Categories
Gold & Silver

GOLD – Higher, Then Lower, Then Skyward – David Brady

GOLD – Higher, Then Lower, Then Skyward – David Brady for Sprott Money

FUNDAMENTALS

The recent 20% dump in stocks triggered growing expectations of a Fed reversal in monetary policy back to interest rate cuts and QE. To the extent that the nascent rally in stocks since the start of the year continues, those expectations are likely to recede and put pressure on Gold.

The Fed is “talking” dovish, but its purpose is hawkish: to push stocks higher in order to enable further rate hikes. Higher stocks and the increasing risk of higher interest rates are likely to weigh on Gold in the near future.

Ultimately, the Fed will be forced to reverse policy to avoid a collapse in stocks, which will contribute to dollar weakness, triggering a massive rally in Gold.

U.S.-China trade talks are unlikely to be resolved voluntarily, because President “Xi will NEVER allow the U.S. to dictate China’s domestic policies.” The pattern right now is that optimism grows ahead of trade talks, USD/CNY falls and Gold rises, only for disappointment to follow because nothing substantive has been agreed upon, and USD/CNY rises, Gold falls. A lot of optimism has already been priced into USD/CNY that is likely to be reversed soon.

TECHNICALS

Gold has rallied ~$130 off its August 16 low and could go higher, but the risk/reward increasingly favors at least a short-term pullback.

That said, the trend is clearly up. Only a break of the recent low at 1278 followed by a lower high would change that.

Daily

  • Gold is in a steep channel higher, with resistance at 1310 and support at ~1278.
  • The 200-day moving average is currently at 1255.
  • Gold peaked at an RSI of 74 when it hit 1300 recently. It is still extreme overbought.
  • There is also the risk of a negatively divergent higher high between 1300-1318 on the RSI and both MACDs.

Weekly

  • Gold is now running up against former trendline support, now resistance, since its low in December 2015 (purple line). That resistance is currently at ~1308.
  • At an RSI of 65, it is overbought and close to extreme overbought.
  • The MACD Histogram is at its highest since the spectacular rally in the first half of 2016.
  • The MACD Line is powering up from its low in September last, but there is a gap between it and its signal to allow for at least a pullback before going higher again.

FIBONACCI LEVELS

1318 Close = 76.4% of 1360 to 1184 on a closing basis.

1318 = 76.4% of 2016 High at 1377 to December 2016 low of 1124.

1322 = 76.4% of 1369 to 1167 on an intraday basis.

23.6% and 38.2% Fibs of the current rally are at 1270 and 1250.

SENTIMENT

The spot DSI, currently at 59, means the risks are relatively balanced here. However, the trend is clearly higher, demonstrated by the 21-day moving average.

POSITIONING

Given the partial Government shutdown, we have not had any updated reports since December 18. However, given that the price is ~$40 higher since then and Funds were racing to get long at the time, it is reasonable to assume that they have continued to add to those longs. The question is, how long are they and how fast have they been adding to their position? We won’t know until we get new data.

It was notable that the Commercials, and specifically the Banks, were racing to get short back on December 18 and have likely increased those shorts also.

INTER-MARKET ANALYSIS – XAU/CNY & USD/CNY

Although Gold has risen against all major currencies recently, Gold in dollar terms (XAU/USD) and in yuan terms (XAU/CNY) have been fused at the hip since both of them bottomed on the same day, August 16. This makes sense, given that USD/CNY has been in a tight range between 6.78 to 6.98 since then.

The formula XAU/USD = XAU/CNY divided by USD/CNY effectively becomes XAU/USD = XAU/CNY as long as USD/CNY remains in a tight range.

Like XAU/USD, XAU/CNY has soared since August, but it became extreme overbought on January 3 with an RSI of 78. As expected, it has fallen back since. The risk now is negatively divergent higher high to ~9000, signaling a potentially sizeable pullback. This matches the scenario laid out on the daily Gold chart above.

Switching to USD/CNY: As I mentioned earlier, it has remained in a relatively fixed range of 6.78-6.98 since August, but it has fallen to the bottom of that range recently and is extreme oversold with an RSI of 31. It has also hit a positively divergent lower low relative to its low on December 4, when the RSI fell to 30. It could continue to fall, but the risk is that USD/CNY rises while XAU/CNY falls, a toxic combination for XAU/USD, and would certainly contribute to a pullback in Gold.

What could be a catalyst for a rise in USD/CNY? Disappointment (again) with the news from the trade talks?

CONCLUSION

The overall trend in Gold is clearly higher. However, it is running into strong resistance after a long rally and is extreme overbought on multiple indicators. There is the risk of a negatively divergent higher high and pullback to follow. This can be clearly seen in XAU/CNY terms also. The fundamental backdrop also supports a pullback in Gold, to the extent that stocks continue to rise and expectations for further rate hikes increase and those for a Fed policy reversal recede. Another disappointing outcome from the U.S.-China trade talks could also cause a pop in USD/CNY.

The only caveat to this conclusion would be a precipitous drop in the dollar against all currencies, which would obviously benefit Gold also.

On balance, based on the data available to us, the risk/reward clearly favors a pullback following a negatively divergent higher high. The question is, how low do we go? What is more certain is that this will be the final opportunity to get long Gold (and Silver), given the rally that is to follow once stocks peak and complete the third and final leg of their crash. Gold is not only the new “TINA” (there is no alternative), but if we do get a reversal in Gold, there is no better place to “BTFD”.

Source – References – Sprott Money

Categories
Gold & Silver

Gold Hits Our $1300 Price Target – What Next?

Gold Hits Our $1300 Price Target – What Next? by Chris Vermeulen – Sprott Money

Early trading on January 4, 2019, saw Gold reach just above $1300 per ounce – confirming our price target. The importance of this move cannot be under-estimated. Traders and investors need to understand the recent rally in the metals markets are attempting to alert us that FEAR is starting to re-enter the market and that 2019 could start the year off with some extended volatility.

