From Silver Doctors: Looking at where we’ve been over the last two years, and where we are today, it looks like there could be more pain to come.
Monday through Wednesday are going to be busy:
There’s market moving data in Retail Sales, Industrial Production and Housing Starts.
Additionally, twice a year the Fed Chair goes before congress in what is called the Humphrey-Hawkins Testimony, so on Tuesday Powell gets to play tee-ball with the Senate, and on Wednesday he will also be playing tee-ball with the House.
On the economic calendar, the week ends with much less action:
Geo-politically, today is the Trump-Putin Summit.
Presidents Trump and Putin are meeting in Helsinki, Finland.
Here’s the handshake:
It’s pretty anti-climatic if you ask me, but yeah.
Russia is an up-n-comer, and they have been stacking mad gold, so it pays to be on good speaking terms with them because sooner or later they will have some serious clout.
Not to mention they have nukes.
Not that I buy the whole “Russia is the most evil country on the face of the planet” argument anyway, but rather, I take the view of many that our Military Industrial Complex needs an enemy, always, to justify such massive spending on the military.
And since the Middle East is pretty much as decimated as it can be, and since there’s peace with Kim, and now there’s great strides being made with Russia, now we can see whey we are immediately creating a sixth branch of the military, separate but equal to the Air Force, known as the Space Force.
I guess the real question about the Trump Putin Summit is what does it mean for gold, silver, and the dollar?
Well, the last time there was a summit and the world was safe again thanks to President Trump, as in the North Korea Summit, that was June 12th, and shortly thereafter we have only gone lower for longer in gold & silver.
I’m not sure how a two hour meeting is even considered a summit, but that’s not the point.
It’s more like in the past, when you’d meet an out-of-town friend at the airport who was changing flights and had a layover. You’d have lunch with them, but yeah, good old day, and that’s the kind of thing we have here, only since they are Presidents, we call it a Summit.
Back on point.
I get it, past is not prologue, but, generally speaking, I don’t think this is “good for gold”, so to say, based on the reaction of the markets to North Korea, but then again, Kim Jong-un isn’t the mortal enemy of half of the United States the way Putin is, so it’s possible the anti-Trump forces in the nation and in the Deep State use this meeting to stir the pot so to say, and if that’s the case, it could create some uncertainty out there which would help give a bid to gold & silver.
But I don’t think that’s the case because the strength and the tool of the Deep State is the dollar, and the financial oppression that goes along with it around the world.
So we’ll see.
Let’s go back a couple years on some of the charts.
Anybody remember the famous “infrastructure spend”?
We see in copper there was much optimism, but it never materialized:
That initial run-up in copper is from a few days before and a few days after the 2016 presidential election.
What could be providing a bid in the price of copper nowadays could be the Belt & Road Initiative out of China.
I mean, we might not be rebuilding our crumbling infrastructure, but China is embarking on a bold infrastructure project of new building around the Silk Road.
I don’t think any of this infrastructure build has anything to do with the price of crude oil, however:
Two years ago we were in the $20s, and last year in the mid $40s.
This is just plain old price inflation after bottoming in a cyclical bust.
But notice the dollar:
Remember how everybody was bullish on the dollar, and that in part was due to President Trump and the infrastructure spend, and the booming economy he was going to create?
Which I guess he has created in less than two years, because he said we have the greatest economy, ever.
That hope faded in 2017 and at the start of 2018.
But what happened beginning in April of this year?
The dollar began to rally again.
Yes, there’s the whole emerging markets currency crisis and debt crisis, and there is the LIBOR blow-out, and the flattening yield curve, but, part of it is fundamental in a geo-political sense too – part of my “Peak Trump” theory.
Specifically, the dollar was fading, and then, two days after the North Korea Summit – BAM!
Spike in the dollar.
Yeah, “But Half Dollar, don’t you know that spike was the day after the Fed raised rates in June”?
Yes, I do know that, but my point is there is a confluence of events that turn into the sum of their total parts.
And the rate hikes are priced in anyway.
So we had:
- Emerging market chaos – strengthening dollar
- LIBOR and yield curve chaos
- World peace – strengthening dollar
- Hawkish Fed – strengthening dollar
And what do we have today?
- Emerging markets still in chaos
- Yield curve flattening
- Developed nations looking chaotic (May/Brexit, Macron-Merkel/globalist immigration debacle)
- Likely a hawkish Fed on display again this week
- Improving relations with Russia.
