Time To Talk Support: Gold & Silver Prices Will Need It

SD Monday Outlook: Time to talk support. We’re gonna need it…

Yesterday, what can perhaps be called “the biggest event” since the Euro currency was born took place. Before anybody is quick to shout “Brexit”, let’s understand that the British voted in favor of Brexit in June of 2016, and just last month, PM May laid out plans to work on a two-year transition. On the other hand, on Sunday, 89% of Catalonia voted to secede from Spain. The Catalan government has said they would declare independence from Spain within 48 hours of the vote.

Since the absolute biggest news in Europe just went down last night, one has to wonder what type of coincidence it is that the worst mass shooting in U.S. history just took place here. It’s absolutely horrific what just went down in Las Vegas last night, but looking at it objectively, it seems peculiar that with everybody’s time as precious as it is, not one second in the U.S. mainstream will be spent on a modern nation declaring itself free and independent from another.

In addition, not only will the shooting in Las Vegas serve as cover for non-stop coverage until the Catalonia secession news is quelled, though it will be harder and harder for the MSM to avoid the news seeing as how this is the beginning for Catalonia, not the end.

Domestically, the Las Vegas shooting will serve the politicians in Washington, who will inevitably say they will step up efforts to protect citizens from such evil behaviors of murderous rampages. As an added bonus for the deep state, they can see where the country stands as a whole, perhaps even in regards to studying the current national desire to “rally around the flag” or not.

So the biggest news since a common currency in Europe just went down, and curiously, the worst mass shooting in the U.S. went down too. The economic implications for the former are not even understood, and in regards to the latter, get ready for more police state, more surveillance, more loss of freedom and liberty generally.

Not to get political, so let’s bring it back to what this means for gold and silver. The cartel has the ability to strong arm the markets with Chinese markets closed all week in celebration of the Golden Week. The cartel does not have to worry about a Chinese bid coming in and buying a hard smashing of gold and silver prices.

Where this gets tricky is what it means for the week after Golden Week. With two completely massive fundamental pieces of news (Catalonia and Las Vegas), which could only be bullish for the precious metals if for nothing else than a major increase in uncertainty around the globe, if the cartel pushes too hard and underestimates the pent up demand brewing in China, which will not “officially” be seen until next week, continued smashings on gold and silver could backfire dramatically and create a massive surge in physical demand. On the other hand, with demand so weak all year, which could have more to do with a tapped-out consumer than with people no longer interested in the metals, the cartel certainly plenty of physical metal sloshing around right now to weather a rush on physical metals.

The bottom line, fundamentally speaking: Get ready for what could be even lower prices this week. And since this is a very real possibility, let’s look a the charts with an eye for support levels.

In gold, the support is holding up better than in silver:



The yellow area is a possible landing zone. The support line looks better in gold right now because the uptrend is clear on the daily chart. Furthermore, the more days that go by, the higher the support line moves to the upside. Yes, the line could have been drawn at $1220, but let’s be optimistic here for a moment. Besides, how much buying would come in with a vengeance at $1220. With weak demand all year on the physical side, it’s quite possible anything below $1250 alone could see a significant increase in buying, but getting down to or even under $1225, well, those who were waiting for their opportunity to buy in significant amounts would be much more inclined to pull the trigger.

So it is important to ask ourselves, what has changed this year that makes gold less of a desired asset? A Fed funds rate averaging around 1.125% is hardly a hawkish Fed to start the 4th quarter, and politically, for the first 9 months there has been a whole lot of fiscal talk, but not very much action, if any.

The divergence on the charts between gold and silver remains:



And while we have been asking when silver would catch up to gold, we have also asked when gold would catch down to silver. Now, however, with the continued downside price smashing on silver, we could once again ask when silver will catch up to gold.

Before silver catches a bid, however, the fall has to stop:



That is one nasty looking chart there. Methodical monkey-hammering is putting it lightly. Silver has had a downright brutal time all year long, so now we should ask where the support is. Support is where silver would find a floor and buyers would step into the marketplace.

Silver has found support three times this year around the $16.25 level. If silver will successfully be smashed lower in price from here, we might want to look at that level for a clue. Regardless, silver at $16.65 at the start of Q4 is an absolute gift. The cartel has to know this.

If they bring silver down to the $16.25 level again, there could be a rush of buying and serious risk of running through the supply that has been built up over the year. If they brought silver down to $16 or even a $15 handle, the cartel risks losing absolute control of the physical market. At that point, it might not be “back up the truck” but we could see “back up the cargo ship”.

Especially if the dollar continues to strengthen from here:



The opposite of support is resistance. In the U.S. dollar, we could look at the 94 level as resistance on the daily chart. Granted, there has been little consolidation all year in the dollar, but there is some technical resistance at 94. If the dollar strengthens up to that level, that could add continued pressure on the metals, so it will be important to watch the greenback here. Said differently, if the dollar starts turning down again, we could very well have found the short term bottom in the metals.

Supporting the precious metals is the action in palladium:



Palladium looks to be turning the corner here in terms of positive price action. Palladium is both a precious metal, and it is mostly used in industry. We will be watching palladium to see if this is indeed a new break-out forming on the daily.

Base metal copper looks to be pivoting on the daily chart as well:



This is bullish for silver because silver is used so heavily in industry. However, when looking at the commodities in general, the waters become somewhat muddy.

Crude is looking as if it is breaking down again:



If we can call that a sideways channel that has been developing for over a year, it certainly looks like WTI is set to enter the channel again. On the daily, the range looks to be in the $45 – $50 level. If crude becomes range-bound, could we be looking at a re-test of $45? It is certainly set up on the charts to be the case.

The big unknown is the effect on demand due to the destruction of the hurricanes. In the United States, to relative calm of late from Mother Nature, rebuilding is underway, but in Puerto Rico, much more diesel will be burned than would have the run generators, bring in supplies, and distribute food, water and other supplies around the island. That doesn’t even take into consideration a start towards rebuilding. Puerto Rico is still in disaster response on an island that is, for all intents and purposes, catastrophically devastated. 

Finally, we await President Trump’s Tweet in praise of Dow 22,500: