SD Outlook: Can gold & silver withstand world peace, a booming economy and a rate ‘hiking’ Fed? Here’s a look at what will surely be a very important week…
It’s going to be a cliff hanger.
This week is going to be one of the most important weeks for gold & silver, both on the fundamental front and on the technical front.
Today is the lightest day when it comes to planned events, but things really start picking up on Tuesday:
On Tuesday we have the CPI inflation data release, but more importantly will be the fundamental news and progress of this supposed North Korea Summit.
The summit will be a real test of gold & silver, because whatever happens, the outcome will be spun by the mainstream financial press as “bad for gold & silver and good for the dollar”, especially if there is all of the sudden “world peace”.
But in today’s world, just like modern wars last days or even mere hours, will the peace last?
Does anyone remember those 103 missiles launched against Syria? What about Israel and Iran/Gaza Strip escalations?
If there is some sort of peace “deal”, will it last? And will it last more than a few months?
Swamp creature and warmonger neocon extraordinaire John Bolton always seems to be within spitting distance of President Trump, after all:
Why is the National Security Advisor at the right side of the President, when apparently, this is the seven closest countries on planet earth?
You would think that the President would have some of his economic team beside him, so that progress could be made on making America Great Again while still maintaining the semblance of friendship and coordination.
But nope. We get the War Cabinet.
But I digress.
Looking back up at the Mon through Weds calendar of events, because it is that important, we see that on Wednesday, the most important economic event in months will come at 2:00 p.m. EST when the Fed concludes its June FOMC meeting and Fed Head Jerome Powell gives a press conference.
Odds are still over 90% of a rate hike.
Gold & silver have performed well since the fed began this rate “hiking” cycle, so we welcome the rate hike and just look forward to getting it over with already.
If the Fed does “hike”, and I use “hike” in quotations, because the Fed Funds Rate would then be at 1.75% to 2.0%, but it’s a floating rate, so in all likelihood the rate would be around 1.87%.
In other words, Since “hiking” began nearly three years ago, we’re still not even at 2.0%, and come Wednesday, we will be there in theory but not in practice.
Call it want you want but don’t call a rate of 1.87% normal. Call it absurd?
And that’s not the rate you or I get either. Last I checked, my “performance” savings account from a credit union still gives me my whopping $.01 per month interest earned.
Seriously. It’s a joke.
But I digress.
On Thursday and Friday we still have economic data releases:
Those red-dotted data releases are important too. We have retail sales on Thursday and Industrial Production on Friday. In other words, we’ll get to see just how tapped out the consumer is, if you can believe the government statistics, which I can’t, and we’ll also get to see how great America is again (Industrial Production is the stuff we make in factories basically).
Additionally, be on the look-out for what we haven’t seen in a while – some good old-fashioned Fed Jawboning, in case something doesn’t go as expected as we near the end of the week.
OK, “What does that mean Half Dollar?”.
That means if the stock market moves down in any meaningful way, they will parade a Fed “dove” in front of a camera somewhere, most likely at CNBC, to talk calm to the markets by reassuring everybody that the Fed is ‘monitoring’ the situation.
Bottom line (which I took way to long to write about): This week is going to be action packed with data and fundamental factors moving the markets, so buckle up, it will get bumpy.
I zoomed the gold to silver ratio out two years to make three points:
The first point is to show how there is clearly a top, peaking out on the chart at 83.20. That’s bullish for silver because if it is indeed the top, which I think it is, then silver will outperform gold, which I have been saying should be the case and will become clear for all to see once this rally begins in earnest.
The second point is to show where the ratio has been in the last two years. Notice that in July 2016, the ratio was under 65.
Assuming the next rally tests $1400 in gold, with gold consolidating at, say $1375, that means the next rally would squarely put us over $21 in silver.
My final point about the gold to silver ratio is that, seeing the numbers, that would basically put us where we were when gold & silver were topping in 2016 after that nice run, and unfortunately, that is going to be some nerve wrecking resistance.
I’m sure nobody will be ready to accept the bull market has resumed, therefore, until gold is using $1400 as support and silver $25, because how many times have we been let down now, especially in gold?
We’ll get there. It’s only a matter of how high does price move and how long does it take.
Overnight we can see the pressure was applied to gold & silver:
After beginning the early evening with momentum, which I said would be important on Friday, we can see at several instances the pressure was applied to walk down price.
We can see why too:
These metals want to rally, and they have momentum.
Gold & silver are rising in the morning pre-market action now.
So the Cartel comes in when the market is thinly traded in the middle of the night and applies constant pressure.
We can see why the Cartel does not want gold to break-out above $1305:
That’s where gold opened 2018.
I know, right?