Our research has shown that Gold will likely rotate between $1270~1315 over the next 30~60 days before attempting to begin another rally. Our next upside price target is near $1500. We will continue to post articles to help everyone understand when and how this move will happen. We expect Gold to rotate near the $1300 level for at least another 30 days before attempting another price rally.

Pay attention to the Support Zone on this Daily Gold chart and understand that price rotation is very healthy for the metals markets at this point. A reprieve in this recent Gold rally would allow the start of 2019 to prompt a moderate rally in the US stock market as well as allow a continued capital shift to take place. As capital re-enters the global equities markets, investors will be seeking the best investment opportunities and safest environments for their capital. Our belief is that the US stock market will become the top-tier solution for many of these investments.

This Weekly Gold chart shows our Adaptive Fibonacci price modeling system and why price rotation is important at this time. The highlighted GREEN Fibonacci price target levels on the right side of this chart are projecting upside price objectives for the move that started near mid-November. We

can see that $1325 (or so) is the highest target level and that $1273 to $1288 are the lower levels. This suggests that we have already reached the upper resistance range and a mild price rotation would allow forthe price to establish a new fractal low rotation that would establish NEW upside Fibonacci price targets. In other words, we much have some price rotation to support the next leg higher in the Metals markets.

Source – Sprott Money – https://www.sprottmoney.com/Blog/gold-hits-our-1300-price-target-what-next-chris-vermeluen.html

Categories
Banksters Gold & Silver Manipulation

Why 2019 Will Be A Good Year For Gold (Podcast)

Why 2019 Will Be A Good Year For Gold Podcast – Sprott Money

Happy New Year! As we ring in 2019, the December rally in precious metals continues. And Eric Sprott returns with all the gold and silver news you need to make this a happy new year after all.

In this edition of the Wrap-Up, you’ll hear:

• The “weird” things happening in the market

• What’s working right now (and what’s not)

• Plus: What Eric has his eye on in 2019

“It’s been a great week so far. And I don’t think we could have expected a better setup than we’ve had here. Perhaps I should even start off with an economic thing that happened. That was the Apple/iPhone sales suggestion that the revenues would be down. And it was interesting that the announcement was made the first business day of the year. … Being the sort-of cynic and/or skeptic that I am, I said, ‘Well, I wonder what would have happened if that announcement had been made in mid-December? … Had they made that announcement while stocks were plunging, it might have put the nail right in the coffin.”

Categories
Economy Manipulation

Preparation is Vital. 2019 is Destined for Chaos

Preparation is Vital. 2019 is Destined for Chaos by Nathan McDonald – Sprott Money

As you make your New Year’s resolutions, make sure you allot room for some much needed protection as we head into 2019 and beyond.

It may not be the rosy picture many of you were hoping for, but sadly, 2019 appears to be destined for increased chaos, turmoil and outright confusion.

The chief driver of this will undoubtedly be the current disheveled state of affairs we are seeing unfold in the United States.

As we enter another week of government shutdowns, we are getting just a small sample of what this year has in store. We haven’t seen anything yet, and I believe the madness witnessed throughout 2018 was just an opening act.

President Trump is being challenged on all sides, and I believe at this point moving forward we will see some very serious and drastic changes within his administration, as he rapidly clears house of anyone he believes belongs to the “old establishment”, replacing them with those whom he deems “loyal” to him.

In addition to this, we are going to see him use every weapon in his arsenal to jam through as much of his agenda as he possibly can within his legal powers.

This will enrage his opponents and embolden his die-hard supporters, all while doing damage to the system as a whole in the long run.

At this point, from a personal perspective, the left has left him little-to-no options, as he now fights for his and his family’s survival—all of whom his opponents would love to see behind bars, no matter the ramifications this would cause to the very fabric of the United States.

Meanwhile, emboldened by their recent victories, the radical far-left elements within the Democratic party are going to come fast and hard at Trump, attempting to take him down as viciously as they can.

This will lead to a powder keg of an explosion as we move throughout 2019, as markets are tossed back and forth in a gruesome and bloody manner, rocking the very foundations of Wall Street.

Sadly, I believe all of this is unavoidable, as both the radical left and the far right have entered into such deep echo chambers that only a massive calamity will shake them out of it at this point.

The time for discussion, in these people’s eyes, is over.

As this chaos erupts and markets begins to deflate throughout 2019, the increased uncertainty will have a compounding effect as money is pulled out of the system, perhaps even triggering another economic collapse similar to what was witnessed in 2008.

As bad as all of this will be, there will be one place of safety, one rock of certainty that has always—and will always—provide the much needed insurance in times of increased political upheaval.

Gold and silver will be that safety, and they are ripe for a recovery after being battered for years on end.

They are destined to move higher and break free of the shackles that have been placed on them, and like a beach balloon suppressed deep under water, gold and silver are ready to rocket higher.

The sparks are flying all around us. The fire is inevitable. Preparation is vital.

Source – Sprott Money – https://www.sprottmoney.com/Blog/preparation-is-vital-2019-is-destined-for-chaos.html

Categories
Gold & Silver

GOLD Takes Center Stage in a Fiat World – David Brady

GOLD Takes Center Stage in a Fiat World – David Brady for Sprott Money

Just as Neo flexed his muscles upon learning he is “The One” and took out Agent Smith at the finale of The Matrix , Gold is now letting fiat currencies know who is really in charge.

Many take credit for anticipating Gold’s ascent from the lows in August, and yet they cite all of the wrong reasons for its appreciation: peak DXY, peak USD/JPY, falling real yields, speculative buying, and so on. The truth is that Gold is doing its own thing and taking matters into its own hands. We know this because Gold isn’t just rising against the dollar or the euro or the yuan, it is soaring against ALL major currencies.

