.
That means traders are “buying the dips”.
And that’s what you do in a bull market.
– 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.