SD Midweek: The bottom is falling out of gold & silver. The situation is dire, but the stock market doesn’t know it yet. Here’s an update…
Today is the 47th anniversary of Nixon ‘closing the gold window’ as it is commonly called.
Let’s hear him cut the last remaining tie to sound money in his own words:
Interesting to note, that address to the world was given on what day of the week in 1971?
You guessed it: A Sunday evening.
Let’s recap the last several major changes in the monetary system in the last several decades:
- 1933/1934 Gold demonetized for citizen’s daily use, and gold revalued from $20.67 in 1933 to $35 in 1934 (in other words – dollar devaluation).
- WWII Bretton Woods era (US pegs to gold, nations peg to US dollar)
- 1965 Silver removed from coinage
- August 15th, 1971 – Nixon ‘temporarily’ suspends convertibility of dollar into gold (kills off remaining tie to sound money)
From 1971 to the present, the system is commonly referred to as the “petro-dollar” era. This scheme was devised in the 1970s, and the foundation of the scheme is that nations, mainly Saudi Arabia, would sell their oil for US dollars only. This placed a permanent demand for the US dollar as oil is the most consumed commodity in the world. This standard has been backed up by the might of the US military.
Where do we find ourselves now?
We find ourselves near the end of the current monetary system. The pure fiat monetary system is a debt based system that requires unsustainable, exponential growth in debt.
Furthermore, the Fed is publicly stating they are shooting for 2.0% inflation, which means they want the US dollar to lose 2% of it’s purchasing power every year. Nobody in the mainstream financial media calls them out on this, nor does anybody in government.
Here’s a question: Can you perpetually lose 2.0% of your purchasing power every year?
No you cannot.
At a point, the currency will be worthless.
Sure, the currency won’t get to absolute zero, but it doesn’t need to in order to become worthless.
Wwhat the Fed is basically saying is this: “We are trying our best to kill the dollar and we will keep trying until we succeed”.
Again, nobody calls them out on this.
And if you really think about it, what they are doing is evil.
So here we find ourselves today – the global debt-based fiat currency system, led by the US dollar, is now 47 years old and all grown up – but it’s a deadbeat on life support. A worthless instrument backed by death and destruction courtesy of the US military.
This system will come to an end. un-backed fiat currency systems always do. The US and the US dollar are not immune from this demise.
The only real question is this: How bad will it get before it comes to an end?
The longer we take to transition to the new monetary system, which for the last 5000 years has always reverted to gold and silver, the more painful it will be.
But the illusion continues, in part because the US is still the dominant global power, and half of the people in this nation, at least the half that still has any savings left, thinks the US has never been in a better position.
So this could current system can go on for a while longer.
Bottom line: Change is coming, resets happen, and we’re overdue.
The economic events for the rest of the week are light, but there are a few data points today and tomorrow worth noting:
Not that the cartel needs any cover to smash.
In fact, they don’t even need to smash.
Between the sentiment and the hedge funds going short, this latest downturn is on auto-pilot.
Well done cartel! (that’s sarcasm).
Is the stock market repeating 2015/2016?
As in basing for the next (hyperinflationary) leg-up?
Zooming out shows that could be the case:
Because here’s the thing: The stock market has never been better, relatively speaking. However, pension funds and retirement plans around the nation have never been in worse shape.
So here’s the question: What happens to the pension and retirement systems if there is a serious stock market crash?
Just like the demise of the fiat money system itself, there will be some sort of demise in the pension and retirement system, and the longer we wait before facing the problems head-on, the more pain that is going to be felt across the board.
So here’s the next question: Will they even let the stock market crash, or will the government literally come in and print up as much fiat as necessary to buy up the market?
If they do that, what will happen to the value of the US dollar?
We all know what naturally would happen, but there is nothing natural about any of these markets anymore.
I’ve zoomed out five years on all the charts just to show where we’ve been recently.
Remember the volatility spike in August of 2015 that went along with the sell-off and speedy recovery in the stock market?
Here’s what it looks like on the daily chart:
We’re still sitting below 15 today, but with all the emerging market panic and currency turmoil around the world, the VIX looks like it’s waking up again.
Notice the uptrends in yield on the 10-Year Note:
Yield is certainly very interesting right now because between the Fed selling, the US selling, and foreign nations selling, there is natural pressure for higher interest rates (because who’s buying?), but the economy is not going to be able to handle the higher rates, and neither is the US when it comes to debt servicing costs.
It is clear there is no easy way out of any of this.
US fiscal and monetary policy are both counting on low interest rates, but rates naturally would be surging higher, and we’re right at that point where we’re about to see which way they’re truly headed – and if the forces of nature (free markets) or of artificial sweeteners (ESF & Fed manipulators) will take over.
The dollar is now pretty much right back to where it was after the initial run in the second half of 2014:
Again, there is no easy way out for anything – dollar included.