Below is Gold’s performance against all of the major currencies since it bottomed on August 16 th:

Gold has risen significantly against them all by over 10% on average. Its gains are not solely against the dollar or yuan due to U.S.- or China-specific policies, but against ALL of them. What is the common denominator here? Gold.

Retrospection can be extremely informative in terms of where we’re headed next. Most of my readers are familiar with this equation:

XAU/USD = XAU/CNY divided by USD/CNY

When XAU/CNY was relatively fixed within a range, Gold in dollar terms was almost perfectly correlated to USD/CNY on an inverse basis. This is what happens when one variable in an equation is fixed. Then something strange happened on August 16 th. XAU/CNY bottomed at 8084 and proceeded to rise from that point forward. At the same time, USD/CNY became fixed in a range of 6.78-6.98, as a stalemate developed in the trade war between the U.S. and China. This meant that XAU/CNY and XAU/USD became directly correlated. It was no coincidence that both bottomed out the same day.

Then on October 11th, the following occurred:

Optimism that the trade war between the U.S.and China could be resolved sent Gold soaring through its 200-day moving average against the yuan. The huge white candle in the XAU/CNY that day suggested the low was in. This was followed by a successful backtest on November 12 and 13 that appeared to confirm the low was in, and it hasn’t looked back since. Gold in dollar terms lagged the move in XAU/CNY, but given the new direct correlation, it, too, just went higher.

But Gold isn’t just rising against the yuan, it is rising against all the major currencies. Gold is the common denominator in all cases, which makes it clear that Gold is driving the bus now. Why would Gold rise against all fiat currencies? Since October, it has become clear that the global stock markets cannot rise without increasing liquidity and that economic activity is deteriorating worldwide. The market is anticipating that the central banks will be forced to turn on the monetary spigots again—print currency—to prevent a total collapse of the markets and the monetary system itself. Gold soars in such an environment.

Regardless of what the cause is, Gold is asserting its status as the supreme money in a fiat currency system, which is a significantly positive development and may signal the end of the paper markets’ control of precious metals’ pricing. If so, the sky is the limit.

That said, Gold is unlikely to go up in a straight line. We will get healthy pullbacks along the way for sure. For example, Gold is becoming increasingly overbought in the short-term. I recommend using such pullbacks to add, rather than try to short the market. Whereas stocks have become a sell-the-rip market, it’s all about buy-the-dip in Gold for now.

One final caveat: Although the bottom in Gold appears to be in place, should trade tensions between the U.S. and China escalate dramatically, the risk remains that USD/CNY could break out of its current range and break the critical 7 level. If XAU/CNY declines at the same time, or worse, falls back below its 200-day moving average, then Gold could still go a lot lower. But we know what to watch for now: USD/CNY and XAU/CNY. How they both behave going forward will tell us where Gold is headed.

As always, long-term, Gold, and especially Silver, are going much, much higher, in my opinion. If USD/CNY and XAU/CNY continue to behave as they have since August 16 th, then the massive rally in Gold that we have always expected has already begun.

Source – Sprott Money – https://www.sprottmoney.com/Blog/gold-takes-center-stage-in-a-fiat-world-david-brady-03-012019.html

Categories
Gold & Silver

Expectations for Gold and Silver in 2019 – Craig Hemke

Expectations for Gold and Silver in 2019 – Craig Hemke for Sprott Money

As 2018 drew to a close, the prices of Comex gold and silver began to move higher. This was just as expected and we wrote about these pending year-end rallies on several occasions. Before going further, perhaps you should take time to review these links:

The rallies have proceeded almost entirely as projected and, as the new year begins, several of our short-term price goals have been achieved. In Comex gold, we anticipated that a break of the 200-day moving average would serve to accelerate price toward the psychologically-important $1300 level. This is occurring as I type and, once $1300 falls, the final short-term objective becomes $1310.

As noted in the post linked above that was written on December 12, the key event was the bullish cross of the 50-day moving up and through the 100-day. This has led to significant Spec HFT algo buying pressure and though The Banks have responded by issuing nearly 50,000 new contracts since this this crossover occurred, price has rallied over $60 and will continue to move higher with, again, the current short-term goal being $1310. See the chart below:

And now Comex silver is following the same pattern. In that December post, we told you that once silver moved through $15, the target would become its own 200-day and it reached that level today, January 2. Though stiff Bank resistance is to be expected at this level, silver will win the fight and begin a move toward its own short-term target of $16.40 and the 200-week moving average. Heavy resistance has been enforced at this level since mid-2016 so you must expect that out initial silver rally of 2019 will end near there. See the charts below:

But this is just the beginning of what promises to be a very exciting year for precious metals investors. And why will 2019 bring the best performance since 2010? Because the conditions which sparked the rallies in 2010-2011 are presenting themselves again in the new year.

Back in early 2010, the US economy was perceived to be recovering from The Great Financial Crisis debacle of 2008. The mainstream media was endlessly telling us about “green shoots” of growth and The Fed’s policy of Quantitative Easing was perceived to be a one-off that would never need to be repeated. However, by mid-2010, it became clear that the U.S. economy was slowing and, in November of that year, The Fed capitulated and announced the $6ooB program dubbed “QE2”. The subsequent loss of faith in central bankers, their policies and the dollar led to this:

  • Comex gold began 2010 at $1096. It was $1192 by the end of July 2010 and it finished the year at $1421 for a gain of 29.6%. It then went on to peak at $1920 in early September of 2011 following a true crisis of confidence in US solvency and the dollar in August.
  • Comex silver began 2010 at $16.85 and it was still at just $18.01 by the end of July of that year. However, the pending announcement of QE2 sparked a rally that carried all the way through the epic Bank short squeeze of April 2011. This rally totaled an incredible 170% over just those ten months.

