Gold And Silver May Be Setting Up For A Big Move

The price of gold soared over $13 Monday as flight-to-safety money flowed into the precious metals sector while the stock market went into a downward spiral. I see Monday’s market action as a preview of what’s in store going forward as price discovery once again engulfs the stock market and causes the most extreme stock bubble in U.S. history to deflate.

Despite the fact that it seems to be taking forever for gold and silver to enter into a prolonged move higher, the chart below should offer encouragement.

Gold, silver and mining stocks are deeply oversold technically. It’s  obvious that the western Central Banks are throwing everything they can at the gold price via the paper derivative gold markets in London and NYC in an attempt to prevent a massive move higher.  The data for gold and silver futures on the Comex show that the banks are working hard to stunt any rally by unloading loads of paper gold on the market.

This effort is rewarding the large physical gold importing countries in the east. India’s net import of gold jumped by 27 per cent to 192.4 tonnes in the first quarter of calendar year 2019 from 151 tonnes in the same period last year. In April India unofficially imported 121 tonnes of gold, up significantly from April 2018. The increase in import activity is attributable to the lower gold price. Note that the official statistics do not include smuggled gold, which is thought to average around 25 tonnes per month. China also has stepped up its gold buying over the last several weeks.

At some point the Fed is going to be forced by the market to cut the Fed Funds rate, as the 1yr Treasury is now yielding less that the Fed Funds target rate. In addition, the yield curve is inverted from 1yr out to 7yrs, with a steep inversion between the 1yr and 3yr Treasurys. It won’t take much flinching from the Fed to ignite a rally in the metals. In addition, the investor sentiment as measured by MarketVane is about as low as I’ve seen it in a long time (34% bullish for both gold and silver).

Despite the 600 pt sell-off in the Dow today, complacency persists, along with an expectation that the Fed will continue to support wanton speculation in the stock market.  But the inverted yield curve, combined with an effective Fed Funds rate that is above the interest rate used to calculate the quantity of free money given by the Fed to the banks on excess reserves, is strong evidence that the Fed is losing its ability to control the financial markets.  At some point the Fed and its western Central Bank collaborators, led by the BIS, will also lose control of the gold price.

6 thoughts on “Gold And Silver May Be Setting Up For A Big Move

  1. “Despite the 600 pt sell-off in the Dow today, complacency persists…”

    Certainly in the silver market, which despite the 600+ drop didn’t go up at all.

  2. “At some point the Fed and its western Central Bank collaborators, led by the BIS, will also lose control of the gold price.”
    And then presumably, at some time after gold is on a tear, silver will get a lift. As noted, the gold silver ratio is as high as it has been since 1993.

  3. Dear Dave, Helicopter money will come just to keep the pitchforks out of Billionaires Row. This is when gold will rise into the sky. This moment is not very far off. Less than a year by my judgement. My reasoning is as follows:
    Once “risk on” turns into “risk off”, the stream of liquidity that drove financial assets to ever higher levels will stop and a period of asset liquidation will start. The liquidating will be triggered by fear and by force as loans are called in or denied. The trigger will be most likely (but not exclusively) the collapse of the US consumer under financial stress. Private consumption drives roughly 70 per cent of the US economy. Just listen to Federal Reserve governor Lael Brainard in his missive of the 10 May: “ Even modest unexpected expenses could be disruptive for many middle-income families. According to the forthcoming results from the 2018 SHED, one-third of middle-income adults said that they would borrow money, sell something, or not be able to pay an unexpected $400 expense. Drilling down further indicates that while 6 percent of middle-income adults said they would not be able to pay the expense using any means, 27 percent would borrow or sell something to pay the expense. The reliance on credit to meet unexpected expenses is pronounced among those already carrying a balance on their credit cards. Nearly 3 in 10 middle-income adults carry a balance on their credit card most or all of the time, and the same households are five times as likely to borrow if faced with a $400 expense as those who never carry a balance.”

    As the consumer falls so will the house of cards called “Financial System”. Because like in a cartoon of the French revolution, it is based on the permanent stealing of wealth from the people to enrich the 1 per cent. All debt and revenue is ultimately based on the financial health of the people. When this goes, everything goes.

  4. Hi Dave, I have an addendum to my last post. Helicopter money will destroy trust in the currency but will not stop the depression from engulfing the world. The bankruptcies and the “never ending” stream of forced asset sales at ever lower prices to repay debt will far outweigh any inflationary impact of money printing. The banking system will become insolvent because of extreme loan losses and the transmission mechanism to channel new debt into the economy will be broken.

  5. I can’t believe , Dow went more than 200 points up. Eureka
    Dead Cat Bounce
    Fooling right to the end. Gold is going up.

  6. Today, Wednesday, Retail Sales data is weak, Industrial Production data is weak…..LOL.
    More China data is weak also. Gotta love this trend into the economic recession and then economic depression. PPT working very hard to keep these markets propped up……they will own it all or most of it, stocks and bonds.

    Vehicle sales down….Around Easter, I posted that new car lots in my area are filled to the max. They are not selling. Look around at vehicle dealers in your area. They are probably filled up too. Here come all the TV vehicle commercials with big savings and low interest rates again. They are desperate. I know a car salesman, was working at a Mercedes dealer, no more, then went to a Chevy dealer, there no more. He sits home now because the dealers are laying their sales people off….permanently…..why? vehicle sales have been DOWN and keep going down. Zero and low rates the past 5-10 years sucked future demand and suckered the masses into houses and vehicles they cannot afford….Day of Reckoning is here and now……and going forward.

    When does a slow motion train wreck turn into just a full blown train wreck….soon!

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