SD Midweek: The cartel looks to be in a managed retreat as gold & silver have held their lines and begin making their moves…
As a reminder, here’s silver in 2015:
And here’s silver this year:
So far so good.
A look at the 1-Hour chart shows how the most recent short-term bottom has been carved out in silver:
While we are not out of the clear yet, especially with the biggest most-bestest ever tax cuts and what most likely will be another kicking of the government can, which would keep the government on it’s payday loan scheme for another two weeks, but signs in silver sure are looking bullish.
This brings us to our first point: “Buy the dips, sell the rips”.
That is a trading term which is generally followed depending on whether a person is trading is in a bull market or a bear market.
In a bull market, traders “buy the dip”, but in a bear market, traders “sell the rip”.
Granted, we’re talking about short term here, but the same logic applies, and that is one of the problems the cartel will face right now.
If they bring the hammer and smash price, traders will probably buy the dip.
If traders buy the dip, the cartel loses over three months of heavy price smashing and flushing of the spec long positions.
If the cartel doesn’t flood the market with paper, the price rises could raise an eyebrow and spark interest in traders looking for price movement.
So for now, it looks like the cartel is in what is often referred to as a “managed retreat”.
A managed retreat means the cartel has to back off of flooding the market with paper, but rest assured knowing they have extra fingers at the ready to hit the “sell” button should the price spike dramatically.
Imagine a group of soldiers retreating: some pull back and get into position to provide cover fire if needed for the rest. The rest pull back even further that the first, and the rest get into position to provide cover fire for the first. Then the first pulls back again, further than the rest so the first group can provide cover fire for the rest once more. So on and so forth this “managed retreat” takes place.
But wasn’t it Mike Tyson who said, “Everybody has a plan until they get punched in the face”?
The problem is if the advances of the enemy (which in the case of the cartel would be a rising silver price) overwhelm and overrun the positions of the retreating soldiers.C chaos can ensues and all heck can break loose.
The cartel has the calendar on their side, which is why so far the retreat has indeed looked “managed”.
The gold-to-silver ratio shows the calculated, almost in-our-faces managed retreat:
But if they want to keep the price favoring silver, fine by me.
I know that the price of silver is artificially suppressed to the downside, and the value of silver is many multiples higher than the price shows, so I’ll play the waiting game.
Gold is showing a similar retreat by the cartel:
The concern with gold, even more so than with silver, is that it becomes “overbought” on the RSI, in which case a pullback would be expected.
Silver pulled back $.01 yesterday, so silver is not as close to overheating as gold.
But it brings us back to our first point: Pull-backs in the short-term are often bought in a bull trend.
Yesterday I fired off a post about how the cartel, giving their marching orders to the CME Group, decided to cut margin requirements for trading paper gold and paper silver. This will further entice new buyers to enter the market because the cartel, in all their ingloriously evil corruptness, makes a ton of fiat both ways on the trade, and by taking both sides of the trade.
It could almost be thought of like this: A grown man playing basketball against a 5 year-old child.
Sometimes the grown man will let the child score, and sometimes the grown man can let the child think he or she won, but in the end, the grown man controls the game.
This is what has been going on since 1974 when the COMEX first began trading paper futures contracts and this will continue until either there’s a monetary reset, which we are overdue for, or until physical supply constraints force the price higher.
While I’m not sure which will happen first, if I were leaning one way or another, I would say the most likely course would be that China and Russia are no longer able to scarf up physical supply they desire, and then they will force the reset on world gold & silver prices.
Platinum is at risk of overheating right now:
Which would provide a healthy “buy the dip” opportunity if indeed the short-term trend is bullish.
But palladium is bid and could put in a new high this week:
Palladium has shown what healthy pullbacks and buying the dips looks like on the daily chart.
Copper is bid:
And crude is bid:
But it should be noted that both of the commodities are going to face serious resistance. Resistance of which neither has been able to break through.
Copper faces resistance at $3.20 and crude faces resistance at $58.
Rising commodities prices raises the floor (the lowest price) for precious metals.
One of the roles precious metals plays is a “hedge against inflation”.
That is, if the cost of basic goods is going up, the dollar buys less, but if those dollars were converted into ounces of gold or ounces of silver, no purchasing power is lost.
Speaking of losing purchasing power:
The head-n-shoulders pattern looks to be holding so far, and since it’s bearish, if the chart pattern holds, the dollar is getting weaker.
The yield on the 10-year note spiked higher yesterday:
But the St. Louis Fed is preparing us for negative nominal interest rates.
In the meantime, however, higher yields and these ‘massive’ rate hikes by the Fed means that everybody’s debt servicing is about to get more expensive, and that cuts into everyone’s purchasing power as well.
See the theme here?
Commodities prices rising, the dollar weakening, interest rates rising, yet gold and silver are artificially priced on the low end.
Guess what people sooner or later will figure out?
All those gold and silver insurance policies, that is to say, owning physical gold and physical silver, are going to pay off spectacularly.
Oh yeah, not to mention the government is growing, not shrinking, and the tax cuts are putting extra US debt-based fiat currency in everybody’s pockets, which will also work hand-in-hand to spur price inflation on Main Street.
The inflation monster is getting angry, and while it has already been unruly, its about to start lashing out in rage.
Which we are already seeing signs of anyway in this:
And in this:
Just ask Venezuela:
– Half Dollar