So, will 2019 mirror 2010 in price gains? As stated above, the conditions are similar. To wit:

  • The U.S. economy is demonstrably slowing due to higher interest rates and a nearly-inverted yield curve.
  • Political Risk in the US is high as the year begins with a government shutdown and a Democrat party takeover of the U.S. House of Representatives. Soon there will be about 20 new investigations of President Trump from 20, different congressional committees. All of this will foster more economic uncertainty and, for the first time since 2011, some real concern about U.S. fiscal policy and accumulated debt.
  • And, from a forecast of 3-4 Fed Funds rate hikes in 2019, expectations have rapidly shifted in the past two months to 0-1 rate hikes. Many economists now expect even rate cuts in 2019, as you can on the chart below.

So, as you can likely discern for yourself, conditions are eerily similar to 2010. Thus, why would we not expect precious metal prices to rally? These “markets” are already beginning to figure this out and the result is the year-end rallies discussed earlier in this post and displayed on the charts above.

What’s next will be a continued rally. It won’t be straight up and it certainly won’t be without Bank resistance every step of the way: https://www.sprottmoney.com/Blog/the-endless-war-o… However, prices will rallyover the balance of the year and annual performance will resemble 2010. A similar, 30% rally in Comex gold in 2019 would take price to near $1700. If silver were to replicate 2010, we would see a move to $25+. Thus, the time is now to peer over the horizon and take steps in anticipation of these events.

And what is your best and most prudent step in preparation? Buying physical precious metal, of course! Acquiring real, physical gold and silver is easy. It can be held at a trusted gold bullion storage company or in your own, personal safe. You can hold it in gold bullion coins or silver bullion bars. Take your pick. Just be sure you own some before confidence collapses, the dollar declines and The Fed begins its next course of rate cuts and quantitative easing.

Categories
Banksters Economy Manipulation

Collapsing U.S. Productivity Changes Everything

Collapsing U.S. Productivity Changes Everything by Peter Diekmeyer – Sprott Money

U.S. private sector productivity rose by 2.3% during Q3, according to the Bureau of Labour Statistics, following a massive hike in deficit spending by the Trump Administration.

These data matter.

If each of us produces more each year, we make ourselves richer … but more importantly, through the progressive income tax system, we also make each other richer.

However, longer term, annual U.S. productivity gains have slipped from an average of 2.3% during the seven decades starting in Q4 1948 to just 1.1% in the decade following the start of the 2007 financial crisis.

Collapsing U.S. Productivity Changes Everything - Peter Diekmeyer (02/01/2019)

Worse, there are growing signs that U.S. labour productivity is not just slowing, it’s in a freefall.

That means, far from making each other richer, Americans are making each other poorer.

Consider:

Why is productivity collapsing?

The idea that American productivity is collapsing seems ludicrous. This, during a time of an increasingly educated population, exploding technology and communications power, as well as the proliferation of AI, mobile devices and robotized manufacturing processes.

However, a range of forces are pushing in the opposite direction:

  • The U.S. Federal Reserve’s low interest rate policies have made it more profitable for businesses to buy back stock than reinvest in technology.
  • Bail-outs of large U.S. banks, automotive companies and other key sectors have stifled private sector innovation for a generation.
  • Increased government borrowing has enabled vast, inefficient bureaucracies at the U.S. federal, state and local levels to avoid reform.
  • America’s seniors are draining productive resources from the economy by collecting pensions and healthcare benefits they never fully funded.

Americans producing less with more

The reason that the collapse is not reflected in the official data is in part due to the fact that the BLS measures only private sector hourly productivity.

This does not reflect the growing drag on potential growth stemming from the increasing resources transferred to the more than 100 million working age Americans who are unemployed, out of the labour force or in jail.

Worse, the BLS calculations rely on the flawed GDP totals produced by the Bureau of Economic Analysis.

As John Williams of ShadowStats notes, the results are likely overestimated, because the deflator the BEA uses does not fully account for the loss in purchasing power in the U.S. dollar—the unit of measure used in its calculations.

The chart below (produced by Williams) shows U.S. GDP growth as measured by official sources.

The following chart shows GDP growth as calculated using a GDP deflator, corrected for an approximately two percentage point understatement.

Using this adjusted measure, the U.S. economy is no bigger than it was two decades ago. Yet America’s population has shot up by 15% since then.

This suggests the country’s per capita productivity has fallen by 0.75 percentage points per year on a straight-line basis since then.

America’s most important work. But are California teachers worth $73,000 a year?

The productivity drain stemming from bloated state, local and federal government spending, which now accounts for more than 60% of U.S. GDP, is particularly troubling.

As Ludwig von Mises pointed out in Socialism: An Economic and Sociological Analysis, public sector planners—even brilliant ones—are simply unable to allocate resources effectively because they lack access to effective price signals.

The inefficiencies are startling.

U.S. governments routinely transfer massive subsidies to the big banks. The Department of Defence can’t account for trillions of dollars of missing funds. Ongoing regressive U.S. Federal Reserve interest rate policies transfer huge wealth to the top 10% of income earners.

Government resource allocation challenges become particularly clear at the micro level.

For example, Time Magazine recently ran an excellent article on how the country’s public-school teachers, like most Americans, have seen the purchasing power of their take-home pay decline.

There is no free market in education. With few effective price signals, California’s central planners are thus unable to determine whether they should raise taxes to increase pay for teachers earning $73,000 a year (plus benefits and a pension plan).

Adding to the complexity is the fact that millions of American college graduates who could teach—at far lower salaries—are underemployed or wasting time doing graduate studies.

A Soviet-style collapse?

America’s freefall in productivity is likely even worse than the estimates provided above.

That’s because—as we have pointed out—BEA data also don’t account for the massive debt and unfunded liability increases needed to juice up existing economic growth.

If those effects—which suggest that U.S. GDP is as much as 30% smaller than experts claim— are included, they could herald a coming slow-motion, Soviet Union-style collapse in the American economy.

Indeed, one of the worst problems in the old Russia-led empire was that sloppy Communist Party data made it impossible to confirm whether problems existed … and if so, where.

