SD Outlook: There’s lot’s of reasons to get bullish on gold & silver this week, as long as we can get through today and tomorrow. Here’s the details…
Those who aren’t pausing are the various Fed Heads.
In fact, we’ll be getting a heavy doses of Fedspeak through Hump Day:
Seven times before Wednesday to implement the Fed’s favorite policy tool: The “Jawbone”.
They’ll be looking to clarify anything that is still left in the air from Powell’s first Humphrey-Hawkins Testimony, and we can be sure the mainstream financial press will cheer-lead all the way.
The week is also important because of what we have coming down the pike on Friday:
Recall that while everyday is a day for smashin’ the metals in the eyes of the cartel, this Friday is one of those “extra special” days: Non-farm payrolls.
And if for some reason the markets do not like the number of jobs that were created in the month of February, you know, because it was only transitional because the weather was too cold, or was it too hot, ah, either way, Evans will be there to give the needed spin in the early afternoon in case the BLS Jobs Report does cause some indigestion.
– Rant off.
The big fundamental news of the week, however, would be if there is increasing talk or actually action with regards to President Trump’s proposed tariffs on steel and aluminum. The world stands by ready to see what is to come of The trade Wars.
Today, the President is already seeming to take the position of “Tariffs first, negotiations later”.
We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed. Also, Canada must..
— Donald J. Trump (@realDonaldTrump) March 5, 2018
…treat our farmers much better. Highly restrictive. Mexico must do much more on stopping drugs from pouring into the U.S. They have not done what needs to be done. Millions of people addicted and dying.
— Donald J. Trump (@realDonaldTrump) March 5, 2018
So fundamentally speaking, this is going to be a very interesting week.
I’ve printed out the gold to silver ratio over the last year (instead of the usual last six months):
Even a year ago, the ratio was in the 60s.
To put that into perspective, right now it takes about 80 ounces of silver to buy one single ounce of gold.
At the ratio of 68/69 such as last April, we would be looking at a silver price today of $19.25. ($1325 / 19.25 = GSR of 68.83)
Let that sink in for a moment.
That’s how fast I think silver is going to start moving.
The move has been up all year, and those massive red candles on the end of the chart are the underlying convulsions seen at the top of a market (in this case the GSR).
There’s another reason why I think silver is ready to start moving in a hurry:
That’s Friday’s Commitments of Futures Traders, also known as the COT Report.
Right now we’ve seen such a royal flush in open interest, that it’s hard to see on the chart, but large specs are actually net short!
We know the speculators opposite the commercials are always on the wrong side of the trade, so we’re really right there at the pivot.
This turn could even be boosted by an epic short squeeze depending on how much paper the cartel wants to feed into the squeeze.
Once we get past the sick and twisted 9th anniversary of S&P 500 666 low print (03-06-09), we could even be at $18 as early as the end of the week.
Things are certainly set-up bullish right now for silver, so much so that we haven’t even looked at the silver chart yet.
So without further ado:
Yeah, I know. Anti-climatic.
I’m known for that.
But I want to look at one thing on the chart that is also very bullish (when it happens).
Now, obviously the 200-day moving average has been falling. We don’t want to see that happening but those are the
cards we’ve been dealt smashings we’ve had to endure.
But because of that, and with the 50-day moving average turning up in the middle of December, we’re close to what is known as the “golden cross”, which is when the 50-day moving average crosses up and through the 200-day.
That is seen as very bullish.
So silver has some things going for it right now:
- GSR too extreme
- GSR convulsing signs of a top
- Large Specs now net-short (amazing)
- “Golden Cross”
So we’ll see. They’ve defended $17 with authority so we really need to get above $17.50 with authority.
Gold punched through it’s 50-day moving average in the overnight session:
We know which side the cartel would like to keep price on.
But if silver catches a bid first, that’s okay. We need silver to catch up to gold to eventually outperform the yellow metal.
When gold was smashed below the 50-day last week, and I put out the “lower for longer” post, I said I think it will be a short-lived trip under the moving average.
I still think that, with a potential bottom either already behind us, or coming today or tomorrow.
Keeping in line with the sickness of the cartel and their satanic fetish with numbers, I wouldn’t put it past them to smash one more time on that anniversary.
Overnight the other precious metals and the commodities showed weakness:
Platinum is looking bearish on the chart if it doesn’t get to moving soon:
That’s two lower-highs and two lower-lows on the chart, so we really want to see that get turned around.
Palladium was weak overnight:
We’ll have to watch to see if the 50-day doesn’t get too far downward sloping. That wouldn’t be good for the home team.
However, as palladium is mostly an industrial precious metal, the weakness is on par with the weakness in the other commodities.
Copper is doing it’s dance and that continued overnight:
You can see the bearish candle for today already forming. However, if copper can rally from here, we will have an upward trendline forming off of three higher-lows.
Crude was weak overnight as well:
It tried to, but so far could not get above it’s 50-day in the overnight action.
Granted, it’s a love-hate with crude. On the one hand, we’re kind-of wanting crude to go up because it’s good for the precious metals, but on the other hand, that comes out of our wallets, albeit with lag, at the pump. Offsetting the difference by adjusting driving behaviors is one way to mitigate the conundrum.
We’ll see what’s in store for the 10-Year Yield:
Its definitely consolidating in the 2.8% – 2.9% range.
The song remains the same, however. The Fed is hiking, the dollar is weakening, the U.S. is going on a binge of spending and Japan and China could be dumping treasuries, so the break-out would most likely be to the upside instead of a break-down.
But then again, everybody and their brother are expecting the break-out. Either way, it’s all good for the precious metals. Gold & silver are inflation hedges, so with rising interest rates the metals perform well, and when real rates are negative, gold and silver function as stores of wealth. And those are but two of the roles found in the precious metals.
Volatility could be making a comeback this week:
We’ll have to see if there are any market shocks this week that could send the VIX one way or another.
Speaking of market shocks, this one’s turning nine tomorrow:
And it doesn’t look at all happy about it.
And the dollar is not really bouncing, even though it did rise overnight:
However, between The Trade Wars and tough talk or weak talk on NAFTA, we could see some longer candles instead of just muddling along.
– Half Dollar