Fundamental and technical analysis on gold, silver, the US dollar, commodities, the stock market, and a VERY humbling argument for why the VIX has topped out here, for now.
The Silver Price has put in a higher-high, smashed through the 50-day moving average, and is now testing the 200-day. We said on Monday the white metal would either break-out or break-down, and it sure did break-out. We are above $17, and it looks like we can put our bullish wedge behind us as early as today depending on how silver performs:
Volatility is the talk of the markets this week, especially after that 44% move yesterday, however, as we mentioned last night, perhaps a little perspective is warranted. Yes, fears mount as escalating tensions between the United States and North Korea continue, though the VIX is looking extreme right now in terms of yesterday’s move, but when comparing the VIX yesterday to the US Presidential Election and Brexit, we see this:
And when comparing the moves in volatility this week to Black Monday 2.0 in August of 2015, we can see that not only is volatility nowhere near where it was two years ago, the Dow is 7,000 points higher, all which begs the question, is the market more likely to crash or rip higher?
Normally with so much fear in the markets, even if it just doesn’t add up to recent trends, we would see flight to safety in the US Dollar, but what is most telling is that the dollar has been choppy, and the flight to safety is not there, although, as shown when compared to gold, the most traditional safe haven asset there is, we can see the flight to safety is taking place for the yellow metal:
Perhaps the dollar has peaked and is heading lower? Certainly action since late January indicates it is just as everybody went long dollar on the inflation trade hype.
Which merits recollection of a few terms that are now completely out of the MSM. “Trump Trade”, “Infrastructure Spend”, “Obamacare Repeal & Replace”, and all the other Dow 22,000 catch phrases have been replaced by “Fire and Fury” and “Nuclear Strike”. What is not, present, however, is mention of gold & silver, though in mentioning the metals here, we see there is still room to run after stellar gains on the week:
Will we see a Friday surge to bring gold prices above $1,300? Can the silver price pop another $0.40? With CPI data coming out today, and with not one but two Fed speeches (after Dudley’s nothing burger speech) to talk fear, markets and dollar, today seems to be more of a test of consolidating here than moving even higher on the week. At this point, consolidation is welcomed as sentiment has been devastated with much reservation to calling a turn across the precious metals community.
In other commodity news, copper has been consolidating and is above $2.90, though crude has pulled back after breaking the $50 barrier earlier in the week. The question is whether crude will catch-up to copper, or is copper due for a pull-back to catch-down to WTI?
As for the stock market, a little perspective on the Dow shows that since the lows earlier in the year, and the near perfect climb ever since, we are not even close to the 50-day moving average:
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