America is now facing the exact same challenges.

Source – Sprott Money – https://www.sprottmoney.com/Blog/collapsing-us-productivity-changes-everything.html

Categories
Economy Gold & Silver

Eric Sprott Looks Ahead To 2019: “Big Things Can Happen This Year.” (Podcast)

Eric Sprott Looks Ahead To 2019: “Big Things Can Happen This Year.” Podcast – Sprott Money

It’s the final Wrap-Up of the year, and even as we weathered a “brutal, quick bear market”, precious metals appear to be on the way to their sixth consecutive December rally. Will it continue into 2019?

Our own Eric Sprott returns with all the gold and silver news you need heading into the new year, including:

  • The realreason for the year-end gold rally
  • Why silver is significantly outperforming gold
  • Plus: The one Fed move that would send gold rocketing in 2019

“We’ve been aided and abetted by the tremendous weakness that was experienced in the stock market… It’s instructive, certainly for people in the precious metals business, because even though we’ve had a bear market rally here, I suspect it will roll back over again. I think it’s interesting that gold and silver—particularly silver—have fared very well, even while the markets rallied. So, I don’t know that the precious metals markets are buying into this bear market rally that we’re going through. So, lots of good signs for great things to happen.”

Categories
Banksters Corruption Gold & Silver Manipulation

Pullback Ahead in Gold – David Brady

Pullback Ahead in Gold – David Brady for Sprott Money

Last week, I discussed the Bull and Bear cases for Gold. The stock market sell-off that began on October 3, the associated fall in bond yields, increasing expectations that the Fed would be forced to reverse policy, recent weakness in the dollar, and Gold rising in yuan terms have all contributed to Gold’s rally since September 28 th.

The rise in XAU/CNY, in particular, has finally cast some doubt on the “yuan as good as Gold” argument, as the yuan has weakened ~9% against Gold since August 16 th. For those who still question the China connection to Gold, this was also the same day that Gold bottomed at $1167. USD/CNY has been relatively stable since then, so all of the move in XAU/CNY factored into Gold’s rise in dollar terms. Why would China devalue the yuan in Gold terms? Perhaps because the previous midpoint for Gold at ~8200, yuan was deflationary for China at a time when it is dealing with slowing domestic growth and a trade war with U.S. This could continue to support a Gold rally in dollar terms, but the risk remains of a sharp move higher in USD/CNY if the U.S.-China trade dispute escalates.

13c6ed07201c12d831eb247ea59a0f52.png

Since July, my base case for a sustainable bottom in Gold and a massive rally to follow has been a Fed reversal in policy that would mean the peak and fall in the dollar and USD/CNY. Given the ~25% drop in the S&P since its all-time-high at 2941 on October 3, expectations for a Fed policy 180 to rate cuts and QE have risen dramatically. This is most evident in market forecasts for interest rate hikes in 2019 being erased almost overnight and the drop in the 2-year treasury yield from 2.98% to 2.54% today. The risk to this scenario is that stocks rally significantly without a Fed reversal in policy, increasing expectations for rate hikes in 2019 once again and weighing on Gold prices. However, as I shared in my previous article, I do not believe we can have a sustainable bottom in stocks without a Fed reversal in policy, so any rally ahead of that is doomed to fail, in my opinion. The key question is how low we go in Gold terms if and when such a stock market rally occurs. In the short-term, it looks like we are due a pullback in Gold soon.

63f5a585a4b545fee1d21e4d79605d6e.png

Stocks remain near their lows and could go down to lower lows yet, but the odds of a significant rally are increasing. Gold has risen $114 from its low of $1167 and is now extreme overbought short-term per its RSI. Gold is also setting negatively divergent higher highs per its DSI (Daily Sentiment Index) and MACD Histogram. Its MACD Line is now higher than its April peak at $1369 and approaching February peak levels.1293 is the 61.8% fibonacci retracement of the entire decline from 1360 to 1184 on a closing basis.Gold’s rally is also parabolic in nature, and those are the most fragile to breakdown.

Lastly, Gold is also running up against its weekly and monthly trendline since the bottom in December 2015, former support now resistance. And the month of December is almost done.

0b773ff488be8327989938d5b4fc0df0.png

dae2ab2cc98b70a7f4380388fd5786bc.png

At the end of the day, we have not seen the inevitable Fed reversal in policy “yet”, and the risk of escalation in the U.S-China trade dispute remains a risk. A stock market rally at the same time Gold is overbought and hitting resistance could trigger a sizeable pullback. The key question is: how low do we go? That said, the Fed will be forced to reverse policy or risk total collapse of the stock market and monetary system, and Gold will soar once that reversal occurs. Its recent rally confirms this. So use the coming decline to average in on the long side, in my opinion. Gold is only going higher long-term.

Categories
Gold & Silver

“Everything is going down.” Why you need to own gold bullion right now (Podcast)

“Everything is going down.” Why you need to own gold bullion right now Podcast – Sprott Money

It’s four days to Christmas, and gold is up $20 on the week. Does that mean the December rally has begun? Eric Sprott stops by to break down all the gold and silver news you need heading into 2019, including:

Which company delivered an ominous warning for the market.

Why silver may be setting up for a tremendous run.

Plus: signs that the big run for gold has already started.

“More important than the gold going up is what else is going on. It’s funny how the macro-theory all along suggested that when the Fed stopped their quantitative easing and rates went up—but particularly the quantitative easing, where they go from quantitative easing to quantitative tightening—that one should have expected the stock market to roll over. Because the whole 2009 to 2018 was essentially a fraud created by the Fed, by doing things that no one in the history of the financial world had ever heard about before: printing money and having zero or negative interest rates. Well here we are. Now we’re doing the opposite. Are we surprised that stocks are going down? Well, we shouldn’t be.”

