It May Be All Eyes On The Fed Today, But Those Shorts Better Keep All Eyes On Gold & Silver

SD Midweek Update: There will be market movement today, and it might just be a “tale of two halves” for gold & silver. Here’s why…

Today should be a volatile day for the markets. We get housing market data, crude oil market data, and of course we have the Fed rate hike at the conclusion of today’s FOMC meeting (2:00 p.m. EST) along with the MSM-Fed Love Fest at 2:30 p.m. EST when the mainstream financial press gets to drool over Jerome Powell and ask him questions of no real significance or substance.

What is interesting, however, is that with today’s rate hike, assuming the Fed actually does what they say, and we don’t know since we’re not allowed to audit their cooked books, the Fed Funds Rate will be above 2.0% for the first time in a decade. Right now the rate floats in a range of 1.75% to 2.0%, but with today’s assumed 25 basis point hike, the new range will be 2.0% to 2.25%. Conventional Wall Street “wisdom” says “three hikes and a stumble”, but we’ve now had eight rake hikes and barely a stumble. In fact, many stock market indices are at or near all-time highs right now, just as I have been forecasting (Dow & S&P 500).  So today we can add another term to our constantly developing theory – “Peak Fed”. Peak Fed is like Peak Trump, and coming to the realization that we may peak with both the Fed and Trump at the same time, this is really going to be one heck of an economic collapse when it finally happens.

I’ll keep this Midweek Update short because I’ll have a post-Fed Wrap in the afternoon including a look at what is going on with gold, silver and the dollar.

So let’s dive into the charts.

On Monday I was asking if gold & silver could have a “sell the rumor, buy the news” type of week, and it is looking that way.

However, I did say gold and silver may have a “buy the rumor (of the rate hike), buy the news (the rate hike)” start, and we see that is what has happened in silver.

Silver caught a small bid yesterday:

If I were one of those specs that was short silver, I’d be very nervous right about now. Rate hikes have proven to be bullish for gold & silver. Granted, we could see the metals prepped for Jerome Powell, and pressured lower in price, and that is actually what I’m expecting.

I will be looking for pressure this morning with a recovery this afternoon highly possible.

We’ll see.

Gold has not caught a bid as it is all caught-up in its 50-day moving average wall of resistance:

If we do get movement to the upside, we could very well see gold take out that moving average, and that would be a nice bullish sign for the yellow metal.

We see the gold to silver ratio is now clearly in the process of topping:

Hopefully since the end of August everybody has focused on silver in order to take advantage of the arbitrage down the line.

Palladium has not pulled back, nor has it consolidated:

Palladium’s 50-day moving average is sloping up nicely and is now starting to close in on the 200-day, and we all know what a “golden cross” means on the charts.

Wow, it’s been so long since we talked about a golden cross that for the sake of new readers, when the price of the underlying (in this case palladium) averaged over the last 50-days crosses through and becomes higher than the average price of the last 200-days, that is bullish.

It means price is moving up and with momentum.

Even platinum doesn’t look all that bad right about now:

Platinum’s 50-day moving average is about to make the turn, and this pullback right now is healthy, so we may have seen the bottom here. Remember, platinum took out the lows of early 2016, which is one of the reasons many analysts think the other metals will take out their December, 2015 lows.

I don’t think so, at least not unless the price of crude oil falls into the $50s.

Copper has pulled-back here after the surge of the last two weeks:

That’s what we would expect to see as nothing goes straight up or straight down.

Crude oil is setting-up to take out 52-week highs:

If my call for $80 crude oil by the end of the year holds, we should see those new highs here pretty soon.

Confidence, optimism, sentiment, and all that other Peak Trump stuff may be at all time highs, along with the Dow and the S&P 500, but the Heartbeat of America Index looks like it has already peaked:

This could become problematic, especially if the Russell 2000 loses the support of the 50-day moving average.

Of course, the farce is still doing all it can to help prop-up the indices:

If we get pressure on the metals this morning, I would expect the VIX to stay suppressed as part of the market prep work for Powell & Co.

Just like the Heartbeat of America index looks like it has topped, so does the rally in the dollar:

That is not to say we don’t see a little post-FOMC relief rally, especially if the Fed is “hawkish”.

But even when looking at the dollar against the Chinese yuan, there appears to be a top forming:

IF USDCNY rolls over here, that means the yuan is strengthening against the dollar, and as the “china controls the gold price” theory goes, if USDCNY rolls over, that is bullish for gold.

Finally, since today is all about the rate “hike”, notice yield on the 10-Year has still not taken out that 3.115% high print from back in mid-May:

It’s really quite simple: The stock “market” can’t handle higher rates, the US government can’t handle higher rates, the tapped-out American consumer can’t handle higher rates, and President Trump is not happy about higher rates.

The Fed however, because it must bluff at this point, feels the US economy is perfectly capable of handling higher rates.

Because when the narrative changes, and when the Fed announces that it’s cutting rates, it will be game over.

Stack accordingly…

– 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.

Paul’s free book Gold & Silver 2.0: Tales from the Crypto can be found in the usual places like Amazon, Apple iBooks & Google Play, or online at Paul’s Twitter is @Paul_Eberhart.