Gold Silver Desk

August 7, 2019

With bond markets in full panic and the price of gold surging above $1,500, Albert Edwards just warned about what the next phase of the global “Ice Age” will look like.

The Global “Ice Age”

August 7 (KWN) – Albert Edwards, Former Global Strategist at Societe Generale: 

“Many investors simply cannot countenance the possibility the Fed will take Fund Funds negative.  The charts suggest otherwise. I’m with the charts.  The intensification of this currency war will force the Fed to act to to keep pace with the ECB, even against their better judgement.  Negative yields and a currency was always what the next phase of The Ice Age will look like.  The final phase will see US yields converge with the Eurozone below zero accompanied by a huge decline in the equity market as global economy plunges into a deep, deflationary recession.”

The Truth Is Finally Coming Out

Fred Hickey:  “The truth is finally coming out – “The cleanest shirt” is not the US dollar, nor the yen or Swiss franc – and it’s not even dirty – it’s shiny (Gold)!…

US 10-Year Yield Collapsing

Holger Zschaepitz:  “US 10y yield briefly drops below 1.6%, 30y yield nears record low as collapse in rates accelerates. (See below).

US 10-Year Yield Collapses To 1.6%!

Meanwhile, In Switzerland…

Jeroen Blokland:  “Switzerland’s 50-year bond yield is now at -0.25%! (See below).

Switzerland’s 50-Year Bond Yield Collapses To -0.25%!

$1,500+ Gold

Jeroen Blokland:  “Gold $1,500! First time since April 2013. (See below).

For First Time Since 2013 Gold Surges Above $1,500!

“Everyone Will Be Buying Gold & Silver”

Peter Schiff:  “The Reserve Bank of New Zealand’s 50 basis point rate cut, to a record low 1%, simply to prevent the N.Z. dollar from strengthening, and the costs of living from rising too slowly, was insane. Central bankers have lost their minds. Soon everyone will be buying gold and silver!”

Silver Breakout

Graddhy out of Sweden:  “We got the backtest in the form of a bull flag to my large double bottom and today we have the longed for breakout out of the bull flag. Beautiful stuff. Could not ask for more really. Developing perfectly. Just loving it. (See below).

Silver Breaks Out Of The Bull Flag…Now Above $17

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August 2, 2019

Gold and silver continue to shine as Theater of the Absurd continues, plus Tom McClellan on stock market reversal.

Lifetime Low 

August 2 (KWN) – Holger Zschaepitz:  “Germany’s 10y yields drop to fresh lifetime low of -0.49% as Trump’s trade threat triggers a rush to safety. (See chart below).

THEATER OF THE ABSURD CONTINUES: Germany’s 10-Year Yields Hit Lifetime Low Of -0.49%!

Will It Go Negative?

Jeroen Blokland:  “Austria’s 100-year bond yield now at 0.899%! (See chart below).

GLOBAL INTEREST RATE COLLAPSE CONTINUES: Austria’s 100-Year Bond Yields Plunge To 0.889%!

Incomes And Inflation

Lawrence McDonald, Former Head of Macro Strategy Societe Generale:  “Incomes are up 14%, housing 290%, college tuition 311%. Filling the gap between earning and spending is an explosion of finance into nearly every corner of the consumer economy.”

Gold Action Very Bullish

Graddhy out of Sweden:  “Gold is giving us perfect 2h TA here. Look at how price respected my trend lines and painted the chart. It was Fed that brought it back into my black triangle but the day after, gold gave Fed the finger and came right back up again. (See chart below).

Attempts To Take Price Of Gold Lower Are Failing

Keeping An Eye On Silver’s Breakout

Stefano Bottaioli, Italian analyst:  “Watch carefully the bullish signal. (See chart below).

Keeping An Eye On Silver’s Breakout: Silver Should Trade Violently Higher

Plus something from Tom McClellan…

Quiet McClellan Oscillator is a Tell For a Top

Tom McClellan:  Quietness is a sign of trader complacency, and thus of a topping condition for prices.  Quietness manifests itself in a variety of ways, and can be measured also in a bunch of different ways.  Most often, chartists will use Average True Range (ATR) to look at what prices are doing.

This week’s chart was featured in a recent issue of our Daily Edition, calling attention to the condition which now appears to be starting to matter.  It borrows from the idea of ATR, but applies it to the McClellan A-D Oscillator instead of prices.  Since the Oscillator is an end-of-day indicator, we don’t have to worry about the intraday range as we would for prices.  Through some experimentation, I have found that 15 trading days makes for a useful lookback period.

Stock Market Traders Were Far Too Complacent

The highest Oscillator reading over the past 15 trading days was a +55 on July 12, 2019, a reading which is about to drop out of the 15-day lookback.  The lowest before August 1 was the -64 reading on July 22, 2019.  That produced a low for this indicator of only 119.  It has jumped up a little bit with the Oscillator move to -92 on August 1, but we still have the low reading on the books.

That low reading was telling us that traders were feeling too complacent to do much work moving prices anywhere, a condition which also resulted in quiet Oscillator readings.  Most of the time, such very low readings for this 15-day range indicator are associated with meaningful price tops, but not always. 

