The Fed Offensive: Raining Down “Fire and Fury” On ALL Markets This Week

Two weeks ago we discussed the Fed radio silence for the entire week before the FOMC meeting.

This is what it looked like:

Last week we of course we know what happened, which was basically nothing until talk turns into action.

This week, however, it’s going to be all about talking the markets. Every day of the week there are Fed speakers. What is particularly interesting is that today, Monday 9-25, the Fed will be jawboning in the morning, in the afternoon, and in the early evening.

Prepare for an all-out assault from the Fed, in addition to a heavy hand in the market (behind the scenes and not spoken of in the MSM of course):

What is the message here? The Fed is holding control of these markets like the over-protective parent who walks around with their kid on a leash. The kid is also wearing elbow pads, knee pads and a helmet. Not only that, but the Fed is carrying the kid even with all the measures taken to ensure “safety”. These markets can no longer walk on their own.

Last week finished the week rather optimistic. Gold and silver fought hard and finished above the whole numbers. 

For now, seeing as how the Fed will be engaged in their main policy tool (talking the markets) in addition to gold and silver starting the week off under considerable pressure, we might want to just cast aside the optimism and brace for impact.

And because we know the routine, let’s focus for a minute on the importance of moving averages and how they have an impact on gold and silver prices.

Here is that all important 50-day moving average in the gold price:

Last night, at exactly 7:19 p.m. EST on Sunday September 24th, the gold price broke through the 50-day to the downside.

That is a very bad sign. Recall that every time we have fallen through the 50-day, gold has gone lower, but as long as we remained above the simple moving average indicating what the average price of the yellow metal is over the last fifty days, we have stayed positive on the price action.

The question in gold is this. Does a Sunday night piercing count? Is that the “bounce” off the 50-day we are looking for? For now that remains to be seen. Either way it is an omen that we are now forced to deal with.

Here is how important the 50-day is in the silver price:

It is just as important as it is with gold right now, but for a different reason. If the 50-day moving average crosses the 200-day moving average on the daily chart above, that is very bullish. That is the “golden cross”, and it generally means that price is moving higher.

The 50-day is very close to punching through the 200-day on the daily, and the cartel will do everything in their power to delay this as long as possible. In fact, just to add insult to injury, look at the price action in silver since the opening on Sunday evening. Silver opened below the average, and it hasn’t even gone up to touch the line.

If there is a bright side on the price action, silver has been pushed down for 10 of the last 12 days. Are they just going to clobber the price for the next five too?

They are skating on very, very thin ice. We said there is a price point where buyers will flood the retail market and scoop up as much physical silver as possible. Is that price $16.50?

Check out how choppy crude oil has been all year:

The low point on the chart could be the head of an inverse head-and-shoulders patter, and if that is the case, the price is going even higher from here. For now, it looks like West Texas Intermediate is set to make a run at the $54 – $55 price range range.

Oil is a key expense in gold and silver mining. There is a lot of energy required to get the precious metals out of the ground and to the market, and the more it costs to fuel the equipment required to mine and transport the metal, this more this contributes to a rise in price. So now, the cartel must deal with cost-push inflation, where the higher cost of production contributes to higher prices to the end user.

Looking at the “go-to” safety of the US dollar and US Treasury paper, there has been this divergence in the 10-year yield compared to the performance of the dollar index:

This is not to say the dollar is going to strengthen. Also, it remains to be seen how much selling of bonds, as in rolling them over at maturity, which is what the Fed calls “balance sheet normalization” will impact interest rates. The Fed talked interest rate “hikes” for years before they actually did anything. When they finally did “hike”, interest rates on the fed funds rate have risen to a whopping 100 to 125 basis points (1.0% – 1.25%). That is still basically nothing and nowhere near “normal”.

Fundamentally, the yield of a bond rises as the price goes down. If the Fed is selling their treasury paper, this theoretically increases the interest rate because more sellers are in the market trying to sell the same thing. But for now, all the Fed has done is talk. Furthermore, the United States seems set to go on a spending spree that not only offsets the increase in interest rates, but increases the notional dollar value of the net overall buying. There is the aftermath of three devastating hurricanes to deal with, increased beating of the war drums, tax cuts, increases in spending, a debt ceiling, the need to spend more to service the debt if interest rates continue rising, and the need for more treasuries to pay the maturing ones at the Fed. With all of those factors, are yields really going to rise? If even a handful of those factors comes to fruition, yield is most likely going lower, not higher. There is a day coming, however, when the bond market crashes and the yield explodes. Then we wouldn’t be talking about 2.5% yield on a 10-year but something much, much higher.

There is another thrown at the whole US Treasury market as well, and it’s the dreaded “D” world: Who will buy our bonds when the whole world is starting to become spooked by “de-dollarization”? The topic of the move away from the dollar is just as polarizing as the cryptocurrency topic, and that is not good news for the dollar no matter how one looks at it. Since 2017 so far has been the year of cryptocurrencies, if de-dollarization comes front and center in the MSM, one can assume that there will be equally massive market shocks and movements as the concept picks up speed, which right now is only on the fringe of the alternative media.

So where is the dollar and treasuries headed?

The answer to the dollar part is left open to interpretation. Here’s one:

The dollar has been strengthening for the last 3+ years, and the Fed is set on making sure it “officially” loses 2% of purchasing power per year, even though anybody who ever buys something with dollar realizes that the “real” loss of purchasing power is way more than 2%. Said differently, price inflation is much higher than the government and the central bankers will admit.

And the same goes for the the bond market:

Hurricanes, de-dollarization, tax cuts, war drums, debt servicing costs, extra bond issuance to cover rolling debts, and all the other factors mentioned is screaming that the United States needs lower interest rates, not higher.

Finally, there’s this:

Just in case anybody was looking for a sick joke…

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