SD Midweek Update: Today is one very important day, and with so many critical things happening right now, Powell has zero room for error…
The Fed might not actually cut rates today:
Gold & silver win either way.
Well, the Fed is already engaged in QE, whether they’ve officially announced it or not.
This has been going on for a few weeks now.
It began with the Fed increasing it’s balance sheet through the purchase of bonds, and just yesterday the Fed intervened in the Repo market, which is a kind of “overnight lending” program between banks, but the point is, the Fed pumped tens-of-billions of dollars into the banking system yesterday to retard natural market forces which were causing rates to spike, so the Fed heavily-handily pumped money to maintain the Fed Funds rate suppressed at its target range of 2.0% – 2.25%.
From the NY Fed (bold added for emphasis):
In accordance with the FOMC Directive issued July 31, 2019, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York will conduct an overnight repurchase agreement (repo) operation from 9:30 AM ET to 9:45 AM ET today, September 17, 2019, in order to help maintain the federal funds rate within the target range of 2 to 2-1/4 percent.
By the Fed intervening to keep rates held artificially low, we have a fundamental backdrop that’s bullish for gold regardless of what their action is today with respect to a rate cut or a rate hold.
Recall the Fed primarily has three tools, in no particular order:
- Screw the savers: The Fed suppresses the Fed Funds Rate to stimulate borrowing and such.
- Money printing: The Fed purchases bonds, mortgages, and there’s even talk the Fed will outright buy stocks during the next crisis.
- Jaw-boning: This is when the Fed “signals” to the “markets” well in advance what the Fed will be doing.
The three primary tools are “good for gold” in so many ways.
For example, with regards to interest rates, which will be today’s main topic in the mainstream, if a person’s savings do not earn enough interest to keep up with inflation, then it makes more financial sense to take those savings and purchase gold & silver, which in this example serve as inflation hedges.
Regardless, Powell has said the Fed will do what needs to be done to ensure it can “sustain the expansion”, and Powell has been saying that a 25 basis point cut this time around is appropriate, so does anybody really think the Fed is not going to cut interest rates?
I think the Fed does cut 25 basis points, but with so much doubt now surrounding today’s actions, we could very well see a pop in gold & silver prices, beginning today, if the rate cut is not priced in.
Interestingly, if the Fed does not cut today, yield on the 10-Year Note will still be inverted with the Fed Funds Rate.
In fact, yield on the 10-Year Note is showing the Fed is “behind the curve” on rate cuts:
Of course, I’m talking about being behind the curve from an enabling, apologizing, supportive mainstream financial press point-of-view.
The free market wouldn’t be having any of this.
Of course, there’s nothing free about any of our markets.
The dollar is still being held in its allowable range:
This really is odd, too, because forget the trade war, it’s now all about real war, and war with Iran, yet where is the flight to safety bid in the dollar?
On Monday, President Trump had this to say about the dollar:
Producer prices in China shrank most in 3 years due to China’s big devaluation of their currency, coupled with monetary stimulus. Federal Reserve not watching? Will Fed ever get into the game? Dollar strongest EVER! Really bad for exports. No Inflation…Highest Interest Rates…
— Donald J. Trump (@realDonaldTrump) September 16, 2019
“Dollar strongest EVER! Really bad for exports. No inflation…”
The sheeple aren’t going to know what hit them once the dollar takes a hit!
Speaking of hits, the stock market has not hit new all-time record highs:
It’s so close to record highs that I don’t understand why they don’t just ramp it right now, but then again, I only understand that is ultimately coming, because that is out of the cartel’s control, but for their planned crashing oof the US markets and economy, since I’m not on the inside, nor have a direct line to the inside, I simply don’t know the when, nor do I know the how high or how low.
We’ll know soon enough, however, if I’m correct about my “Fall Guy” theory.
We’re on the brink of War with Iran, and check out the VIX:
Does it not?
Crude oil has already filled its gap:
anal retentive manipulation deniers in vogue technical analysts will be quick to carve out the next upside target with laser precision.
Copper is straddling its 50-day moving average:
It’s taken much longer than I thought, but the average is finally getting turned around.
In my opinion, the gold-to-silver ratio is still favoring silver:
I don’t think we are going to be in the 80s for much longer, so while common sense tells me not to include a time-frame in a directional call, I think we could finish this week with a 7-handle on the GSR.
And that’s another way of saying that time is running out to get 80 ounces of silver for one single ounce of gold.
Why does it matter?
Well, not if, but when, the ratio reverts to the mean, and to keep it simple let’s say the ratio moves from 80 to 40 – this means that instead of getting one once of gold for 80 ounces of silver, you can get two ounces of gold for 80 ounces of silver.
Who doesn’t like free money?
It’s what I’ve been calling a “once in a cycle opportunity”, and the gold-to-ratio is still (barely) that.
Palladium is having a hard time holding $1600:
If the technicals matter, a pullback to $1550 is a good thing anyway.
Let’s see if platinum can hold near-term support at $940:
If not, that’s one huge air pocket to the upper $800s.
I really like the way gold is base-building at $1500:
I also really like the upward slope of gold’s 200-day moving average, and I think we could be ready to see some newfound bullishness in the technicals.
All things considered, silver is more or less holding-up at $18:
We’re still under $20 an ounce for one ounce of silver, in-hand.
We will soon look back on these days and kick ourselves.
For not converting even more fiat into physical silver.
That is the bottom line here this beautiful day.
A day in late September, before the fall.
And no, that was not a dang pun!
We all only get one shot at this.
It’s possible to position late.
Because silver is real.
Fiat paper will burn.
And our streets?
They will too.
– 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.