There was one example back in September 2017, when we saw a really low reading for this indicator had no effect on the progress of the uptrend.  Chalk that up to the notion that nothing works all the time. 

We are now seeing stock prices starting to drop, as called for by the low indicator reading.  It took a while to “work”, and the FOMC helped when they disappointed with only a quarter-point rate cut.  The small range of Oscillator values over the prior 3 weeks did not “cause” the price drop we are seeing now.  It just revealed a ripe condition which set up the events we are now seeing unfold.

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Anna Golubova Monday July 22, 2019 11:34

With silver trading near fresh one-year highs, analysts see a lot more gains in store for the metal, which could be “more aligned to the perception of real economic activity.”

Silver saw positive action on Monday after hitting 13-month highs on Friday. September Comex silver prices were last at $16.40, up 1.30% on the day.

“We liked silver for a long time. It is nice to see it do what it should be doing,” TD Securities head of global strategy told Kitco News on Monday.

Silver picking up its pace is a reflection of the market’s perception of gold entering into a bull market, Melek pointed out.

“[The metal] has traditionally doubled the volatility of gold and it tends to outperform in time of the boom market. And I think we are very much entering that. Typically for every 1% move in gold, silver tends to move too,” Melek stated.

The longer-term outlook for silver is very positive with TD Securities projecting the metal to climb to $18.75 by the end of 2020. “We are looking at $16.10 for Q3 and $16.70 for Q4, ultimately going to $18.75 by the end of 2020,” he said.

The supply-demand fundamentals are also looking pro-higher silver prices, added Melek.

“This market could very well start to turn into a deficit and a lot of the inventories that people have been talking about should start dissipating. And much of it will be investment-driven,” he noted.

What Is Gold/Silver Ratio Telling Investors?

The gold/silver ratio surged to record highs this year, making silver very cheap relative to gold. And with silver now rallying, markets are starting to see a reversal of that trend. The gold/silver ratio was last around 87.35.

The ratio saw its biggest weekly decline in three years, falling 5.4%, said Pepperstone’s head of research Chris Weston as he questioned what the move means from the macroeconomic perspective.

“There is … an interesting macro thematic around this ratio too, with some seeing silver more aligned to the perception of real economic activity. If this is the start of a new trend of silver outperforming gold, then the debate will center on whether things are not as bad in the US and global economy,” Weston said.

“That said, it is easy to think this is just a reflection that market has pared back expectations of how aggressive the Federal Reserve will be in next week’s FOMC meeting, after last week’s communication nightmare, with the probability of a 50bp cut now set at 18%.”

A trade Weston throws out there is short gold and long silver: “If there is more downside in this ratio, meaning gold underperforms silver on a relative basis, then being short of gold and long of silver and netting off the exposures as a ‘pairs trade’ could be an interesting way of trading this theme,” he wrote on Monday.

Silver does offer an interesting opportunity to investors at the moment — being so cheap relative to gold, added TD’s Melek.

“There’s an element where it is so-called ‘poor man’s gold’ here. It is very cheap relative to gold. And if you are of the view that the Federal Reserve will cut rates aggressively along with central banks around the world then we are moving into a broadly negative view of the world. We already have 13.3 trillion of bonds yielding negative returns here, silver is a natural,” he said. “There is a lot of relative value.”

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Submitted by cpowell (GATA) on Thursday, July 18, 2019. Section: Daily Dispatches

By William Watts
MarketWatch.com, New York
Wednesday, July 17, 2019

Currency traders are contemplating the “I” word.

While still seen as a longshot — Goldman Sachs described it last week as a “low but rising risk” — a growing number of analysts are warning that President Donald Trump’s longstanding frustration with the U.S. dollar’s relative strength versus major rivals could eventually lead to U.S. government to intervene in the currency market in an effort to weaken the greenback.

Last week, Bloomberg News reported that Trump has asked aides to look for ways to weaken the dollar and asked about the currency in job interviews with the candidates he’s selected for seats on the Federal Reserve’s board.

Here’s a guide to how intervention works and what it would mean for the market.

… What is intervention?

Intervention occurs when a central bank buys or sells its own currency in an effort to influence the exchange rate.

A government might take action to halt a precipitous slide or a sharp runup in its currency following a shock. It could also act in concert with or on behalf of other countries in an effort to stabilize a particular currency. In fact, the last time the U.S. intervened in the currency market was in March 2011, as part of a coordinated effort by the Group of Seven nations to arrest a surge in the Japanese yen following a devastating earthquake and tsunami.

Utilizing their massive reserves, central banks can get their way, at least in the short term. A credible threat — explicit or implied — to intervene around a certain level can often hold sway, particularly if underlying fundamentals and other factors stand in the central bank’s favor.

But even central banks can be overwhelmed by the market if fundamentals are out of line with goals. The Bank of England pulled out all the stops on Black Wednesday in 1992 in a futile effort to keep the British pound trading within the bands set by the European exchange rate mechanism, wasting billions of pounds of reserves.