Categories
Banksters Economy Gold & Silver Manipulation

Gold Bulls vs Bears – David Brady

Gold Bulls vs Bears – David Brady from Sprott Money

I have to admit that the action in Gold of late has been exciting. After dumping post the FOMC meeting on Wednesday, Gold came roaring back yesterday and then some. It closed at its highest level since July. What is more interesting is: why? It is this that will determine whether we head higher or not. The following are what I believe may be the drivers of Gold’s recent renaissance.

THE BULL CASE

  1. Increasing expectations of a Fed reversal in policy.

Back on July 17, I wrote the following:

https://www.sprottmoney.com/Blog/the-downside-case-for-gold-david-brady-19-072018.html

I have consistently said that my primary scenario for “the low” in Gold and the massive rally to follow is a reversal in policy by the Fed to “stimulus on steroids” that precipitates the peak and fall of the dollar, including USD/CNY.

We have had a 20% decline from all-time highs in most stock market indices. This is due to global net liquidity turning negative, for which the Fed is the primary culprit. Yet Chair Powell disappointed the market Wednesday by saying that the Fed plans to stay the course on further rate hikes, and in particular, the reduction of its balance sheet. Stocks have continued to dump since. In response, I tweeted the following:

Perhaps this is the reason Gold is going higher. It is anticipating the inevitable: a Fed reversal in policy. The stock market may have short-term rallies, but it will continue to fall to lower lows until the Fed does a 180 to ZIRP and QE again. Gold isn’t waiting around for that to happen and then rally. It has already begun to rally knowing that this eventuality will come.

A Fed policy likely means a major peak in the dollar and decline thereafter. But perhaps it has already begun?

  1. Peak Dollar

The Fed was dovish on Wednesday—just not dovish enough for the stock market. Even though the Fed raised rates and plans to continue to do so and reduce its balance sheet further, the dollar has been falling since anyway.

On December 14th, when the DXY was once again testing its prior high at 97.50, I shared the following on my site, globalprotraders.com:

“Momentum is clearly deteriorating, as you can see from the inverted parabola in orange on the daily chart… Dollar long positioning by Large Speculators (the dumb money) is at its highest in 3 years… Sentiment is also negatively divergent on the spot DSI (peak 95, yesterday 73) but more importantly, per the 21-day moving average, which has already peaked at a negatively divergent high and is now falling.”

Put simply: the dollar was ready to fall, and fall it did. But what if it is falling because it, too, is anticipating the inevitable reversal in Fed monetary policy?

Gold’s inverse correlation to the DXY broke down recently in favor of USD/CNY, but now it seems to be returning. Should the dollar continue to fall, this would be extremely bullish for Gold.

3. Gold in Yuan terms, or XAU/CNY

With USD/CNY relatively fixed in a range between 6.80-6.97 since August, it is XAU/CNY that is driving Gold in dollar terms these days, and it just broke its previous high at ~8640.

Recall: $GOLD = XAU/CNY divided by USD/CNY

It used to be XAU/CNY trapped in a tight range. Now it is USD/CNY’s turn. If XAU/CNY continues to rise and USD/CNY remains as-is, Gold in dollar terms will continue to rise. It’s simple math.

In summary, if Gold and the Dollar are anticipating a Fed reversal in policy, and XAU/CNY continues to rise while USD/CNY remains stagnant or even starts to fall, Gold may have already begun its meteoric rise. Time for the Bulls to party at last!

Well, hold on. Not quite yet. There are still quite a few land mines for Gold out there.

THE BEAR CASE

  1. A Stock Market Rally

Gold may be anticipating a Fed reversal in policy, but what happens to those expectations if stocks rally without it? Gold may be increasingly correlated to the DXY on an inverse basis, but its inverse correlation to the S&P is far higher at -0.70 and also rising.

Stocks have fallen precipitously since hitting their all-time-highs and are extremely oversold, overbearish, and positively divergent. Bear market rallies can be violent to the upside. Such a rally now would catch everyone off guard, including buyers of Gold.

  1. Technical Resistance & Momentum

Based on the front month future, December, Gold has still not broken out of its Bear Flag/Channel or its 200-day moving average. It is also extremely overbought per its RSI. Despite increasing bullishness, the risk is that it fails to break these levels and heads lower again, which brings me to the third point.

  1. Silver lagging Gold

Although Gold can and often does lead the way at major turns in the precious metals sector, as it did in December 2015, it is not always the case.

Silver is still well below its 200-day moving average. Momentum is clearly lagging that in Gold, also based on its RSI. It continues to struggle to break out to the upside and, like Gold, is right at resistance here.

Worse, its higher closing high yesterday was negatively divergent per its RSI and MACD Histogram. On a standalone basis, this might not be an issue, but don’t get me started on Platinum, which is lagging badly behind both of them.

  1. U.S.-China Trade War Escalation

Saving the biggest caveat of all for the Bull Case. Here is my view on the U.S.-China trade dispute in a nutshell…

We have had nothing but comic relief in the form of positive headlines, chats, meetings, group photos, détentes and great progress, followed by threats of further tariffs on all of China’s exports to the United States, and perhaps even higher than 25%. Nothing has improved. The U.S. continues to demand more action from China on the key issues, and China continues to play for time to wait out the U.S. until the S&P crashes.

I didn’t expect the détente to last until March 1 without both sides trading verbal punches, and I haven’t been disappointed. Cutting to the chase, there will NEVER be an agreement to U.S. core demands. Unless the S&P crashes first and the U.S. relents, there is a high risk of 25% tariffs being implemented and China responding by allowing “market forces” to push USD/CNY significantly above 7.

If the U.S. were to impose 25% on all of China’s exports to the United States, it is not unreasonable to expect the CNY to devalue by another 10% against the dollar. Unless XAU/CNY goes to 9000 or above, this means Gold is going back down, perhaps to lower lows.

Unfortunately, although the XAU/CNY has broken up to new highs this week, it has done so in a negatively divergent fashion, as can be seen from the RSI in the chart above. The risk is not that it goes higher from here, but lower. This means that any devaluation of the CNY before or after March 1 will likely mean lower Gold prices.