It’s danged if it goes higher, danged if it doesn’t.
If it goes higher, on a macro level, the trade deficit will worsen, and emerging markets would continue to blow-up until there’s a full blown crisis.
If the dollar goes lower, then those who use dollars will see their standard of living shrink as inflation picks up speed. Thankfully, gold and silver are hedges against inflation, so smart people will be protected when that happens.
Copper looks like it is crashing again:
DR Copper is generally thought of as the health meter for the economy.
If the economy was booming, would copper start crashing for a second time in 2018? Copper is now down over 20% since the start of the year. That’s a bear market. And it’s crashing yet again?
What ever happened to President Trump’s infrastructure spend, or China’s Belt & Road Initiative?
Crude oil is still trying to decide what it’s doing:
It is hard to argue crude oil is no longer in an uptrend.
But can the economy handle higher oil prices?
Remember the several Tweets over the last several months where President Trump was complaining crude oil prices were too high? Prices aren’t high at all, comparatively speaking, so for him to say the price of oil is too high shows just how weak the economy is.
When we zoom out, we really see the series of lower-lows in palladium:
Being less manipulated than gold & silver, seeing the waning open interest is not a good sign, because palladium is primarily a precious metal that is industrial first and foremost.
What is that telling us about the economy?
Notice the theme here?
The charts are telling us there are grave problems in the economy.
Dismiss the mainstream financial news, whatever the Fed says, whatever the President says about the economy, and whatever the various Bureaus of
Lies Statistics tell us about the economy. The charts are simply telling us the bottom is falling out everywhere.
Platinum, well, yeah:
The daily charts go back five years, so it’s hard to see individual candles, but if you’re thinking, “is platinum making new multi-year lows just today?”, you would be correct.
The gold to silver ratio spiked, but has since retreated:
My 78-80 call looks like it may be breaking down as gold & silver leg down yet again. Come Friday I’ll re-assess the call and adjust if needed.
Moving on to gold & silver, I said let’s look at some downside targets today.
Gold looks like it has support at $1185:
I did not draw the next support line on the chart, but if $1,185/$1,183 doesn’t hold, coming off of the December 2015 bottom, it seems the next support isn’t until $1130.
Amazing, isn’t it?
Here we sit in late 2018, and we’re talking a bout support at $1130 in gold, with all the economic, financial and market chaos brewing under the surface which is clear as day in the charts.
The problem is that most people don’t see the charts, and if they did, they don’t know how to read them. Furthermore, most people are content with whatever CNBC and the other mainstream financial propaganda machines are pumping, most people are content with that the Fed is telling them, and most people are content with what the government and governmental agencies are telling them, so most people really don’t see the dire situation we find ourselves in.
And the hedge funds are convinced gold only has one way to go, which is down.
Look, we all know there is a short squeeze at the very minimum coming. Even if it’s not a “rally”, those shorts the hedge funds have piled on have to be covered. But every analyst who has said “the bottom is in” and “rally to begin now” only gets proven even more wrong.
I’m going to keep it simple.
You know what they say if you’ve been in the Army – “work harder, not smarter”, LOL.
So here goes: If $1185 doesn’t hold, we really need $1130 to hold because that is the next support zone. If it doesn’t, then revisiting the December 2015 lows is a very real possibility.
In my opinion, it is “back-up the truck” time right now. Further weakness would require the sourcing of additional trucks.
But I’m partial to silver.
At the current 80 to 1 GSR, the arbitrage play is still as valid as it has been for a couple of years now.
Silver’s daily chart looks downright nasty:
Silver is a jumbled hot mess from about $14 to $14.50, and if we get in that quagmire, then testing $14 is a very real possibility.
Again, I’m just trying to keep it real.
Here’s the question: Are the metals dropping again because this is the 2018 version of the 2008 pre-stock market crash?
It’s still summer.
- Have a car wash
- Cut some lawns
- Have a yard sale
- Set up a lemonade stand
Find the way to add something to that stack here.
I just spent way more than I wanted “back-to-school” shopping for my kids, but personally, I’m looking to see where I can free-up some funds, because at these prices, gold and silver are deeply discounted.
We know the short squeeze at a very minimum is coming, so in the long run, is buying silver at $14.70 vs $14.35 really that big of a difference, especially considering that premium creep is real and could offset that last little bit of downside?
Again, I’m speaking for myself here, as a stacker and as a Silver Bug, but I’ll be looking to add what I can now, and if we get some serious additional downside, I’ll be watching premiums, and if they have not gone up, I’ll be looking to add some more.
Happy Birthday global debt-based fiat currency sysytem, even if you are on life support propped up every hour of every day in every market around the globe!
One day somebody will decide to pull the plug and take the fiat currency system off of life support, because at a point, it will no longer make any sense to maintain the current system.
Best thing to do is say your goodbyes now, while there are still options.
– 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.