Precious Metals End Mixed: Is The Flush Over And The Cartel Out Of Ammo For Now?

SD Friday Wrap: Another difficult week, just like the last 10, but there’s signs that the cartel may be out of ammo…

Is the flush over? Does the cartel fall back and gold & silver prices rise as the cartel regroups and reloads, or is a parachute drop of reinforcements in route?

Last week we were all cautiously optimistic with gold & silver.

On the one hand, it was good to see a decent week after ten weeks of pain, but on the other hand, we knew the cartel (the Fed, the Exchange Stabilization Fund, and the complicit banks & traders) would take advantage of the holiday week and smash.

We just weren’t expecting the smash right out of the gates on Monday, but it’s pretty much what we got. It was so brutal, that the metals never recovered.

Gold was hit for $20 and managed to climb back up most of the week and erase the smash by Wednesday:

But the move has since been faded and now gold is losing $1290.

It just shows how desperate the cartel is to prevent gold from busting above $1300.

Gold did, however, manage to stay above the 50-day moving average:

And the open interest is slowly but surely coming down in gold. We must be near the end of all that the cartel is gonna get on the flush this time around.

On the weekly, it’s actually not that bad:

All things considered of course.

After two up weeks, we have had a slight pullback on the week. Cool. Kind of like that Paula Abdul song about two steps something or other.

We must all understand and recognize that nothing straight up or straight down. “Markets” are always looking to find the price to settle upon. So that pullback, well, heck, the official start to the shopping season just began didn’t it? And stackers have an even better sale thanks to that brutal smash on Monday.

You’re truly managed to scrape up enough to get two ounces for my stack this week. Silver that is. And since I’m a buyer, I like paying less, because when the cartel looses control, and it’s not if but when, stackers will be rewarded for their hard work and discipline, and our discipline is especially deserving now that we have a whole new band of Bitcoin and crypto fans to hear how Bitcoin is going to $1,000,000.

Silver didn’t do so well after the Monday Smash:

Silver never recovered from the smash, and since Wednesday silver has faded the move. Silver is clinging to whole number support at $17.

On the daily, however, silver is quickly becoming a coiled spring:

Recall that for the first half of the year and up through early September, silver was range-bound between $16 – $18. That range has now compressed from late September on through today with a range of $16.75 – $17.25.

The cartel really is stuck here, because the white metal is consolidating in an ever tighter and tighter range. One could even argue that the correction in silver is occurring over time instead of over price.

That needs repeating: From September 8th to September 18th, silver dropped 5.4% in price. Silver has since been consolidating, range-bound, for two months.

This is the correction in silver played out over time instead of over price. The open interest as shown by the green line over the volume bars shows that it is at the end of the flush, or else there is very little to go until the flush is over.

On Wednesday we said that gold and silver were making final boarding calls. They still are, but the flush could already be over and we just won’t know it until the action picks up Sunday night and then Monday.

Just like in gold, after two weeks of gains (even though it doesn’t feel like it) silver has put in a down week:

The arrow pointing to the price line represents where silver really needs to close on a weekly basis to put in a bullish trend change. We need to close above the $17.44 high to complete two higher-lows and two higher-highs.

The gold to silver ratio is still playing pinball:

However, slowly but surely the 50-day moving average is topping and rolling over.

Nothing has changed on the GSR. Yet.

The set-ups are there for the next leg higher in gold & silver prices. What we just don’t know is if the cartel is done with their flush or if they will pick up next Monday where the left off this past Monday.

It looks like they may be done, hopefully, and for more reasons still listed below. We have been dealing with this crap since September 9th.

A rate hike is now more than priced in:

Seriously? Not only does everybody agree there’s going to be a rate hike on December 13th, but now even 8.5% feel the Fed is not going to raise by 25 but by 50 basis points!

Raise by 50, and that might leash all kinds of havoc on the markets, because a 25 basis point hike is pretty much priced in, but a 50 basis point hike could be a serious policy error, not priced in, and it might be too much for the stock markets. If they start falling, the “safe haven” rush into gold is on.

On the other hand, if the Fed holds, well, that is not priced in right now.

If the Fed holds here, we could see a run into gold as it signals a reversal from the brief hawkish Fed and their “rate hiking cycle” which managed to go from a range of 0% – .25% to a range of 1.0% – 1.25%.

So summarize: The Fed and by extension, the cartel, are still in a box, and a 25 basis point hike is already baked in the cake.

Palladium and platinum are showing that we may indeed be done with this cartel flush.

Palladium’s pull-back is textbook:

That’s buying on the dip. Also notice the drop in open interest.

Those are more clues the flush is over with gold & silver.

Platinum has had three strong days up in a row:

After feeling the Monday Smash, platinum, while not having recouped the losses, has been bought.

Platinum has been the lagging under-performer of the precious metals all year, though still up year to date:

Year to date:

  • Platinum is up 4.19%
  • Silver is up 6.5%
  • Gold is up 11.9%
  • Palladium is up 46.39%

The US dollar has resumed it’s fall and the yen is strengthening against the dollar (which shows as downward movement):

The move down is turning into big drops. Seems so long ago, that “the trade of the year” was long dollar.

The falling DXY and USD/JPY on the chart above just present themselves as more evidence that this flush is over. If DXY and USD/JPY are going to keep falling, that is bullish for gold & silver.

Check out crude oil busting through $59 :

In fact, check out crude oil on the weekly:

Crude oil closed the week of June 29, 2015 at $56.60 and just this week it closed at $58.97.

Isn’t it eerily similar to gold & silver’s long, drawn out bottoming and long, drawn out start of the bull market?

Copper is up six days in a row:

On Monday we were looking for copper to ride the 50-day, but on Monday copper bounced off the support line and closed at $3.17. Open interest is coming down and volume was up to end the day, so it remains to be seen if this is short covering or the start of the actual rally what will eventually take out the $2.25 high on October 16th.

One thing is for sure: A rising cost of oil rises the cost of mining, and cost push inflation will come in sooner or later.

That is true for gold and silver too. Cost push inflation, that is, price increasing because the costs to produce metal is going up, and the cartel won’t be able to drive the metals down much further based on the input cost of oil alone.

The yield curve is flattening, meaning short-term rates are rising as long-term rates are falling, and if the curve inverts, meaning short-term rates go higher than long-term rates, we have had a recession every single time it happened.

We’re not diving into that inverting yield curve inverting math though.

We’ll just stick with the benchmark US dollar proxy in all it’s debt based glory, the 10-Year Note:

And the yield (2.34%) is still nearly in the middle of the wait on the Fed 2.3% – 2.4% range.

Introducing our WTF? chart of the day:

VIX flash crash to the lowest print ever at 8.56. What a farce.

And then there’s this farce:

 

Record high again today! Is this the final melt-up? It might not be, but isn’t that “V” shaped “recovery” something to see?

Put together, here’s the Fed’s magic trick: Sell VIX and Buy SPX.

Bottom line: The set-up in gold & silver is there, and the flush may be over for this round which began on September 8th for silver and September 11th for gold.

If the cartel is not done with the smashing, it looks like it can’t go on much longer.

We’ll know soon enough.

Stack accordingly…

– Half Dollar