CONCLUSION

Although everyone is once again getting excited by the prospect of higher Gold prices (including myself), there is plenty of ammunition for the BEAR CASE also. At the end of the day, whether we go higher or lower in the next 0-6 months depends on whether we get a crash in U.S. stocks followed by a Fed policy reversal and subsequent decline in the dollar, before the U.S. increases tariffs to 25%.

The absolute worst case for Gold would be a Fed reversal in policy and the dollar goes higher—stocks too—and the U.S. proceeds with 25% or more in tariffs on all of China’s exports, before China pulls the plug on everything by significantly devaluing the yuan. However remote a probability this is, it is possible.

Long-term: Gold, Silver, and the miners are only going much higher. It’s just a matter of time, in my opinion.

Source – Sprott Money – https://www.sprottmoney.com/Blog/gold-bulls-vs-bears-david-brady-21-122018.html

Categories
Banksters Economy Manipulation

The FED Could Bring the Economy Crashing to Its Knees

The FED Could Bring the Economy Crashing to Its Knees by Nathan McDonald – Sprott Money

With tightly clenched fists, market pundits, analyst and investors eagerly awaited the news from Jerome Powell, the current FED Chairman.


What had the markets once again on edge is whether or not the FED would continue down its path towards calamity, going against the market’s wishes and short-term interests by raising rates.


Throughout the course of 2018, I wrote a series of articles highlighting how the FED could and perhaps even may want to bring the economy crashing to a halt.


The reasons for this are many, but the most obvious is their opposition to President Trump, who has made it crystal clear through his constant sparring with them that he is not a fan of the Federal Reserve.


Trump, much to the dismay of many of his supporters, has tied himself with an anchor to the movements of the markets.


This has worked out fabulously for him as new all-time highs were achieved. But as we have seen, it doesn’t work so well with the recent gyrations the market is experiencing.


The “hawkish” approach adopted by the FED recently has confused those who are unable to see what is happening, and angered others who wish they would simply leave the market to its own devices, unhindered by their meddling.


Unfortunately for the latter, more anger is on the way. The FED has increased rates and will likely continue to do so further, bringing the markets down in the process as we head into the campaign cycle for the upcoming 2020 elections.


This raise in rates comes in spite of a 3,000 point plunge in the DOW from its highs—a drop that I accurately predicted, once they began their recent rate increases.


In addition to this, major corporations
have stated that they see numerous indicators that reflect a slowing global economy.


Geopolitical tensions are also running at all-time highs, as France continues to be
wracked by the “yellow vest” protests , which have nearly brought the country to its knees.


Meanwhile, the recent trade wars between the United States and China has taken a heavy toll on both sides, with the latter experiencing a
significant slowing of growth.


In spite of all these bearish indicators, I believe the FED will STILL continue to raise rates, leaving many top economists simply shaking their heads in confusion.


Economist Stephen Moore had the following to say in a
recent Fox Business interview;


“The Fed has been way too tight. They made a major blunder three months ago with raising the rates. It’s caused a deflation in commodity prices. And I will say this… if the Fed raises interest rates tomorrow they should all be fired for economic malpractice.”


In regards to firing the FED: if only it was that easy.


I, for one, stand with Ron Paul and would love to see the FED utterly abolished, as it is a corrupt organization that has done nothing to assist the economy since its
sinister creation back in 1913 on Jekyll Island .


Meanwhile, legendary investor Peter Schiff predicted accurately that the FED will likely raise rates. However, he believes they will
take a different approach moving forward, rapidly decreasing rates over the course of 2019, as a new round of Quantitative Easing begins:


“The Fed will announce another rate hike tomorrow most likely,” Schiff says.

“I think that if the Fed hikes rates, there is a very high probability that it’s the last hike in the cycle. That should remove a headwind from gold.”

Regardless of who is right in this scenario, one thing is clear: Turbulent times are in store for the markets moving forward, as we head into an increasingly uncertain and erratic future where the risks of a massive economic downturn are a real possibility…

Source – Sprott Money – https://www.sprottmoney.com/Blog/the-fed-could-bring-the-economy-crashing-to-its-knees.html

Categories
Banksters Gold & Silver Manipulation

The Endless War on Gold and Silver – Craig Hemke

The Endless War on Gold and Silver – Craig Hemke from Sprott Money

Last week, we succinctly laid out for you what to expect for the end of this year and into 2019. Though, there are many reasons for optimism regarding higher precious metal prices next year, understand that The Banks are already taking steps to fight us every step of the way.

In case you missed it, here is the post from last week. The key takeaway is that Comex precious metal prices have rallied into year end and the first quarter for each of the past five years. Expect this year and the first quarter of 2019 to see similar gains.

https://www.sprottmoney.com/Blog/gold-and-silver-p…

But understand that this isn’t going to be all sunshine and lollipops. While other analysts were rejoicing a few months ago and falsely proclaiming that The Banks were now long and on the side of precious metal investors, we were quick to point out that that simply was NOT the case. The Banks that make markets on the Comex were never NET long and they had no intention of “shifting sides” and “letting price run”. We laid this out for you back in October and you should be sure to read these articles again now as new rallies begin:

https://www.sprottmoney.com/Blog/the-banks-are-not…

https://www.sprottmoney.com/Blog/the-same-old-come…

Simply put, The Banks are not “on your side” nor will they ever be. They’ve profited for years by controlling open interest, sentiment and price so you must expect them to continue their efforts in 2019. And we’ve already seen this play out.

For example, over the past few months, the “Managed Money” portion of the Commitment of Traders report for Comex gold revealed a massive and unprecedented NET short position for the hedge and trading funds that make up this category. As you can see below, at one point in October, these funds were NET short 110,000 Comex contracts for about 340 metric tonnes of digital gold obligations. If The Banks had been “on our side”, they would have forced these funds to be squeezed in price as they do not hold 340 metric tonnes of gold for future delivery. Instead, as you can see below, the entire position was covered as of December 11 with a net change in price of just $47. For all intents and purposes, The Banks let the managed money funds off the hook by re-assuming the short obligation from them.

