SD Friday Wrap: Get bullish, but be on guard and at the ready come Sunday. Here’s why…
Silver rallies on FOMC day as traders and stackers alike knew what has been coming:
Are we looking at a late December comeback in the making?
The ‘Moving Averages Convergence / Divergence’ (MACD – the bottom most indicator on the chart) is turning up, and the ‘Relative Strength Index’ (RSI) has recovered from being “oversold” like we had pointed out on Wednesday (Currently a healthy 41.39).
On Wednesday morning, for our Midweek Update, your’s truly took a bunch of heat for calling the most recent short-term bottom.
So far, so good.
Now I’m not going to say that was the short-term bottom, and I most certainly will not say silver is never going back there.
Time will tell if we revisit a $15 handle again. If we do, we’ll know next week.
But here’s a question: If we are slowly taking out whole dollar numbers at the rate of a buck a year, does this mean we are done with $15 silver?
Like I said, never say never, but in 2016, once we got moving in the month of February, we firmly left $13 in the rear-view mirror, and this in 2017, we left $14 in the rear-view as well.
But it needs to be stressed again that we are not out of the clear. We all know that just when things are looking good – they swing the hammer.
Granted, if the cartel does bring the hammer once more at this price level, especially into the mid-15s, we could have a silver shortage faster than we could say the word “shortage”.
The reason why I keep stressing we are not out if the clear yet is because we are only two days passed the Fed rate ‘hike’ (as if it were some huge feat).
Because we got the taste of the bottom six days after the FOMC statement last year:
So we all need to be on guard, or better yet, at the ready, for a price smash on Sunday night.
However, the cartel knows they are on dangerous ground here late in 2017.
With every “asset” up this year and many asset classes at record highs, a silver price barely treading water may be too hard to resist for even the most staunch silver bashers who are looking for contrarian or value investment ideas.
On the silver weekly, there’s a big difference between this year and even the bottom in December 2015:
That difference is the volume of trading. Since April of this year, the volume of trading is much stronger than the previous two years.
Notice the last two weeks of the year on the chart though. Scary drop.
If anybody wishes to relive the pain of the last few trading weeks:
Yet nothing fundamental has changed with respect to silver, and if they want to give us rock-bottom prices for silver, we’ll just keep on stackin’.
I am quite sure the cartel understands that us stackers are both smarter and stronger than before. Maybe not the speculators that trade paper silver on the COMEX, but those who actually buy real physical. We are the strength and we are the ones who will force the hand. We’re adding to our stacks regularly, dollar cost averaging, and we’re buying very heavy near the end of their price smashes.
The gold to silver ratio is still stubbornly high, and it’s down only slightly:
Everything sooner or later reverts to the mean. That holds true to an out-of-whack GSR too.
The question is, which mean?
50 to 1?
How about 20 to 1 or even 9-1 (the rate of which silver is taken out of the ground)?
I would even go so far as saying that once the cartel finally loses control and the market forces a price rise, reaching parity with gold before it’s all over is not too much of a stretch.
Palladium and platinum are near parity to gold as it is anyway, and last I checked, silver is in fact a precious metal.
Gold’s technicals are showing the signs of life:
Granted, gold has held up much better than silver has all year.
On the weekly, gold looks to have put in a short-term bottom:
Also notice who the volume is up this year over the last couple of years.
However, just like in silver, the last two weeks of the year could be nerve wrecking if the cartel has any smash left in them.
While we’re on the weekly, notice the anomaly on the chart. Specifically, I’m referring to the week Candidate Trump became President-Elect Trump. The volume on that week (and on November 9th) speak to the amount of paper the cartel must flood the market with to smash the price.
They will keep the metals prices artificially low until they can no longer afford to supply the physical markets with metal.
If it coincides with a debt-based fiat currency crisis, or a crypto-based fiat currency crisis, we could see eye-popping price movements unless governments around the world, or a select few leading governments around the world, revalue gold. That would be the “reset” that gets talked about. Resets happen. Just ask anybody who was there for the Gold Reserve Act of 1934 ($20-$34) or the closing of the gold window in the 1970s when the $35 peg could no longer hold.
Are we close to the current artificially low prices coming to an end? We don’t know how close we are because we don’t see the frantic scramble to supply the markets. We don’t know how large the cartel’s stack is.
If there is any left at COMEX (or London) at all, we do know that with each passing day, and with each passing price smash, the revaluation will be all the more dramatic.
Platinum surged on the day:
That’s what we call a “bullish engulfing” candle.
Like with gold and silver, platinum looks to have turned as well and put in it’s short-term bottom.
Palladium, well, yesterday palladium just kept on doing it’s own thing again:
Oblivious to the fact the hammer is brought down on it’s siblings.
If this bearish head-n-shoulders pattern holds the dollar can start dropping in a hurry:
A weaker dollar is not just bullish for gold and silver, but it also means that there will be upward pressure on prices as the goods we import end up costing more.
In addition to price inflation on imported goods due, if crude is in fact in a new bull market, then it’s going to be a double whammy:
And at that point we wouldn’t be talking about the prices of imported goods but literally the price of everything. Many are skeptical of crude right now, not unlike we were with gold in silver throughout most of 2016.
Copper is up 8 days in a row:
Copper sure did bounce off of that support at $2.95 with a fury.
Sure, the Fed’s “rate hike” on the Fed Funds Rate (overnight inter-bank lending) may be between 1.25% and 1.5%, but the 10-year is still right in the middle of the channel we have been following for weeks now:
Interestingly, that range is right smack dab in the middle of the trading range seen from the start of the year until the low of the year, a low print in yield which consequently was gold’s high print of the year so far.
But as we stated many times before, good luck with the Fed “normalizing” interest rates.
After a massive, multi-decade bond market bull run, “normalized” rates are going to mean surging interest rates possibly re-visiting the Volcker era.
Until then, a likely course is the yield on the 10-year note drifting lower, or, with a change in the narrative put out by the Fed, sharp moves lower in yield due to rate cuts could be a shocker the markets have not price in.
Thankfully though, our departing Fed Head says everything’s all good with nary a red flashing warning light, or even an orange one for that matter.
One of the reasons why Yellen can say that is because when you sell volatility, uncertainty in the markets is neutered:
How many times now have we been under 10 on the VIX? I lost count myself.
Stock market record high today:
We are still standing by for President Trump to cheer-lead the new record.
In the meantime, I guess we’ll have to settle for this:
– 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.