SD Friday Wrap: Gold & silver leg-up on a week they couldn’t get Stevie to shut-up..
What an adrenaline filled week with gold & silver!
Let’s check out the decent highlight reel for a change.
Starting with silver, check out that massive candle on the daily:
Wednesday was the day that Stevie said he’s all about a weak dollar. From the lows to the highs silver surged $.64 on the day.
I’ll take that not too shabby 3.75% gain any day. “Slow and steady wins the race”, right?
Or as we used to say in the army, “slow is smooth and smooth is fast”.
Drilling down to the 15 minute chart, we can see there are three events to highlight:
The cartel worked in a mini cliff dive on Tuesday, but notice what happened: The “dip” was bought.
That’s what happens in bull markets.
Traders buy the dips.
That’s a good thing.
On Wednesday we can see how silver took to the “weak dollar” talk and ran with it. Literally. Silver ran up in price all the way until peaking out at $17.70 in the wee hours of Thursday morning.
Come Thursday afternoon, we can see that President Trump was deployed to talk some sense back into the dollar, and as such, silver dropped hard and fast after Trump said, “nope, we’re all about a strong greenback”.
Today has been mixed.
President Trump was once again singing the U.S. economic recovery praises in Davos, but by now, it seems the whole world is catching on to the fact that the U.S. economy is a whole lot of talk, but not much action.
Turning to gold on the daily, notice what may draw your eyes to hone in on a certain point on the graph:
Yes sir, that’s an intra-day high that took out gold’s previous high from last September, 2017.
Check out the consolidation on the 15 minute chart.
Gold has been consolidating in a sideways channel with a range between $1355 and $1360. Thursday looks chaotic on the chart and price action is kind of all over the place, because we have both the a new high and President Trump talking the markets within the same trading day.
However, over the last few days, traders have been adjusting their positions, and gold is forming a base, a base that will eventually become support once the break-out occurs and we see the next leg higher in price.
For now, we really want to see gold staying above $1355 until the breaking out into the $1370s, but $1350 is a psychological level that is very important to hold.
Said differently, we really don’t want to lose support at $1350, because if we do, then it becomes resistance.
What I wanted to do this week is zoom out from the typical daily chart and look at things on a slower time-frame.
With so many different ups and downs this week, sometimes it is important to see the big picture (not the super long-term, but big in the sense of the last few years).
Where we have been over the last few years and where we are going paint two very different pictures.
Check out all of those arrows on the silver weekly chart:
There are four bullish signals on that weekly silver chart:
- The 50-Week Moving Average has crossed up and through the 200-Week Moving Average (called a “Golden Cross”).
- We have put in higher-lows on the chart, and if this run continues, we will have put in a second higher-high.
- There is plenty of room to run on the Relative Strength Index (RSI) before even approaching “overbought” (currency at 55).
- The Moving Averages Convergence Divergence (MACD) is bullish with, like the RSI, room to run.
But since we’re focusing on the big picture, let’s zoom out a little on that weekly to grab the last few years worth of price action:
That’s a little reminder of just how painful it has been for the last several years.
But we’re pulling out of that bear market.
And notice the steady increase in trading volume ever since the December, 2015 bottom.
Gold has performed better than silver on the weekly:
Remember too, that last year, 2017, gold saw a record year in trading volume.
At the end of 2016, of course, also regarding trading volume, gold had the biggest single day trading volume ever, which was the day Candidate Trump was elected President Trump and the cartel needed to throw more fake paper gold at the “market” than ever before in order to reverse the $70 price spike and turn gold red on the day come November 9th, 2016.
Nonetheless, the story is the same with gold: That weekly chart is very bullish.
A weekly chart of the gold to silver ratio shows how gold has outperformed silver over the last few years:
Ever so slowly notice how the GSR is rolling over.
Over the long term, we can see a lower-high developing (82.95 in early 2016 to 80.93 in late 2017).
As silver begins to out-perform gold, the gold to silver ration will be coming down as each ounce of gold will buy less and less silver.
Palladium looks bullish on the weekly chart:
Since bottoming out palladium has been in a long series of higher-lows higher-highs.
That is one of the simplest ways to define bull markets: They have a series of higher-lows and higher-highs.
Bear markets, on the other hand, have a series of lower-highs and lower-lows.
It would be nice to see a pullback in palladium, or perhaps some sideways consolidation, to get the RSI back to a more neutral level of neither “overbought” or “oversold”, but between concerns of possible shortages due to industrial demand and even increased demand from the new American Palladium Eagle that just debuted last year, palladium could still run from here.
Platinum shows that right now, on the weekly, the precious metals are at a very critical juncture:
Is platinum signaling a pullback in the metals here?
Or has it merely pause and set-up for the next surge higher?
The dollar may give us some insight.
The dollar looks downright bearish:
It is important to note that the dollar was falling long before any of this “weak dollar”/”strong dollar” confusion which took place this week.
Here’s another way to look at the dollar:
Crude oil and the U.S. dollar generally move to the inverse of each other.
We can see that, on the run over the last four years, the dollar began a bull run as crude oil turned into a bear market. After years a couple years of dollar consolidation and a break-out fake-out post 2016 election, the dollar began it’s slide, and crude oil, albeit slowly, has begun to break-out on the weekly.
The dollar and crude oil are now at the point where the two are converging and then ready to diverge again on the charts. When that happens the inflation in this country (as shown in rising prices for good and services) is really going to pick up speed.
We already see inflation picking up, and it’s only just begun.
Once that comparative chart gains some more weeks worth of candlesticks, everybody paying for goods and services in U.S. dollars is going to be nickel-and-dimed at every turn.
Here’s two quick, real world examples I noticed just yesterday:
I was working on my taxes, and not only is it going to cost more for me to file, but as I was waiting on that “verify your account” email, I noticed in my inbox there was a little “hello” from Netflix saying rates are going up starting next month.
Folks, it bears repeating, pun intended, and I think i’ll put it in bold:
Prices of everything will be going up as the dollar enters a bear market.
On top of that, throw in all this extra fiat that was just borrowed into existence to be put into “middle class” hands via the tax cuts, and just for fun, throw in some repatriated corporate dollars that may actually end up on Main Street, and we have a recipe for spiking inflation.
Copper shows the inflation is coming too:
I’m not so sure about the whole “rampant Chinese speculators” meme.
How is China going to build out their new New Silk Road (also called the Belt and Road Initiative) without massive amounts of the base metal?
And while we are talking about inflation, here’s one price increase that everybody hates: paying higher interest rates.
The 10-Year Treasury Note might actually get above 3% relatively soon:
What better way to understand just where we are in the big picture than to see one of the Fed’s babies that’s about to turn into a rebellious teenager:
We don’t have a lot of time left before we run out of wedge and the VIX starts to spike.
Think about it:
Forget inflation fears, we’re about to get actual inflation. We’re going to get inflation that will make a big impact on all of the financial markets. All of the financial markets have been rigged to no end since the Global Financial Crisis. It will be hard to tell the outcome, but one outcome we can tell, is that when “inflation expectations” turn into plain old “inflation”, and when crude becomes painful on the wallet, and when the coming fiat currency crisis turns into fear and uncertainty, we can be sure that volatility will be going much higher, with multiple spikes as unintended consequences of all the central banking voo-doo take their toll.
How many weeks do we have until that happens?
Well, that chart of the VIX is running out of wedge, and it’s running out of wedge fast.
– Half Dollar