Geez, when I lay it all out like that, it sure looks like we are are going to see another surge in the dollar from here, doesn’t it?
I mean, for a while, the dollar has been held in a range of 94 to 95:
On the chart, we’d be looking to come down and test the lower end of the range, so we’ll see.
The dollar will be interesting to watch this week, I think even more so than gold & silver, because gold & silver have so much work cut out for them, but the dollar is at a critical juncture.
Now, long term, yeah, the dollar is toast, but I’m talking about what would be in store for us for the next several months.
Which means, if the dollar does strengthen from here, that would not be a good sign for gold and silver going into the home stretch of 2018.
Sue, they can move together, but I don’t think that will be the case right now.
Keeping in line with the two year charts, we see palladium was on a fire:
Not this year, however.
That’s a long, drawn out bottoming process since the beginning of the year. We’ll have to see if these levels hold.
Platinum, on the other hand, well, yeah:
That’s been a pain trade there, but, to those who like the platinum to gold ratio, platinum may be signaling something.
We’ll have to see what happens this week in regards to further break-down or not.
Moving on to gold & silver.
Gold has been all over the place in the last two years:
See why $1240 is so critical?
If I’m right about the dollar, then we’re likely going lower in gold.
I think we’re going lower in gold.
The question is at what point do buyers rush in?
I mean, crude oil isn’t $45 anymore.
And this is an incredible opportunity for American investors, if they could only see it.
With a strengthening dollar, and with a weakening gold price, all things considered, we get more gold bang for the buck.
Especially if gold keeps going down and the dollar keeps rising.
Remember – yes, there is a floor somewhere, but, moves often overshoot, both the the upside and to the downside.
So we’ll see.
We can see silver is much like platinum when we zoom out two years:
That’s a pure pain trade there.
Now, both with gold and with silver, the highs of the last two years were put in when the Brexit referendum passed.
And Brexit is front and center again.
For now, it looks like it’s a “Soft Brexit”, or a “Brexit Lite”, but, if it becomes very real again, as in “Hard Brexit”, we could reverse to the upside rather quickly once again, and that would surely catch everybody off guard.
But I think that’s the less likely scenario.
I think Brexit will drag on, the dollar will continue to strengthen, based on my Peak Trump theory and the case I just laid out, and that isn’t good news for gold & silver.
If I’m right about that, it’s going to be a painful second half of the year.
Let’s hope I’m wrong.
The stock market is still positive year-to-date:
But that makes sense.
We have as strengthening dollar, so foreigners get a double dose of profits with a currency play and an equities play.
And, we also have the ESF and the Fed with their heavy hands in the markets daily, working to achieve their immediate goals, which looks to be propping the market and supporting the dollar.
At a point, however, when it is blatantly obvious that the economy is getting much, much worse, I think they will have to let the market come down, because the next time there’s an Occupy Wall St, I don’t think it will be a peaceful event.
Right now the anger and violence is at Trump, the Deplorables, and conservatives in general, but if money gets tight, which I’m sure it is for most Americans, and the stock market keeps going up, then I’m sure some will catch on to the games.
But for now, yeah, the stock market is supported and propped.
Of course, they’ve been able to keep it going by also nixing any fear in the market:
We could seriously go back to a 10-handle before we see a massive spike again.
Finally, the two wait-n-sees.
There’s the gold to silver ratio:
That’s still a topping process, but we’ve gone sideways to slightly higher since June.
If the metals are going to finish the year on a weak note, we could see a trip back up into the 80s, but I don’t think we’re getting to the mid-80s again.
Because the downside in gold & silver is limited from here somewhat.
Likely is that we see just continued sideways agony, with a slightly lower drift, both in the GSR, and in gold & silver, because it not only keeps investors from coming in, but it keeps the pain on for the investors that are already in.
That said, it’s a great opportunity for new investors.
Finishing with the yield on the 10-Year Note:
After the run-up in yield at the start of the year, we have basically gone nowhere since February 2nd.
So again, wait-n-see.
Another way to say it is that we are at inflection points in many assets classes.
Do they break-out or break-down?
They will break one way, because they can’t just go sideways forever.
The iShares Silver Trust ETF (SLV) rose $0.06 (+0.40%) in premarket trading Tuesday. Year-to-date, SLV has declined -7.13%, versus a 5.10% rise in the benchmark S&P 500 index during the same period.
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