SD Midweek: The illusion of sound fundamentals is breaking down around the globe and in the US. Here’s what it means for gold & silver…
Let’s step back for a moment and think about the fundamentals weighing on the markets today.
Specifically, let’s look at:
- US Politics
- The economy
- The markets
In the world of American politics, we have an unhinged left getting all worked-up, and laying the case and groundwork, for what will surely be “the most important mid-term elections in the history of all mid-term elections”.
We all recall Hillary inciting violence last week by saying “you cannot be civil”, and likewise Eric Holder saying:
“When they go low, we kick ‘em. That’s what this new Democratic party’s about” -Obama AG Eric Holder
-Maxine Waters calls for harassment
-Cory Booker says ‘Get up in their faces’
-Hillary says you can’t be civil with Republicans
What a pathetic bunchpic.twitter.com/sl3P1cWag8
— Chet Cannon (@Chet_Cannon) October 11, 2018
“When they go low, we kick ’em”.
So politically, we see the divide and conquer strategy working overtime.
Economically, we see that just yesterday, President Trump is again blaming the Fed, and again, Trump is again saying inflation is ‘very low’:
Later today, we get Fed Head Brainard speaking shortly after noon, followed by the release of the September FOMC minutes at 2:00 p.m. EST:
Additionally, we have a stock market that was in turmoil, but apparently it has been “fixed” enough for the President to Tweet about it:
Stock Market up 548 points today. Also, GREAT jobs numbers!
— Donald J. Trump (@realDonaldTrump) October 17, 2018
Globally, the world is living on a knife’s edge right now, both literally and figuratively, and no pun intended.
Geo-politically, we have a botched political assassination bringing rise to a tense and awkward Saudi Arabian world stage. That’s not the only middle east turmoil either, as tensions are still high between Iran and Israel, and the situation in Syria has only taken a back-burner to the Saudi hackers. Across the pond, we have a nasty BREXIT where a “deal” looks less and less likely, and on the mainland, there is both an ongoing banking and migrant crisis, as well as the whole “populism rising” meme still being very much a thing. Back in the Americas, we have trade wars and trade deals which are far from resolved, and now we have a “migrant caravan 2.0” of thousands of aliens making the trek on foot from Honduras en route to the US.
OK, “Hey Half Dollar, why are you bringing up all these random things?”.
You see, I have said this before, but my reason for thinking the bottom is in for gold is fundamental in nature. That is to say, gold is priced for economic, market, political and geo-political perfection, and as far as all of those factors go, they are all on the brink of going from a perfect state of peace, love, prosperity and happiness around the world to complete and total global chaos. A President vs the Fed, market turmoil, divide & conquer in the US en route to Civil War II, and a global political scene on the brink of disaster all mean that there is no longer the perfection that gold is priced-in for.
Bottom line: With so much chaos in the world, in my opinion, sooner rather than later, the fundamentals will have to assert themselves, and when the fundamentals once again matter, the price of gold will not be at $1230, but much higher as the “flight to safety”, “hedge against uncertainty”, or “whatever you want to call it” takes hold.
We see that gold is still holding above its 50-day moving average rather nicely:
And that is with the continued pressure from yesterday morning on through the afternoon.
Silver is also completely above its 50-day moving average:
Let’s just see if we can succeed in reclaiming $15 before the week is up.
I think we can.
The gold to silver ratio is still heavily favoring silver:
It still takes nearly 84 ounces of silver to buy just one single ounce of gold. That is a historical extreme we are seeing in the ratio.
Palladium is continuing the consolidation:
Check out where palladium’s 50-day moving average is now! That’s very bullish, and the golden cross will likely be obvious for all to see by the time I write the Friday Wrap.
We can even talk about platinum consolidating now:
Even platinum, which has really taken a beating this year, is finally confirming with each passing day that the bottom is in.
Copper looks like a hot mess, but I still think, albeit sloppy, that copper is consolidating at $2.80:
The consolidation is in preparation for the next move higher, and that makes sense, right?
If we have this booming economy, like, the “greatest ever”, then there will be the need for a lot of copper. But if we don’t have a booming economy, and the US economy enters a recession or worse, which I think is the case, we could actually see that massive infrastructure spend that President Trump campaigned on, and if that is the case, there will be the need for a lot of copper.
Crude oil has yet to tag it’s 50-day moving average:
I do think it is coming.
Looking at crude oil’s chart, one could even argue a “bear flag” or a “bear wedge” forming, and if that is the case, then there would be a move down, which in all likelihood would overshoot the 50-day to the downside as has been the case all year.
I’m still holding to my $80 year-end call.
Here’s the “fixed” stock market President Trump is now proud enough of again to Tweet about:
The Dow doesn’t look fixed to me, but then again, I have a knack for bringing rain to parades.
Here’s a question: Everybody is saying the President is setting up the Fed to take the blame when the market comes crashing down, but there the President is again, taking credit for the stock market, so could it be that instead of setting the Fed up to take the blame, President Trump is setting himself up to take the blame?
That would mean the President is stepping up in his role in the globalist plan.
Which would mean the President isn’t a “good guy” after all, wouldn’t it?
I don’t know.
I see it like this: If people vote with their wallets, and if we have a President telling everybody, repeatedly, how great things are, but the illusion of greatness goes away and the reality of the US economy is shown for what it is – collapsing, then we will get something worse than a Hillary in office come the 2020 elections.
The VIX has been coming down as I suspected it would:
Seems like the spiking volatility is in front of us, however, because besides a couple of spikes over the last several years, the era of low volatility has certainly been behind us.
Here’s Team Bonds competing in that tug of war I was mentioning on Monday:
The action in yield over the last several days looks a lot like the action in Crude Oil, and if that is true and the pattern holds, it looks like we could see a drop in yields coming.
Finally, the dollar is still not acting as a safe haven at all:
Which is exactly what we should be seeing anyway.
The world is moving away from the dollar, not rushing to it, and this whole “dollar shortage” meme along with the rush into the dollar are not theories I subscribe to. Even if the dollar somehow does rise to say, 104, or even 120, I still don’t think that is a negative for gold, but rather, it would be one of those times where the dollar and gold rise together.
That said, I do think the next big move in the dollar is down, not up.
If you are around a computer or smartphone today at 2:00 p.m. EST, it might be interesting to see how the “markets” respond to the release of the Fed minutes.
Will the Fed, discreetly, indirectly, overtly or otherwise, fire some shots of its own at either fiscal policy in general, or President Trump specifically?
We’ll know in just a few more hours.
– 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.