Ready To Surge: Dow Is Going To Need A Lot More Than 23,000 To Fend Off Gold & Silver

First this to start a Monday morning:

The U.S. has gained more than 5.2 trillion dollars in Stock Market Value since Election Day! Also, record business enthusiasm.

— Donald J. Trump (@realDonaldTrump) October 16, 2017

In the overnight session, gold and silver have been looking good with respectable price action:

For this Monday Outlook, let’s see where we have been over the last year. As we can see, gold and silver have been all over the place.

For example, Silver is lower than where it was a year ago:

On November 9th, we had the election night spike higher, and then two days lower, they brought the smash. We are in a good position for the week when we move our eyes to the right side of the chart. The 50-day is right there at the 200-day, ready to show the world that the 50-day has decisively crossed to the upside. We know that already, but since the metals have had no love all year, it will be good for everybody else to see it.

Regardless, the silver price is decidedly lower than a year ago. It hasn’t been much fun, and those month long smashings this year have been brutal, but the more they try to force the price down, the more this pent-up energy needs to be released, and the cartel could quickly become overwhelmed.

A problem area on the chart is around $17.70. That is June 6th peak before a month long fall. Once silver gets through that level, the price needs to take out $18 with determination.

But if the copper price has anything to do with it, that could be sooner than later:

We know that everybody has been quick to discount the price action in copper as merely the result of rampant Chinese speculation. We have not been quick to agree with this point of view, and when we zoom out over the last year, we can see that when copper surged from the October 20th low a year ago, there was a seven month consolidation in price in preparation for the next leg up. Perhaps everybody is skeptical because it was a fading consolidation, but that chart looks decent. It does look overbought, due to the overnight surge to a new high since mid-2014, but looking at the surge last October, it could still have room to run before what may be another several month consolidation.

The point with copper is that the price of silver catches a bid with the price of copper. Silver is both money and an industrial commodity. At the very least, a rise in copper will move up the floor in silver.

We have been following the strong performance of gold in relation to silver all year.

In fact, gold is right where it was a year ago, gold has been higher than it was a year ago, and the up-trend is clear. At one point, from the lows last December to the high on September 8th, gold is up $240. In gold, just like there has been very little consolidation this year in silver as well, the gold price really needs to work it’s way up past $1350 sooner than later. The election night $70 surge show the price can move in a hurry. With Israel striking Syria, Iran and North Korea heating up again, all of Europe in chaos of the political, social, and monetary kind, there sure are several catalysts for one of those surges.

We could certainly use the boost to confidence that a surge would provide. Is this the week we finally see a surge in gold, silver, or both?

Palladium is at a new high again:

 

Palladium has shown what surges can do to price.

Platinum, however, has not held up well at all over the year:

Platinum is up year to date, but from a year ago, platinum is slightly down. The September smashing was exceptionally brutal for platinum. At this point, we should all just be hoping that platinum gets back above it’s 50-day. But looking at the other metals, both precious and base, it does seem that the platinum price action will do that sooner than later.

Crude has been surging over the past several days:

Talk about one of the hardest price moves to call all year. The price for crude is basically unchanged from a year ago, and it has been range-bound mainly in the $45-$50 range, but again, looking at the simple moving averages, the 50-day is about to cross to the upside through the 200-day. Crude bulls exist because they trade off of oil, or they have some connection to the oil fields or oil industry. For everybody else, it means get ready for higher diesel and gasoline prices, which means get ready for higher prices in everything else.

The dollar has been decidedly one way this year after the “infrastructure build”,  “inflation trade” and “Trump trade” hype:

It is worth noting that two times before, in 2017, the 50-day moving averaged looked to be turning up, only to fail after a few weeks. If the 50-day starts turning down again, it could get moving in a hurry.

Just yesterday, Janet Yellen was saying that low-rates are the new normal, and the dollar has been falling despite escalating geo-political tensions around the globe. And while the infrastructure spend is indeed coming, it is due to all the devastation caused by mother nature. This is not productive spending because it is only replacing what was already there with dollars that could have been used for something else. Not shown, however, is the fact that the dollar slowly climbed from 70 to 80 from the GFC as the pundits like to call it, and then again the dollar surged from 80 in mid-2014 to where it peaked out after the election.

Somehow it doesn’t seem like the dollar will see continued strength from here, and a decisive move to the downside would confirm this. But no matter where it goes, we all should come to understand that the Fed is doing their hardest to make sure that the dollar devalues by 2% per year as their stated public policy.

The yield in the 10 year Treasury Note had a big move lower on Friday:

Another drop in yield like that and the entire gap-up from September 27th will have been erased. Since we are looking back a full year in this Monday Outlook, it is worth noting that the rate on the 10-year was 1.724% on October 20th. Though all year long, the trend has been lower yields, no higher.

The VIX seems rather calm for all the uncertainty in the world:

Other than the election run-up spike in volatility, the entire year has been muted. There have been a few spikes here and there, and if ever body is short volatility, one has to wonder when the low-vol trade will end up looking showing the traders’ whose boss, just like everybody was long-dollar in the beginning of this year.

Here’s a farce:

Dow 23,000 by Friday? Then what?

On the fundamental side, Europe is a mess. Italian banks are struggling, Australia just elected the world’s youngest leader, Catalonia and Spain are in a good old Mexican standoff, the UK just wants to be friends with the EU as May engages on the most drawn-out break-up ever, and Greece is going to need another bail-out.

Back home, California has been burning to the ground, Puerto Rico is still in the dark, Texas, Florida and many other states in rebuild mode from multiple hurricanes.

Geo-politically, China will most likely re-elect Xi Jinping as the Communist Party Congress convenes in two days and last for the next two weeks. Iran and North Korea are facing an ever increasing war-mongering Donald Trump (who saw a massive spike in the number of bombs dropped on enemies last month), and somehow it is all a bit too much so Russia has to take a back seat again.

The economic calendar is full this week:

There is a slew of data releases and Fed speaker this week.

And it ends with a Janet Yellen crescendo this Friday:

Bottom line: We could see a nice healthy rise in the metals this week. The question is will we see a dominant surge higher in the gold and silver prices?

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