This can be seen in the latest Bank Participation Report, as well. After drawing all the way down to a Comex gold NET short position of just 24,079 contracts on the October report, the 33 Banks surveyed for the report in December showed a summary position that had already grown back to 88,265 contracts NET short…even though price had rallied just $40 over the same time period. See here:https://www.cftc.gov/MarketReports/BankParticipati…

And now, with prices rallying once again, The Banks are back to simply playing the same old games they’ve played for years. This week alone, with the price of Comex gold up $12 or slightly less than one percent on Monday and Tuesday, The Banks have increased the total Comex gold open interest or “float” by nearly 15,000 contracts…just shy of four percent! Managing price by managing the supply of contracts is Price Manipulation 101 for The Banks. At TFMR, we wrote the definitive explanation of this back in April of 2017. If you’ve never read this post, you should definitely do so today:https://www.tfmetalsreport.com/blog/8252/econ-101-…

Thus in summary, while we expect a continuing rally through year end and into the first quarter of 2019…and though we expect 2019 to be a terrific year for precious metals due to a wide range of factors…no one should be under any illusion regarding The Comex and how it operates. As they’ve always done in the past, The Banks which operate there will fight us every step of the way and tick-for-tick. The Banks are not, nor will they ever be, “on your side” and thus no gains will ever come easy.

Source – Sprott Money – https://www.sprottmoney.com/Blog/the-endless-war-on-gold-and-silver.html

Categories
Corruption Economy Manipulation

No “Poloz Put?” Ignore BoC Warning At Your Peril

No “Poloz Put?” Ignore BoC Warning At Your Peril by Peter Diekmeyer – Sprott Money

Governor Stephen Poloz’s warning last week that the Bank of Canada wouldn’t backstop fluctuating stock markets drew little attention.

“Is there a Poloz Put?” the central bank head asked rhetorically. “No.”

At first glance, the fact that only one BNN Bloomberg producer and a few smaller media picked up the story is hardly surprising.

Canada is a mere bit player in global central banking and financial markets, and the opinions of any Canadian official generally carry little weight outside of local circles.

However, in December 2017 Poloz provided investors a similar warning about Bitcoin, then trading near its all-time high, but which subsequently fell by more than 80%.

Investors would thus be foolish to ignore him now.

Consider:

One of the Fed’s main policy tools

First, a little background. The idea that governments are key drivers of stock prices may appear ludicrous to those who believe that Western economies are free markets.

However, as Moody Analytics notes, higher asset prices and resulting wealth effects are one of the Federal Reserve’s main policy tools for achieving its inflation and economic growth targets.

For U.S. stock traders operating today, most of whom have never seen a crisis that government hasn’t bailed them out of, the Fed’s most important manipulation is the existence of a tacit “put,” which ensures that asset prices won’t fall too far.

Former Federal Reserve Chairman Alan Greenspan, Ben Bernanke and Janet Yellen all intervened to boost asset prices at key points when the heavily-indebted U.S. economy appeared set to implode.

The Bank of Canada’s policies are less overt. While the central bank claims that it “does not target asset prices,” asset price manipulation is clearly direct “collateral damage” resulting from its other policy objectives.

Poloz admitted as much earlier this year in a press conference at Queen’s University , when he noted that the wealth effect generated by rising asset prices is “fully articulated” in the central bank’s Terms-of-Trade Economic Model ( ToTEM)).

No “BoC put” implies no “Fed put” either

The fact that Canadian monetary policy closely tracks U.S. actions means that The Bank of Canada could only refrain from backstopping crashing markets if the Fed held back too.

This raises the question of whether Poloz’s denial of the existence of Bank of Canada backstop is credible?

An initial assessment raises doubt.

For one, the credibility of almost all central bankers is currently near zero for anyone who is not paid to believe them.

For example, no global central bank has ever predicted a recession one year in advance.

In addition, the Federal Reserve, which issued trillions of dollars in covert guarantees during the last financial crisis, often acts in contradiction to its public statements, as do most other central banks.

Others—such as the Swiss Central Bank, when it guaranteed the franc’s peg with the euro one trading day before it was lifted—blatantly mislead investors.

An intellectual … but not necessarily an idiot

That said, the Bank of Canada, which earlier this year picked up a Central Bank of the Year Award, has several things going for it.

These include an ability to punch above its weight, due to Canada’s huge in-ground gold reserves, which the government could seize at any time.

Furthermore, the Bank of Canada’s people—including former Governor Mark Carney, who now heads the Bank of England—are in high demand in both the public and private sectors.

Another key BoC asset is Poloz himself, who occasionally provides signs that he is no mere Talebian Intellectual Yet Idiot.

Although the poor fellow is burdened with a Ph.D. (which is usually a contra-indicator of actual economics knowledge), Poloz’s dissertation about currency exchange rates won wide acclaim and quickly labelled him as a man to watch.

The Bank of Canada Governor also brought to the table long stints at BCA Research and Export Development Canada, which provided him broad on-the-ground exposure to business, financial markets and trade issues.

More intangibly, Poloz displays a quick wit and ever-present sense of humour, which signals an ability to analyse a situation from outside the box.

No bullets left?

As such, there is a possibility that Poloz may have unintentionally lurched into the truth.

For example, central banks may have so exhausted their policy tools that they are simply no longer able to backstop markets (although the BoC denies this).

“To be absolutely clear, I am not giving investment advice,” said Poloz, prior to making his Bitcoin comments, which proved to be the most prescient prognostication of any Canadian analyst that year. “I never do.”

With that caveat in mind, investors ignore Poloz’s latest comments at their peril.

Source – Sprott Money –