SD Midweek. There are plenty of fundamental and technical reasons to be bullish on gold & silver right now. Here are the details…
The gold to silver ratio is clearly rolling over:
However, it still takes over 80 ounces of silver to buy just one single ounce of gold. For the long-term, historically speaking, the ratio is still favoring silver.
Will gold & silver be able to pull off something they haven’t been able to do in months? That is to say, will gold & silver be able to break-out above their 50-day moving averages this week, or possibly even today?
The set-up is there, and a break-out above the 50-day would be a good step in the right direction.
Silver’s recent surge is what has given silver the nice set-up:
I think we can break-out above the major moving average, but in addition to the break-out, we need to close above the average.
Recall that on Monday, while I said this would not be an easy week, I did say I think we could have an upside surprise this week, and so far, that has been the case. Continuance to the upside should get us with a close above the 50-day, and better yet, silver has already had the “tagging” of the moving average, and the “testing” of the average, and those are things the technical analysts would say are important things to accomplish.
Yesterday gold tagged the moving average:
So today would be the test of the major moving average.
Imagine how bullish it would be if gold & silver closed above their 50-day moving averages. One could only assume that some of the “technical” specs that are short paper gold or paper silver would start to cover those shorts.
Just a few things, however:
There are a lot of pie holes yappin’ today:
And that is all day.
There is also some potentially market moving data to be released as well, including the ADP Employment Report, which is often times a precursor for Friday’s BLS Employment Situation Report.
So gold and silver will have their work cut out for them.
Not to mention we still have Peak Trump keeping the metals quiet.
As I have said many times before, we are still in the process of peaking.
Don’t take my word for it, see for yourself.
Just this week, we got NAFTA 2.0:
Late last night, our deadline, we reached a wonderful new Trade Deal with Canada, to be added into the deal already reached with Mexico. The new name will be The United States Mexico Canada Agreement, or USMCA. It is a great deal for all three countries, solves the many……
— Donald J. Trump (@realDonaldTrump) October 1, 2018
….deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduces Trade Barriers to the U.S. and will bring all three Great Nations together in competition with the rest of the world. The USMCA is a historic transaction!
— Donald J. Trump (@realDonaldTrump) October 1, 2018
Interestingly, many people are already out there saying it is worse than the existing NAFTA deal, and that USMCA is all hype and something that will ultimately hurt the United States. It is also no less government intrusion nor free-er trade – it is really more government and more protectionism wrapped-up in a bow and given a new acronym.
Hey, “But Half Dollar, it’s going to bring all these manufacturing jobs back to the United States!”.
That remains to be seen, and the tiny incremental restrictions on, say, automobiles, could be offset simply by the sale of less American cars, turning into a loss of jobs on net. In my mind, the government can either get in the way or get out of the way. That’s it.
How is it that a big government program (like NAFTA) re-written and re-branded as USMCA, yet still equally big, can be a positive on net?
But that is why I call it Peak Trump.
People think all these awesome jobs are returning, and all this great stuff is happening in the US economy.
And if kickin’ trade butt and takin’ names isn’t proof enough, we have awesome wage growth:
“National wage growth is at the highest it’s been in nearly 17 months — and, according to a new study released by Glassdoor, it’s not expected to slow down anytime soon….” https://t.co/G0Ts6yVqF9
— Donald J. Trump (@realDonaldTrump) October 3, 2018
Is wage growth skewed to the top wage earners?
Net-net, is wage growth keeping up with inflation?
Are Americans still falling behind?
Are taxes going up in general?
Housing and rental prices?
What good is a couple more nickels if the man demands a few more?
But like I said, all of this “winning” means we are still in the process of peaking in my Peak Trump theory.
And no, that’s not my word:
THE ONLY REASON TO VOTE FOR A DEMOCRAT IS IF YOU’RE TIRED OF WINNING!
— Donald J. Trump (@realDonaldTrump) October 2, 2018
But I digress.
My intention is not to turn this Midweek Update into a political critique, but rather, to show, fundamentally, one of the main reasons why gold & silver have been doing what they have been doing for the better part of this year.
But now gold and silver are rising in spite of Peak Trump.
Palladium has continued its pullback:
Consolidations and pullbacks are all part of a healthy rally.
Platinum, technically speaking, actually bounced nicely off of the now support of the 50-day moving average:
It remains to be seen if platinum can put in a definitive higher-high, but if it does, that would good progress in getting platinum turned around.
Copper is following a similar chart pattern to platinum:
Even though one is a base metal and one is precious, they are both primarily industrial metals, so this makes sense. Notice that copper has yet to come down and tag its major moving average.
Crude oil is above $75 a barrel:
As I have been saying all along, the price of crude oil is putting a floor under the metals, and especially under silver, and the floor is slowly moving higher in price.
I have been looking for a “relief rally” in the dollar:
It is also not too much of a stretch to argue that the dollar is painting a head-n-shoulders pattern, and if the pattern holds, that would be bearish for the dollar.
Granted, I’m bearish on the dollar anyway, but we have to deal with the (misunderstood) flight to safety, and the (also misunderstood) belief that the US economy is just booming.
That said, note a couple things going on here –
First, the price of crude oil is rising even as the dollar is rising. Generally speaking, crude oil and the dollar move the inverse of each other, so when the dollar turns down again, that could act as a springboard to take crude oil to the next level. Will that level be $80? How about $90?
Secondly, we have seen gold and silver maintain and even show some signs of strength here, which leads me to further suspect that this is in fact nothing more than a relief rally in the dollar. In other words, I am looking for gold and silver to really start rising as the dollar starts dropping in earnest.
Another good sign for gold & silver is that they have maintained even in the face of this:
What a joke!
No, what a “big, fat, ugly bubble”. Oh wait, that has already been taken.
What a joke!
The Heartbeat of America Index isn’t buying it:
That’s a pretty bearish plunge below the 50-day moving average.
Granted, we’ve seen it before, but we are also know the stock market is in a bubble, and that October has shown some pretty historic crashes of epic proportions, so it could really only be interpreted as bearish for the Russell 2000.
I keep saying gold & silver are maintaining against all odds, which provides further evidence the paper price bottom is in.
For example, look at the Farce:
I came up with my Peak Trump theory, added the Peak Fed theory to the mix, and we also have Peak Complacency.
Peak Complacency is not a theory, however, it is just a state of mind that will get you killed in the heat of battle. Luckily we’re not talking about the heat of battle here. Just an over-extended stock market bubble aided in part by the cartel’s efforts to suppress volatility.
What a scam!
The yield on the 10-Year Note has basically gone nowhere:
I am now expecting a slight move higher in interest rates, especially post-December as the Fed raises the very short-term rate for the 9th time. It is what comes after that “hike”, however, that is the big wild card. You see, I don’t think rates can just gracefully stair-step higher. So after the next leg-up, I am then expecting rates to come back down, forcibly by the Fed, or else we see surging rates because the ESF and the Fed have lost control of the bond market.
Bottom line: I call it “premium creep” for a reason. It is a “creep” higher in premiums paid over spot for gold and silver bars, coins and rounds in-hand. Because of premium creep, regardless of the paper spot price, gold and silver have bottomed. I also think gold and silver have seen their bottoms with respect to the paper spot price. We are not out in the clear for the week, however: We have a bunch of Fed Heads yappin’ away, all day long today, and on Friday, we have one of the cartel’s favorite days to smash as it will be BLS Jobs Report Friday.
Do I still think gold & silver surprise to the upside this week?
Yes I do.
– 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.