Monday Outlook: Gold & Silver Poised to Break-out or Die Trying

We don’t need another gold & silver break-out fake-out, so watch these indicators going into the week…
Before getting into anything else, let’s start by saying we need improving morale. The last two weeks we have been otherwise hopeful on the price action of gold and silver, so we don’t need our morale or hope crushed right now. Let’s hope to consolidate from here, and if we end the week above $1300 gold and $17.50 silver, that would give us the “we got this” morale boost that is so badly needed.

The difficulty will be in actually consolidating, especially in silver. There has been little to no consolidation all year. The precious metals are either moving up, or they are dropping. Mostly dropping. Before we get into the charts, there is, however, some rough fundamental waters are ahead of us down river, and we know darn well that when we get to them, the market manipulators makers will want to start rocking the boat so that gold & silver tumble overboard.

This week is the Fed Jackson Hole meeting. Specifically it is the 24th, 25th, and 26th. Which means the Fed will have follow-through and a chance to do a little weekend jawboning if their the manipulation markets don not finish the week as they have planned or anticipated.  Of interesting to note, ECB President Mario Draghi will attend this year’s event which is called “Fostering a Dynamic Global Economy”. There are so many things wrong with that name, but suffice to say the Fed is proud to use a US National Park to discus manipulating the liquidity and exchange rates wherever and whenever they are needed at any point around the globe to pump their banking syndicate. Makes you wonder who’s side they are on, but we already knew that. But perhaps, this year, we see that they are not just on the side of the banks, but the side of the banks and not at all fighting for “monetary policy” in the United States. Perhaps Jackson Hole will market will hammer the final nail (after Bannon) in the “America First” stance? Sometimes it seems as if there was never going to be an America First, that it was all for show, but I digress, we’re here to talk about the markets.

Rounding out the technical schedule for the week, it is not very jam packed as far as market moving events.

  • Monday: Chicago Fed National Activity Index
  • Tuesday: House Price Index & Richmond Fed Manufacturing Index
  • Wednesday: MBA Mortgage Applications, New Home Sales, EIA Petroleum Report
  • Thursday: Action Jackson, Jobless Claims, PMI Composite, Existing Home Sales, Fed Balance Sheet, Money Supply, Etc
  • Friday: Action Jackson, Durable Goods, Yellen Morning Speech, Baker-Hughes Rig Count
  • Saturday: Conclusion of Action Jackson (be on the look out for surprise weekend policy announcement)

So fundamentals will be alive and well in the markets this week. As we can see, the “official” fundamental market moving events are many, and this does not even take into consideration the threat of thermo-nuclear war, terrorism and chaos in Europe, racism and violence in the United States, or an increasingly isolated President Trump, whom might be the target of further impeachment talks now that Bannon is out and there really is nobody left who is an “outsider” who could bring fresh, America First views and pressure.

Moving on to the technical, let’s begin with silver. Silver needs to be shown in light of it’s under-performance. On friday, the price of gold put in an intra-day high. But last week, base metal copper and precious metal palladium both had closes at highs for the year. This begs the question, what the heck is going on with silver? Here’s the gap:



Late last year, the three metals were coupled, and this makes sense, because there was election uncertainty, and silver can swing either way in times of increased demand either for monetary use or industrial use. Once the election was over, copper began it’s move in earnest. Palladium began its move too, also based on the fact that palladium is both a precious metal and an industrial metal. Silver, well, without pulling any punches, in my humble opinion, comes down to the fact that out of all the things in the world the US government fears most, it is silver they fear the most.

Sure, there is supporting the dollar, and there is fighting terrorism, domestic extremism spilling over into American streets and worsening international relations, US political turmoil, and the threat of thermo-nuclear war, yet, in light of all the things the that are feared, a rise in the silver price is feared the most. They won’t ever say this, they won’t ever say anything good about silver, but the price action just doesn’t jibe with all the factors, both fundamental and technical. Though maybe that is just the silverbug in me frustrated to be sitting at $17 at the end of summer.

Let’s hope for a silver close above $17.50 this week, even though silver was $20.23  just a year ago. Just realize that silver can put in big moves and fast, so if we have a break-out to the upside, we could add on dollars in just a matter of days.

Gold is looking very bullish. Last Friday, gold put in an intra-day high for the year over $1300. The following chart shows gold compared to the US 10-Year yield:



One thing to keep in mind is that gold has room to run just based on the fact that the 10-year has not seen a low in yield yet. If the yield continues to drop in the short term, as gold is sensitive to interest rate drops in the short term, look for gold to rise. We’re not asking for much, we are just hoping to have a close above $1300 on the week. OK, I want much stronger performance than that, and who knows, this may be the week we finally get the decisive thrust we need, and we shall see.

Moving on to the dollar, we see the dollar looks poised to either move up to 95 in the coming days, or move down to 92. It is right smack dab in the middle of the channel it has formed on the chart:



I am bearish on the dollar. The run since June 2014 just can’t go on much longer, and it sure looks like it ended in late January of this year. We shall see, but I’m seeing any strength right now as a dead cat bounce, and I look to further dollar weakness once this latest move is over.

Crude has been range bound, and I have thrown up a chart of the last 5 days. It’s pretty ugly:



The stock market is looking like it is starting to break down:



Price action in the Dow and S&P 500 have been signaling moves lower over the last several days. The technicals are further signaling weakness in the stock market because they are not yet signaling “oversold”, and the VIX has been waking up, signaling that “fear” is back into the market.