SD Friday Wrap: Gold & silver don’t gain any ground, but they don’t lose any either, and the metals won’t just stay in this same spot for long. Here’s why…
For those who are unaware, “marking time” is basically marching in place.
Here’s a one minute crash course in marking time:
Marking time implies some sort of purpose combined with a graceful military movement.
We could just as easily say this is how gold & silver spent the week:
What we are seeing in gold & silver is a temporary pause as the metals get ready to make their next move higher.
OK, “Hey Half Dollar, how do you know gold & silver’s next move will be higher?”.
Let’s think about this on a fundamental level. When I do that, one of the things I am thinking about is all the new found political and geo-political uncertainty.
In no particular order, we have:
- Increasing political infighting as the US gets closer to “the most important mid-term elections ever”
- A brand new illegal alien trail of migrants making their way to the Southern US Border
- The Middle-East in utter turmoil
- A dysfunctional Europe
Gold and silver thrive in an environment of political and geo-political uncertainty.
Then we can think about all the fundamental aspects of the economy, and we see a similar environment where the metals can really shine here.
Again, in no particular order, we have:
- A crashing China
- A US stock market on the brink of disaster
- Infighting between President Trump and the Fed
- Trade war tensions that, because of the migrant situation, look like they could be increasing again on multiple fronts
- Ever increasing debt in the face of tapped out budgets and increasing interest rates
Gold and silver thrive in that type of economic environment.
So I am expecting gold and silver to get moving higher here, and very soon. Sure, I was thinking this was the week that silver finally got back above fifteen stinkin’ bucks, and silver didn’t, but let’s use this price action to our advantage to accumulate whenever possible, shall we?
Moving on to the charts.
We see the gold to silver ratio is still heavily favoring silver:
That said, it almost looks like we will be putting in a lower-high on the chart, which would be bullish for silver, so we may not have the ratio above 80 for much longer, and when we are in the low 60s en route to the 50s, we’ll look back and think about days like these as “the good old days”.
Here’s that “historical extreme” I keep talking about with the ratio:
Yup. That’s right. That’s a peaking out at 31 on the GSR in 2011. See how I mean that over the long term, and this doesn’t even count any resets, for which we are long overdue, there is the opportunity to convert silver ounces into free gold ounces?
That’s why any and all purchases I make with the ratio over 80 are 100% silver purchases. Now, if a person is a high roller – a big baller – then by all means, scoop up plenty of the yellow metal, because wealth creation on a long-term capital gains play is not something that would make a huge difference in one’s personal fortunes anyway as those good fortunes are already there, but to those who are on a beer budget instead of a champagne budget, the gold to silver ratio is presenting a unique and rare opportunity.
Here we can see silver marking time on the daily chart:
We are still completely above the 50-day moving average, so we are really not in that bad of a spot here.
On the weekly chart, however, we can really see how silver has gone nowhere:
I’m cool with that too, because ultimately, silver is painting a higher-low on the weekly chart, and a higher-low is the first step in establishing a bull trend.
We can see that contrary to silver, gold has made some progress on its weekly chart:
Here’s the cool thing about gold too – the up-and-coming resistance levels gold faces are basically the major moving averages and the psychologically important whole number of $1300 itself, and those would be resistance levels no matter the underlying. The problem areas for gold will be getting through the muck of $1325 – $1350, and then staying above $1350 in preparation to make the run to $1400.
Regardless, the weekly chart is looking bullish, and that is something I have been saying for a few weeks now, and something we get confirmation of with each and every passing week.
Gold’s daily chart is where we really see the marking of time:
We are base-building, stair-stepping, or however you want to call it, but remember, gold is priced right now if there were no economic, market, political or geo-political problems anywhere around the globe, when in reality, we all know that there are multiple powder kegs with their fuses lit everywhere we turn.
I do not think gold stays down here for long.
On Wednesday (or was it Monday?) I said the golden cross would be obvious on the palladium chart come Friday:
I only have one thing to say about that chart above: Bullish!
Platinum looks like it wants to see if support can be found at $825:
I think it can, but more importantly, platinum’s 50-day moving average is about to start moving to the north again.
I said to be on the look out for crude oil to overshoot its 50-day moving average to the downside:
We have done just that. Could we go lower from here? Yes we could. We know that crude oil has been trading erratically all year long, but I am still looking for $80 to close out the year.
If crude oil closes out the year at $80, then it would make sense that the metals, and especially silver, do not drop off into the end of the year, but rather rally into it.
On the other hand, if crude oil looks like it is headed into the $50s, then I certainly think the paper price of silver would be headed lower, but premium creep would offset any significant drops in spot price.
Either way, regardless of what crude oil does, Peak Trump is still something we must contend with.
Copper is a wildcard here:
Though I do think demand for copper will pick up whether we are in some sort of booming economy, which I don’t agree with, or whether we enter a recession, and I think demand for copper will pick up because reflation efforts during the recession will, in my opinion, not be made in the paper financial markets like they were in the 2008 financial crisis, but made in the real world, and copper is about a real world as it gets.
That was a long sentence. It was about as long as the drop you are about to see in the chart below.
While some entity is stepping in a placing a bid under the Dow and the S&P 500, the Russell 2000 has not been so lucky:
It really looks like the bottom could fall out of the Heartbeat of America Index.
That is especially true considering that volatility looks to be on the rise again:
If the plan really is to crash the markets ahead of the mid-terms, then we will certainly see a spike in the VIX, and we will see it soon. The mid-term elections are less than three weeks away, so the good guys, or the bad guys, or whoever it is that wants to use the stock market crash to their advantage better get a move on.
Will we also see as spike in yields?
I certainly looks like we could the way this chart is looking:
Remember the tug-of-war analogy I used on Monday? If we get a spike in yields here, especially if yield takes out that recent high at 3.248%, then there is a strong case to be made that the drop in the stock market continues.
Like I said, considering the recent moves in the stock market indices, the VIX, and the yield on the 10-Year Note, gold and silver are priced as if none of this stuff was happening.
The dollar has been acting rather pesky lately, banging around 95 and 96 on the DXY:
Look how quickly trends can change. Since mid-august the dollar has gone from a bearish trend, to now wanting to establish a bullish trend. I don’t think we establish it. I think the next big move in the dollar is down, not up.
In my opinion, everything is mis-priced right now, and everything will have to go through a re-pricing.
Perhaps that repricing will even be violent?
A re-pricing means the stock market comes down, the dollar comes down, and gold & silver go up.
It really is this simple: If we look around at the broader economy, and if we look at politics and geo-politics, we see that all is not well.
And the solution to all of this malaise is gold.
– 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.