SD Outlook: Will the countdown last just this week, the last week of November, or until the Fed rate hike, or even until next year? Here’s some insight…
The Final Countdown.
Who sang (still sings) that song?
But that’s what I’m feeling with gold & silver right now – the final countdown.
What do I mean by the final countdown?
I mean we’re moving into the final stretch of this continued agony felt by the bulls (who want gold & silver prices to rise). Will the countdown last a week, or will it last until the end of the year?
That’s the $64,000 question.
Let’s revisit a case I argued a couple weeks ago, which I think it is still valid today. Part of the assessment of how much longer we have to go until it’s rally time could depend on these three things (in no particular order):
- Continued US dollar strength
- Falling oil prices
- A stock market rally
Those three things work against a gold & silver rally. Gold & silver held on, in part, because the stock market was falling pretty hard last week.
Though what do we see as we enter this last week of November?
- The dollar, while not surging, still has its uptrend in tact
- Crude oil is below my mid-$50s range of concern, and falling to a 40-handle is a real risk
- The stock market may bounce here
So what does all of this mean for gold & silver?
I think it means continued pressure. I think there is more downside risk to gold than to silver, because let’s get real for a moment – when an ounce of dirt costs more than ounce of silver, that is not a dynamic that will last for long.
Silver is dirt cheap, and soon, it will be cheaper than dirt if they continue to smash.
Besides, the GSR is flirting with 86:
Therefore, if there is pressure on gold coming, then the ratio will be falling, but for the wrong reasons. If you’re a gold & silver bull, you want the ratio falling as the prices of the metals are going up, not down. That said, if you would consider yourself the “average” stacker, as in your orders regularly do not include five digits and a comma to the left of the decimal point, then the decision to buy either gold or silver should not be a difficult one.
Overnight and into this morning, silver seems to think that claiming the 50-day moving average is a pipe dream:
It may in fact be a pipe dram too, at least for a little while longer.
Call it The Final Countdown.
For the moment, gold is above its 50-day moving average:
But if we are going to see continued pressure on the metals, then gold will likely fall below that moving average.
Palladium is holding its own for now:
Of course, palladium has done its own thing for the better part of two years (two years of data not shown on the chart, however).
Platinum has been doing its own thing for the better part of two years as well (even though only one year is shown on the chart):
For the bulls, the thing platinum is doing is not what one wants to see. Was there full-fledged capitulation in mid-August when platinum hit the $750s?
I think so.
I have been saying platinum has been in a stealth bull trend, however, if platinum falls below its 50-day moving average, and if the metals trend downward and lower for longer, then we could see platinum putting in a confirmatory capitulation.
At this point, I hope gold and silver see that too. You know, just one real good flush-out of the remaining weaker hands, so we can all move on and move forward.
Copper must be causing a lot of indigestion for the copper bulls:
With a strong dollar, a falling price of oil, and a bouncing stock market, downward pressure on gold & sliver could be extended to copper.
Crude’s chart shows why I said oil is a risk of trading down to a 40-handle:
Overnight and into this morning, crude came within $.10 of losing $50.
What other, fundamental economic factors must we contend with this week?
In the first part of the week, we have an assortment of data and Fed Heads to contend with:
Wednesday will be an especially important day for the markets from the pre-market action until Fed Head Powell’s speech is over.
Rounding out the week, we still have the ever-present Fed, along with more data:
It will be “all eyes” on the Personal Income and Outlays report. That’s the PCE measure the Fed uses as its official “inflation” measure.
What about fundamental political and geo-political factors?
Interestingly, there are several “hot spots” which, if one of them is perceived as being mis-handled, could lead to an acceleration of our final countdown. Again, in no particular order, political and geo-political factors which could move the prices of gold & silver include:
- Some unforeseen, negative consequence of the migrant caravan at the Southern border
- Problems with Brexit, the European banking system, or the EU in general
- Increasing tension and/or conflict in Syria, Israel, Gaza, or Iran
- Renewed tensions between Russia, Ukraine and Crimea
I’m sure I’m forgetting some of the political and geo-political factors, but the point is that while on paper, the current economic and market realities are not gold & silver friendly, there are plenty of political and geo-political factors, which, if there are mis-calculations or mis-steps, the pain and agony felt in gold & silver could get turned on a dime.
The Russell 2000 shows, in part, why we may see a bounce here:
The experts and pundits are going to be saying things like “double-bottom” and “bear trap” to try to sucker “investors” back into the markets.
And it might work.
It might work, in part, because while not at record lows, the VIX was pretty much in a downtrend last week:
Which would be supportive of a stock market bounce this week.
Plus, the yield on the 10-Year Note has also been falling:
Meaning that yield has a way to run higher before putting additional stress on the stock market. In other words, over the last two weeks, yields have now been set-up so that we could see a run in the stock market.
Especially after everybody and their brother is now super-bearish on the stock market right now. I’m bearish, and I do think the crash is coming, but I also think we could get a mini-bounce here. Now, I hope I’m wrong and that the stock market keeps on crashing, because for the last 10-years it has been propped by money printing anyway, but it may not continue crashing this week. I don’t think it’s going back to record highs, but I do think we bounce, and if we do, it would really be a “bull trap”.
And the dollar is still banging around 97:
The strong dollar is also supportive of the stock market.
We’re in the final countdown.
The final countdown before the rally.
Will it last for the rest of November, or until mid-December and the Fed rate hike, or even until the start of the new year?
That is the question, and unfortunately I don’t have the answer.
It is not up to me to decide.
With gold & silver priced to political and geo-political perfection, it only takes one mis-calculation by some world “leader” or collective sovereign nation to upset the apple cart.
And that would fast-forward the final countdown.
– 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.