Lowrider: Time To Find Out How Low Gold & Silver Can Go

SD Outlook: After getting pummeled on Friday, gold & silver are looking for a bottom. Here’s the details…

On Friday I put up that dramatic spiking gold to silver ratio over a short time frame.

Today I’ll show what the GSR looks like on the standard chart we have been following for some time:

Now that is a dramatic move, but noticed how nothing really has changed.

The spike did not put in a higher-high, but rather, a lower-high (assuming the intra-day high of 79.29 holds). So the trend is still in place. As gold & silver rally, the ratio will be coming down for the right reasons (meaning that both gold & silver are moving higher in price).

Overnight and into this morning we see a bounce forming in silver:

I’m not convinced, however, that the one day drop is the low.

In fact, I’m looking for lower prices this week.

Now, I know “past performance is not indicative of future results”, but last year, from late June until the 10th of July, silver was taken behind the woodshed. It had some pretty big beat downs, and with the “summer doldrums” that everybody has been conditioned to accept, it seems as if the cartel will just strong arm silver towards the lower end of silver’s current range.

That would be $16.20.

I wouldn’t put it past the cartel to smash as hard and as fierce as they can to knock silver all the way down to a 15-handle.

Think about it this way: Silver has been in the sideways channel of pure agony since February 2nd. We know silver is going to break out of the channel. What better way for the cartel than to have a false break-out on the charts, followed by a total break-down into the $15s.

I’m not sure if they’ll be able to pull it off, but I’m sure they’ll try.

Watch $15.72.

That was the December 11th low in silver before the rally. We really need that level to hold.

There’s something rather ominous the cartel is attempting with gold:

If they are able to strong arm the yellow metal some more from here, they will be able to work in a “death cross” where gold’s 50-day moving average crosses the 200-day moving average to the downside.

The only problem is to do that, gold is going to be screaming “oversold”.

That said, if they’re going to put the pressure on silver, they’re going to put pressure on gold as well.

The other two precious metals aren’t even showing what looks like a bounce (not that I’m expecting gold & silver’s overnight bounce to hold).

Palladium just took a time out to reassess the situation:

Palladium’s 50-day moving average has been pointing up, so progress was being made on the chart, we’ll just have to see what kind of a set back any strong-arming of gold & silver create for palladium.

Platinum, on the other hand, still looks terrible:

Platinum is still technically in a “correction”, but if platinum closes below the May 21st intra-day spike low of $877.80, I’m just not sure how there could be a reversal any time soon.

Speaking of “wait and see”, copper has perfected a whole bunch of nothing overnight and into this morning:

The technicals are bearish for Dr Copper, however.

We can see crude oil is trying to bounce:

There is a big OPEC meeting on Friday in Vienna, so be prepared for some volatility in crude oil this week.

The VIX is perhaps one of the biggest farces of the year:

It’s almost as if the massive spike in early February didn’t even matter.

I mean, look at the Nasdaq putting in a new all-time high last week:

It just goes to show that despite the interest rate “hikes”, there’s still plenty of “free money” sloshing around the system.

So these are the forces we’re up against, for now.

They are unnatural and artificial forces, but that’s what the central bankers want, so that’s what they get.

The yield on the 10-year has basically gone nowhere in two months:

Sure, there’s been some volatility in yield, but they more or lest cancel themselves out.

There was the initial surge above 3.0% all the way to 3.115%, and then the Italian government scare which sent yields plummeting as investors rushed in to the “safety” of U.S. bonds, but other than those two events, we’re really in a range between 2.9% & 3.0%.

Perhaps the biggest unknown is the U.S. dollar.

Is the dollar rolling over after the surge last week, or is this merely a couple days of consolidation before the next move higher?

If Europe remains a basket case, there could very well be a continued bid for the dollar. Political pressures aren’t just brewing in Italy, but now Germany is rife with political turmoil as politicians begin to question Chancellor Merkel’s ability to lead the nation. Not only could that put a bid under the dollar, it could put a bid under U.S. bonds, and in theory, it would put a bid into gold & silver, but we know that in practice they’ll smash the metals and blame it on a flight to safety of U.S. securities.

Sooner or later the world will catch on the the U.S. will be paying back bonds with worthless fiat, but for now, there’s still too much trust in the system and with the governments and central banks.

The next financial crisis will put a damper on the confidence game rather quickly.

On the events calendar, it’s a light week, which I why I haven’t even put it up on this SD Outlook. Today there are conveniently two Fed Head speeches, you know, to jawbone the markets in the desired direction to start the week, and we get some housing data this week, but other than that, no major data releases.

So the cartel could smash based on geo-political factors or macro-economic factors, but not based on data dumps. But then again, the cartel is so brazen, they now just smash in the plain of day, positive or negative economic data be danged.

let’s recap the bottom line: Gold & silver were beaten to a bloody pulp on Friday. It’s possible we could rally from here, but in all actuality, I’m expecting a retest of the lows from May. I think we’re going to test the early May lows in silver, and for gold, that would be the mid-May lows.

The cartel showed the world who was boss last week, so I’m not very optimistic as we move in to the end of June.

Just how low will gold & silver go?

I think it depends a lot on the direction of both the dollar and crude oil.

Summer doldrums?

More like summer beat-down.

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 PaulEberhart.com. Paul’s Twitter is @Paul_Eberhart.