SD Midweek Update: What a difference three days makes. These “dips” are being bought right now…
Update: Late afternoon pre-Fed minutes dip is bought:
The banks were closed on Monday. Gold and silver enjoyed a move up in price. Then, overnight on Monday going into Tuesday, gold and silver showed nice strength. Silver especially. We pointed out that when the metals force the cartel to back off and allow price to rise, the negative gold and silver hit pieces started hitting the tape to pick-up where the machines left off. The hit pieces ranged from subtle to not so much, but overnight, gold and silver have held up nicely.
Silver has showed nice strength since the market opened on Sunday night:
From the “don’t worry it’s temporary” negative jobs print, to the highs during yesterday’s trading session, silver has moved nearly $1 higher.
However, on the daily, there are issues:
This is exactly why we cannot become complacent with the action over the last two days. The gold and silver markets are not freely traded markets, and as such, while there is abundant physical supply available at the retail and industrial levels, we do not see massive surges in price. But looking at that chart above, silver really needs to get a close above $17.36 to get out of that muck. Yesterday we went up there to test the waters, and thankfully we still have three full trading days left. Will we get up there and close above it before Friday? We will see, but that would be very bullish if we do.
Looking at the gold-to-silver ratio, we have been calling for the ratio to start coming down, and now, the GSR is firmly below the 50-day moving average:
What that means is that just several trading days ago it took over 78 ounces of silver to buy just one ounce of gold. Now, it takes 75. This is still very high, and we expect this number to come down even further, especially as these metals set-up for the next move higher. In the meantime, that chart still shows silver undervalued compared to gold.
Gold has also fared well since the markets opened on Sunday evening:
Yesterday gold had a nice surge to nearly $1297. Will gold be able to break through $1300 by week’s end? It can, but if the price does not break through, that’s actually good. Silver has been the laggard all year, and gold has been solid all year despite all the pressure. That said, if gold consolidates with a slight gain, yet silver gains decisively on the week, that would be very bullish. Recall that last week we noted that silver rose on the week while gold declined somewhat. That was what we were looking for. Further consolidation in gold this week would just add extra horn to this bull. Ironically, the cartel may actually want gold to rise faster this week so as not to draw attention to this performance convergence.
On the daily, gold is looking strong and ready for the next move up:
If we think about gold in an upward channel, the yellow metal is coming off the support line and has now begun to move up in the channel. How many days will it take to get to the resistance of the channel depends on many factors, but with recent political and geo-political uncertainties heating up all around the globe, and taking into consideration that gold has not seen any $100 surges this year, it is quite possible we could see one of those surges very soon.
Looking at palladium, there really should be no doubt that the latest short-term price smash in the precious metals is over:
On top of bullish price action in palladium, copper and crude look like they are moving higher in price:
If copper and crude are going to move higher in price, that would put a floor on gold and silver moving forward. A special note on copper. Many analysts have said that copper is just in a speculative bubble. The problem, however, is that on the charts, it is hard to argue that a rounded bubble, and a bought dip as being speculative. Crude, well, crude looks in the midst of one of those long, drawn out bottoms like we saw in gold and silver from mid 2015, ultimately bottoming at the end of 2015 to beginning of 2016, and slowly working it’s way back up after the narrative changed for Candidate Trump being good for gold to President Trump being bad for gold.
Recall that the narrative was similar for the stock market. Candidate Trump was bad for the stock market, but President Trump was good for the stock market. If the “markets” are realizing that the initial interpretation was correct, as gold and silver are showing, then Janet we have a problem:
And to think, the VIX is starting to wake up even as the stock market keeps hitting new all-time highs:
It’s everywhere on the VIX too. The RSI is healthy, the MACD is turning up, and the daily action itself is showing a surge in VIX is coming. How is the stock market going to keep hitting new highs as “fear” is on the rise? The answer to that question is if the stock market does keep rising, the Fed will have been relegated to doing kindergarten magic tricks.
Does anybody really think the dollar is strengthening from here:
The “trade of the year – long USD” is turning out to prove that most people are wrong in the markets most of the time, and that US dollar chart does not speak of tightening financial conditions. Not only that, but as the VIX is starting to rise, the dollar is starting to fall. Wasn’t it supposed to be a “safe haven”? That’s rhetorical but to anybody who does not understand – debt based fiat currencies are not safe havens, all they are happen to be government forced devaluing confidence based units of exchange, and the dollar will, as every debt based fiat currency has before it, ultimately reach its intrinsic value of zero. So it is safe to say the dollar is no real safe haven, and it is starting to show its true colors.
Isn’t the Fed engaged in Quantitative Tightening (QT):
Yields could be showing some short term “safe haven” moves despite the Fed “unwinding” it’s balance sheet, surely as the MSM touts the need to purchase US Treasuries in light of all the political and geo-political tension, but sooner or later bond holders will find out that these debts are no good.