That’s why I call it the “sideways channel of pure agony”.
But think about this – Wouldn’t the Fed love to go into Wednesday’s press conference with gold down year to date?
We know they do, just as much as they will try. But remember this – how we start the week and on Wednesday could we very different from how the week ends.
I’m looking for continued gains this week, and if that is the case, we will see gold & silver rebound quickly on any weakness early on.
Kind of like what we saw overnight, and then this morning with the rebound.
Silver will be fighting hard everyday this week:
Silver looks to be making a push to $17, and it ran to $16.95 just last night before the pressure was applied.
Again, with silver, let’s be on the look-out for the rebounds on any weakness, such as what we saw last night. That’s good performance and bullish.
OK, “so what exactly are you looking for this week in the metals Half Dollar?”.
I’m looking for a rough ride with gold & silver up in price on the week again.
I’m also looking for our will to be tested, maybe more than once, between now and Wednesday afternoon, and then, beginning Wednesday afternoon, if the metals break-out to the upside after the initial post-FOMC knee-jerk reaction, I’m feeling good about how the metals will perform to close the week out on Friday.
OK, “but do you have any price targets Half Dollar?”.
Not specifics, but I’ve said all along, once silver breaks $17.50, I think it will be just a few days, give or take a day, to get above $18. With gold, we really need the yellow metal closing out the week above $1330 in part because there will be some stiff resistance at $1325, so let’s just plow right through it.
I get it – a move in five bucks in gold isn’t really plowing through anything, but these metals have been beat down all year, so we need minor victories to get to the major ones.
So we’ll see.
Those are not “calls”, that’s just what I want to see for this rally to show traders and non-believers alike that it’s really on.
Palladium is starting the week above both major moving averages:
I’d like to see palladium close out the week above $1030. That would also confirm the rally is on in earnest because it would be putting in a close above that mid-April high.
Platinum really needs to get above its 50-day moving average this week:
I’m not even looking for a price level in platinum. That’s just how badly platinum has taken it this year. I’m just looking to get above the 50-day.
For those looking for what a good price target would be, however, watch for a close above $930. That would put us above the intra-day high of $929.20 on May 10th. That would be an important price level to take-out.
Crude has pulled back overnight:
If crude doesn’t start turning up again and soon, we’re not going to straddle the 50-day, but rather, we’ll be taking a trip back down to the 200-day moving average, and that would be bearish.
Copper has also pulled back overnight:
Of course, copper got ahead of itself last week, so this pullback is good. The question is what happens next? Also, I left up the low from last summer on the left side of the chart just to show how far we’ve come since last year.
So the dollar bounced overnight:
This is part of the weakness we’re seeing in the commodities. Notice the “golden cross” on the dollar. We could see some upward momentum on the dollar here this week, especially as everybody thinks the economy is so awesome because the Fed is :”hiking” rates.
The dollar really is the wild card this week. What will win out? The length of time the dollar spent “overbought” or an interpretation the the U.S. economy is strong and by extension, the U.S. dollar, and the “overbought” continues for some time?
Additionally, I said to be on the look out for any type of back-door deals that may have been made between nations and what they would like to do about their currencies. We just had both the G7 meeting and the 2018 Bilderberg (global elitists) meeting, so we could see movement one way or another, like if the dollar drops to 90 in a matter of days, we will have known there was some sort of agreement to ‘weaken’ the dollar.
The yield on the 10-Year will most likely be in wait-n-see over the next couple of days:
There’s been these trends where yields dip initially following the rate hikes. As if traders and institutional investors are seeking out U.S. bonds (higher bond prices means lower yields) based on the
complete sham solid fundamentals of the economy.
So we’ll be watching to see how yields break this week.
Speaking of breaking, well:
Not looking good for the hodlers.
Of course, things are as complacent as can be right now:
And why wouldn’t it be that way?
We are, after all, about to have world peace, a bevy of “everything is awesome” economic data releases, and a Fed that hikes rates into an economy moving along “consistently moderate with noted improved subdued conditions towards our policy objectives”. Or however they spew it.
Finally, well, notice the big line on the Dow:
Now scroll back up and look at the gold daily chart.
What do you see?
The Dow is slightly up year to date, and just as the Fed would love to have gold slightly down year-to-date (as in under $1305), the Fed wants to keep the stock market in the green going into Wednesday.
I mean, we just can’t have gold up on the year and the stock market down.
Even though that’s what Ol’ Half Dollar thinks will ultimately be the case when we ring in the new year.
But over the next three days, it’s all about perception management.
The only problem is that the perception is trying to maintain a lazy summer stroll down a fragrant garden pathway.
When what they’re really doing is walking through a minefield.
– 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.