SD Midweek: It’s Wednesday, but the week is really just getting started, and so far it hasn’t been a fun ride, and it could get a lot worse. Here’s why…
I was going to title this Midweek Update something like “Goldilocks Economy And The 7 Fed Heads”, but it was too much of a play on words to be effective.
I think a title like that really highlights the state of the economy right now. The mainstream, the political and the Fed perspectives on the state of the economy that is. For the Goldilocks part, that doesn’t refer to President Trump’s hair, but rather, an economy that is just right – record low unemployment, energetic growth, and a brand new Council for the American Worker. Yes, that’s right, all three of those, and fresh of the presidential presses just yesterday.
Now, with the Fed perspective on the economy, my play on words was like combining two fairy tales in one, and the Fed being the seven little dwarfs, but the more I think about it, it is more like the Fed is on a PlayStation 3 sponsored RockBand World Tour of Rockstars.
See for yourself on the events calendar for Wednesday through Friday:
That’s a lot of red arrows, and I even forgot one. Granted, one of them is on Saturday, but today, you could say they’re nearly every hour, on the hour. Of particular interest is the Neel Kashkari speech at 4:00 p.m. EST. If it is like his others with the Q&A, they sometimes open up for questions on Twitter, and while Ol’ Half Dollar won’t be trolling the Fed today, If you have some free time and don’t mind firing off Tweets that will simply be ignored, hit them with question after question about gold & silver. Just so it shows in the feed. Now, I’m not even sure if the Q&A part of the speech is in that format, but if it is, those Tweets would be to @neelkashkari.
There are three data points of concern from today through the rest of the week as well. Today we get international trade numbers, tomorrow we get a slew of jobs data, and Friday we get BLS Jobs Report for August, 2018.
Consensus is rather Goldilocks:
Remember, there are two days when the cartel absolutely loves to smash the metals prices, and those days are BLS Jobs Report days and FOMC Meeting days.
Since a rate hike is pretty much baked into the cake, I would expect some “everything is awesome” hype to go along with a nice plate of gold & silver smash-burger.
Regardless, look for market movement at various points this week, and look for either the Fed to move the markets with their pie holes flapping, or for President Trump to move the markets in response to something that comes out of said pie holes. It could get very interesting to say the least.
Let’s start off with the gold to silver ratio:
There is lots of chatter about the ratio right now, and sure enough, it is now higher than it peaked as gold & silver were bottoming some three years ago. This is an absolute gift horse, and you know what they say about gift horses.
I was not thinking the ratio would go this high again, but I was also not thinking we would be clinging to $14 for dear life.
Speaking of which, you can see how we nearly lost $14 yesterday:
Silver is up a few cents off of the lows, but I would be surprised if we do not go below $14 and see silver with a 13-handle.
Now, here’s the thing – for the geeks out there like me, start watching product availability on the various bullion dealer’s websites, and start watching what is happening to premiums. Remember, there will come a point, as counter-intuitive as it sounds to some, where the lower the paper spot price goes, an actual silver bar, coin or round will end up costing more than it would at a higher silver spot price because of what I call “premium creep“.
The cartel runs a serious risk of watching the coffers they have worked so hard to replace since late 2016 get dried up in a hurry because we are literally right at the bottom from December , 2015:
I have been thinking and arguing all along that we wouldn’t put in a new bottom, and much of my argument was based on a rising crude oil price. That said, the fundamentals are temporarily thrown out he window, so now I’m not so sure. We may very well put in a new bottom before this is all over. Platinum did, after all.
The question really, is, which is wrong, crude oil or silver?
One of them is wrong.
Gold’s daily chart doesn’t look very good right now:
You can clearly count a series of five lower-highs and lower-lows, and if gold rolls over here, they we would be staring down a sixth series in short order. We already have the lower-high, we’re just missing the lower-low.
Keep this in mind, however – silver overshoots gold in both directions (to the downside in this case), and gold recovers first. That said, gold is at less risk of putting in a new low, lower than the December, 2015 low that is.
Palladium looks over its skis here:
If copper is rolling over (which it is), and if the other precious metals are weak right now (which they are), then I would expect a pullback in palladium and quick.
If the metals continue their weakness through the week, platinum could be staring down another new low:
I think we’ll get there. Less than twenty bucks is nothing for platinum.
Copper is puking again:
If they say Dr Copper is a good indicator of the health of the overall global economy, then it looks like the global economy is in for some health problems.
Crude oil is dancing around its 50-day moving average again:
It’s been doing that dance since the beginning of February. Notice, however, the 50-day moving average is starting to point up again. My call has been for $80 oil to close out 2018, and we are not that far off, and looking at the chart, we see how volatile and erratic crude oil can be.
The farcical VIX is still below 14:
The VIX, of course, is one of the easier indices for the cartel to manipulate. You see, oversimplifying it, the “fear gauge” as it’s commonly called, measures the volatility of the S&P 500, and it is calculated using the number of puts (bets the market is going down) versus the number of calls (bets the market is going up), so, if the cartel needs to smooth out and suppress volatility, well, just buy more index calls (to counter the puts).
And like I said earlier, fundamentals temporarily don’t matter, because fundamentally speaking, there is a ton of risk right now in the US economy, in the global economy, in politics and in geo-politics, but as you can see, the cartel has created peace and tranquility in the markets.
Speaking of which, the Dow Jones Industrial Average better get a move on:
I really don’t put it past the globalists to have the Dow top out at 26669.11.
That’s my conspiracy theorist approved, tin foil hat call, and we know the globalists are evil, satanic people who like to play with their numbers.
The US dollar has seen some renewed strength here:
I can’t remember who said it, but nobody is looking for a sudden reversal and drop in the dollar. I agree, and if it happens, wow, it will catch a bunch of traders, investors and pundits off-guard because everybody is so convinced the dollar has nowhere to go but up.
The yield on the 10-Year Note is still below 3.0%:
If the Fed hikes its Fed Funds Rate on September 26th, which is currently a 100% probability according to CME Group, that rate would be a float of the overnight lending rate between 2.0% and 2.25%, so call it 2.125%.
What effect would that have on the yield curve and the spread between the 2-Year and the 10-Year?
Yield curve inversion is the effect.
Either shortly after this time around, or shortly after December’s hike.
Although we will be told, “this time it’s different”.
It never is.
– 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.