… Why is intervention so rare?

Intervention is hardly novel. In fact, as the Goldman Sachs chart below illustrates, until around the mid-1990s, it was relatively common for the U.S. and other major developed countries to wade into markets in an effort to signal a desired exchange rate.

But unilateral intervention has long been out of favor, with the U.S. and other members of the Group of 20 in June reaffirming a previous commitment to refrain from competitive devaluations and to not target exchange rates for competitive purposes.

… How is it conducted?

According to the New York Fed, the foreign currencies used to intervene by the U.S. usually come equally from Federal Reserve holdings and the Treasury’s Exchange Stabilization Fund. Those holding consist of euros and Japanese yen.

The New York Fed’s trading desk does the buying and selling, often dealing simultaneously with several large interbank dealers in the spot market. The New York Fed, in a 2007 note, observed that it historically hasn’t engaged in the forward market or other derivative transactions.

The process is also meant to be transparent, the New York Fed says, with the U.S. Treasury secretary typically confirming the move while the Fed is conducting the operation or shortly thereafter. After all, authorities are attempting to send market participants a message, so there’s little incentive for them to cover their tracks.

… Who makes the call?

While the Fed is responsible for executing any FX intervention, dollar policy is traditionally the purview of the Treasury Department. The Treasury’s foreign-exchange decisions, however, have typically been taken in consultation with the Federal Reserve System.

There’s much speculation around whether the Fed would go along with a unilateral intervention effort. Powell, in congressional testimony last week, repeated that the Treasury Department is responsible for exchange rate policy. Goldman Sachs strategist Michael Cahill, noting the remark, said it seems likely the Fed would probably defer to the Treasury and go along even if it does not agree.

If the Fed were to stick to the sidelines, it would cast the effectiveness of any intervention effort into doubt, analysts said. The Treasury’s Exchange Stabilization Fund has around just $22 billion in U.S. dollar — and another $51 billion in IMF Special Drawing Rights, or SDRs, that could be converted — that it could tap, The Fed can use its balance sheet, giving it vastly more firepower though the Treasury and the central bank typically would go 50/50 in any intervention efforts.

To Sum it Up Buy Gold!!!

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Clive Maund

July 1, 2019 – 11:10am

We have already been over the reasons why a major PM sector bullmarket is starting, and remarked on how undervalued silver is compared to gold, and how this is typical at the start of a major sector bullmarket, but it is worth “thumping the table” over this, because silver and silver investments may well be the best place of all to put your money at this time.

Many silver investors are manic-depressive and fanatical, which is a reality that we can turn to our advantage, for if we can figure when they are just starting to emerge from the depths of despair, it is the time to move into the sector in a big way. They are just starting to emerge from the depths of despair right now as it happens, which graphically is shown by the silver to gold ratio, the basis of which being that when investors in the sector are at their most risk averse, they tend to favor gold over silver, which is hardly surprising as gold conjures up images of solidity and security to a much greater extent than silver, which is also known as “poor man’s gold”.

It is thus most illuminating to observe a long-term 20-year chart of the silver to gold ratio, on which we see that the rare occasions on which it has dropped to the sort of extremely low levels it is now at, have always preceded a major sector bullmarket except early in 2016 which preceded a big rally. What is remarkable right now is that this ratio has even exceeded its earlier record lows, which makes a new sector bullmarket even more likely, and this indicator, just by itself, is a strong sign that this is what’s brewing.

Now to examine silver’s latest charts to see how it is shaping up.

On the 6-month chart we can see that although silver has reversed, breaking out of its preceding downtrend into a new uptrend, it has still only risen by a meager $1 from its late May lows – BIG DEAL!! Rather than being upset by this, WE SHOULD BE THANKFUL THAT IT HASN’T RISEN MORE because otherwise silver investments would have gone through the roof. Silver’s restrained performance so far is giving us more time to buy investments across the sector before it really gets moving. An important point to note before leaving this chart is the strong volume on a big up day last week, which was the 2nd biggest up day volume in history which is a very bullish sign.

The 3-year chart shows that silver has been an especially dull market during this period, but what is interesting is to compare this chart to the 3-year chart for gold in the article Gold’s Epochal Breakout, which looks way different and shows a massive divergence that is going to be made good by silver catching up big time at some point. Although silver’s 3-year chart still doesn’t look very inspiring, with weak price performance and an overhang of resistance between about $16 and $18.50, the volume buildup of recent weeks coupled with gold’s strong performance suggests that this resistance could be overcome a lot more quickly and easily than many would believe possible.

Finally, the long-term 10-year chart shows that despite gold breaking out from its giant 6-year long base pattern over the past week or so, silver is still scraping along not very far off its lows. However, this is not a situation that is expected to persist for much longer – if gold goes up it’s going to take silver with it, and the volume buildup in silver as it has risen off recent lows suggests that this rally has legs, and what is believed to be happening is that silver is just starting to rise off the 2nd low of a Double Bottom, whose 1st low occurred late in 2015 – early in 2016. If this interpretation is correct then we are at an excellent entry point here for all silver related investments.

End of update.

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