SD Outlook: There are fundamental and technical reasons to think gold & silver could have another good week. Here are the details…
For now, CME Group is showing a less than 75% probability the Fed will hike interest rates next week:
Interestingly, as shown in the chart above, one month ago there was about the same probability, yet a week ago there was an 85% probability.
We have the typical Fed radio silence on week before the FOMC:
But that is not to say we won’t get some of the “most important pre-FOMC data” yet.
Notice Tuesday we get the Producer Price Index, which is a measure of inflation at the producer level, and on Wednesday we get the Consumer Price Index, the government measure of price inflation against a fixed basket of goods.
I would imagine the inflation data comes in cooler than expected, which, when piggybacking a weaker than expected jobs report last Friday, could give the Fed ammunition if they want to pause the rate hikes next week.
I’m thinking they will hike, however.
Sure, Powell has switched his tone from hawkish to dovish recently as interpreted by the mainstream financial press, but on the other hand, the Fed has been pushing the narrative of a decently running economy, and when looking to show their independence from Washington, they may need top hike to save face.
The end of the week has additional important data points:
Especially that Retail Sales number on Friday because the report is for the month of November, so the data will show the start of the holiday shopping season.
Remember, Thanksgiving came very early this year (Nov 22nd), so there were more Black Friday/Cyber Monday (which somehow became Cyber Week) holiday shopping days post-thanksgiving than on average.
And if we get a weak number in Friday’s report?
That would throw a kink in the booming economy narrative.
Bottom Line on the fundamental front?
All the mainstream financial analysts, experts and pundits will be pushing the “will they hike, or won’t they hike?” memes. Of course, if the stock market keeps dropping, and in a significant way, then we’ll also hear talk about the “Powell Put” to reassure the markets.
Speaking of the stock market, the Dow has held up better than the other indices:
If we get a break-down this week, however, that chart is going to be looking very bearish.
Remember, the Russell 2000, the Nasdaq, and now the S&P 500 are all showing death crosses on their daily charts, and with the Dow’s 50-day moving average making a b-line for its 200-day, I just don’t see how the Dow won’t put in a death cross either.
The VIX looks to begin the week above 23:
We have seen more volatile markets of late, but no real spikes like from the “Volpocalypse” back in February.
Look for lots of talk about yield and the yield curve this week:
And if you are not sure what a yield curve is, or why it matters, check out the primer we did on yield just last week.
Overnight and into this morning the dollar index tagged its 50-day moving average:
That’s to the downside.
If the dollar index loses the 50-day, that chart is going to start looking even more bearish, and if the dollar index puts in a close below 96, then we will see a lower-low on the chart, coming off of a lower-high.
I still think the next big move in the dollar is down, not up.
Copper is still trying to figure out what it wants to do:
Copper is looking to gap down and below its 50-day moving average into the open, and if we break-down from here, we might very well double bottom in the $2.55 to $2.60 area if $2.70 doesn’t hold as support.
I’m in a “wait-n-see” mode with crude oil:
I’m thinking we could have a bear flag or a bear wedge forming on the chart, but there is a lot of chatter about OPEC and potential production cuts right now, and furthermore, If I’m right about the dollar, and if the dollar starts falling, I would be expecting crude oil to recover.
If there are significant OPEC cuts, crude oil would recover even faster than it would with just a falling dollar.
Platinum is still concerning for precious metals bulls:
Platinum looks like it wants to consolidate, but it also looks to be opening lower to start the week.
Palladium opened the year at $1058.20:
Right now, palladium is up over 10% on the year.
Not bad in a year where pretty much everything else is down year-to-date.
Speaking of the last year, here’s the last 12 months of the gold to silver ratio:
We’ve been above 80 for most of the year, and above 80 in earnest since mid-August.
For those stackers taking advantage of the GSR arbitrage, there has been plenty of time to do so. For those not taking advantage, there’s still time. Just do the research first, and understand that it is a long term play (assuming the paper market ponzi scheme doesn’t blow-up).
Gold may have a rough time of it this week because of that red-dotted line:
Gold put in a decent week last week, and this week, gold has the chance to do battle at its 200-day moving average.
That said, the last time gold did battle there, from late-May to mid-June, it did not end well for the yellow metal.
I think gold can punch through, however, especially if the cartel is pre-occupied with a falling stock market.
Silver looks to be starting the week lower:
Yet overnight and into this morning, silver is still fully above its 50-day moving average.
My outlook for the metals?
I’m bullish this week.
Here’s the thing: Gold & silver have done pretty well post-December FOMC ever since the Fed began this rate hiking cycle in 2015. The December FOMC is next week, and the way I see it, I think a rate hike is already priced into the markets. A “hold” on a rate hike would be bullish for gold & silver, but even if the Fed hikes, which I think it does, there’s no reason to think the hike will not be bullish for the metals. Finally, I think that investors and traders could essentially “front-run” this trade, and if that is the case, we could even begin the rally before the rate hike, possibly even this week.
All said, I’m not looking for a beat-down this week.
I am looking for more of the same, with slight upside potential.
So be on the look-out for any front-running.
Last week we got some upside.
But not my upside surprise.
If we get an upside surprise, I’d be looking for $1265+ in gold (and squarely above its 200-day moving average), and a move above $15 in silver.
In a week where everybody will be talking about interest rates, yield, the yield curve, and the Fed, gold & silver might just slip out of the cartel’s firm grip this week.
Gold & silver are, after all, chipping away at the cartel’s stronghold.
Maybe gold & silver will find a battering ram?
Or some door kickers?
– 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.