SD Outlook: Gold & silver begin a very critical week that will set the tone for the next several weeks. Here’s why…
Gold & silver really need to rally this week.
It really boils down to one word: Momentum.
My call has been for the rally to begin this week. However, if the rally doesn’t begin this week, I feel we can kiss any hopes of a rally goodbye until the second half of June.
Well, much of it has to do with next week.
You see, U.S. markets are closed next Monday for Memorial Day.
Point one: The cartel loves to strong arm the markets on holiday shortened weeks.
And if that were not bad enough: Next Friday is the BLS Jobs Report.
Point two: The cartel loves to smash the metals on Jobs Friday.
Moving past next week, we have a week of pain, which would lead us into the second week of June, and that week culminates with the FOMC (presumed) rate hike and Fed Head Love Fest (otherwise known as MSM press conference after the statement).
What does all of this mean?
If we don’t rally this week, we have almost no hopes of rallying next week, and the MSM will be all over the Fed in the week leading up to the FOMC meeting. That means we have to deal with the whole, “the economy is awesome, rate hikes are good for the dollar and bad for gold” memes.
We’ve gone over that a million times as to why rate hikes are not bad for gold, but I digress.
We really need to rally this week, or it will be three more weeks of pain.
And there’s plenty of economic speed bumps and potholes to navigate around this week.
To name a few:
- Lot’s of Fed news including the minutes from last month’s meeting and a Fed Head Powell speech on Friday
- Tuesday COT Report ‘repositioning’ and metals options expiration
- Real estate data (new home sales & existing home sales)
The point here is that we have our plate full, and perhaps you have heard the old cliches – “sell in May and go away”. That’s generally a stock market term, but it looks like it could apply to the metals this year.
There’s also the term “summer doldrums”.
If there’s a bright spot, it’s that the metals have consistently rallied coming off of FOMC rate hikes, which next month is on June 13th, 2:00 p.m. EST. There’s no reason to think the metals won’t rally in a “sell the rumor, buy the news” fashion again.
And if the Fed doesn’t hike, well that’s good for gold too.
There is also the possibility that traders could front-run all this economic data and news, and if that’s the case then the metals could begin to rise before the FOMC, but I’m not holding my breath.
Let’s just see how we get through this week. We’ll know how things are by Friday that’s for sure.
So we’ll just have to see.
Bottom line: If we begin the rally this week, we get momentum, and if the rally gets put on hold, or if the metals have another bad week, then the cartel will firmly have the upper hand.
The dollar punched through 94 in the overnight session:
A strengthening dollar will surely act as a headwind for gold & silver.
But geez, how long is the greenback going to remain “overbought”?
It just keeps going, and going ,and going.
We’ll be watching the yield on the 10-year for insight:
We will be starting the week above 3.0%.
That’s new, and we’re about to see just how priced-in higher rates really are.
If the stock market it any indication, it looks like Wall Street is not liking the higher rates:
The S&P 500 looks like it could be rolling over.
Which is interesting, because the stock market even has the help of a newly subdued VIX:
Volatility has faded the move ever since the “Volpocalypse”, and we’ve been below the 200-day moving average for days now.
Interestingly, copper rose in the overnight session:
You see, the commodities and the dollar generally move in opposite directions – known as “inverse correlations”. If the correlation still holds, one of them is wrong. I’d say the dollar, because all indications are for a weaker dollar, and if it’s the dollar that has it wrong, we would see it breaking down soon. Especially if the commodities are going to keep rising.
Crude oil has been rising with the rising dollar, but crude has basically gone nowhere for three days:
Again, either the dollar or crude oil has it wrong – so it would be safe to assume a pullback in crude as the dollar continues rising, or a rise in crude with the dollar finally rolling over.
Palladium showed a little strength overnight:
This is nothing to write home about. We really need to see palladium working away at the moving averages, getting the 50-day rising again to cross up and through the 200-day.
But if platinum is a taste of what’s to come, it’s tasting very sour:
Whereas palladium rose in the overnight session, platinum has fallen in the overnight session and looks to be setting up for the seventh down day in a row.
Platinum is fast approaching oversold territory, but if platinum loses $872 to the downside, that will look very bearish and it could get a lot more oversold before it’s through falling.
Looking to the gold to silver ratio, we can see the top is clear:
That’s a textbook roll-over in progress. We now have 78s across the board.
I get it, it’s for the wrong reasons, but on the next rally, if silver finally begins to lead gold, then it will be for the right reasons, as in silver outperforming gold.
Gold is now down over 1.5% year to date:
Looking like it wanted to pivot over the last three days, we can clearly see the bearish candle that has formed in the overnight session.
If there is good news, gold is at risk of becoming “oversold” on the RSI.
You see, the dollar is screaming “overbought”, and gold is about to enter “oversold” territory.
Can it go on much longer than forecast?
It already has, hasn’t it?
At least the dollar anyway.
So we’ll see. Perhaps a flush out day with a drop below $1280, call it $1275, is just what we need to jump start this rally?
Silver is down nearly 3.7% year to date:
Again, this is not what anybody was calling for at the start of the year. Well, anybody except the haters, trolls, mainstream financial media and cartel.
They have succeeded thus far.
And we’ve had to endure half a year of pain.
What do we want to see from silver this week?
For starters, we need to get above the 50-day moving average on the quick, and then get above and close above $16.80 where the 200-day moving average is. Close above the 200-day today, tomorrow, or Wednesday, and breaking out above $17 with a close on the week above $17 is critical going into next week..
Let’s also look for some volume coming back in the market on that type of price action.
If we can get above $17.50 and close there, we’ll be above $18 in no time, and I get it, “Half Dollar, that’s only like a buck or a buck-fifty from here”.
Yeah. In the grand scheme of things, pretty pathetic.
But that’s the type of year it has been, so I’d take closing out the week above $17. Anything more would be a bonus.
We’re right at a critical point in time right here, right now, in this very week.
If we rally this week, we will have momentum on our side.
Momentum can be a powerful force in markets.
If we don’t rally this week, I will be wrong in the forecast I’ve held for weeks now, and the cartel will have the calendar and economic events on its side, and those are very powerful forces in the markets too, especially when those forces are at the fingertips of agents who stand at the ready to click into existence as many paper contracts as necessary to cap price.
This week will set the tone going into summer.
It’s make it or break it week.
– 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.