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Goldilocks: Did We Just Get A Catalyst That’s ‘Just Right’ For An Upside Surprise In Gold & Silver?

SD Midweek Update: There are a couple of very compelling, fundamental reasons why we may finally get that upside surprise this week. Here are the details…

I’d like to start out with some initial thoughts on the bankruptcy filing of Republic Metals Corporation.

Without diving into production numbers, I would think of RMC as number “2” of the “Big 4”. First, and in my opinion, by a long shot, would be Sunshine Minting (they are a major supplier of planchet blanks to the US Mint), followed by RMC, and then we have Silvertowne and Scottsdale duking it out behind the top two.

What does the bankruptcy mean for gold & silver investors?

In my opinion, this could lead to an increase in premiums as well as some shortages for privately minted retail products. No doubt inventory, refining, minting, and logistics would be adversely affected as this bankruptcy draws out in court. I recall digging around online and finding somewhere showing the company has way more in liabilities than it has in assets, and somewhere around 5,000 creditors who will all be arguing their claim to said assets.

Yikes!

That is going to be one headache to sort out, and no doubt many creditors will get left holding the bag.

The bigger question for us stackers, however, is what does it mean for 1, supply, and 2, for premiums?

I just don’t see how this couldn’t have at least a minimal effect on supply and price, so to any and every stacker considering a purchase, I would suggest monitoring premiums like a hawk to see if there is “premium creep” because of this.

Could refining, minting, and inventory get held up?

I don’t know: While ‘Ol Half Dollar has worn many hats, he has never warn that of a lawyer, but it is hard not to imagine some sort of “freezing” of inventory or processes as this gets sorted out. I just don’t know.

We’ll see.

To move on, I’d like tie in the results of the election, and what the results mean for gold & silver. For those who don’t know, the republicans retain control of the senate, but the democrats won control of the house.

In my opinion, here’s the gist of it: The Democrats taking the house will be good for gold (and silver).

Why?

First of all, as I have said all along, this is a clear sign that we have now definitively peaked in my Peak Trump theory. There is no denying this. This election was more about President Trump than it was about the other candidates running. Those who think otherwise are only lying to themselves. That said, by the democrats winning control of the house, this is a loss for Trump.

How did the Republicans lose out?

Possibly by complacency.

You see, this whole “Q anon” psy-op wants everybody to “trust the plan”.

Therefore, the people who went out and voted for Candidate Trump in 2016 pretty much thought a red wave was a wrap, that there was no way the dems would regain control of the House, and as such, there was no need to vote. No matter how the republicans lost, to use that cliche again, “it is what it is”.

Recall that I have officially labeled November as “put up or shut up” month. Since the republicans lost the house, look for “lock her up” supporters to come out and move the goalposts. I never thought we would get all these mass arrests, military tribunals and all the other “hope porn” type of stuff anyway, but if there ever was a possibility, then there is much less of a possibility now.

So this is a serious defeat to President Trump, even if he is calling it a “Big Victory” and a “Tremendous success”:

Received so many Congratulations from so many on our Big Victory last night, including from foreign nations (friends) that were waiting me out, and hoping, on Trade Deals. Now we can all get back to work and get things done!

— Donald J. Trump (@realDonaldTrump) November 7, 2018

Tremendous success tonight. Thank you to all!

— Donald J. Trump (@realDonaldTrump) November 7, 2018

What should really be concerning, even alarming, however, is that the President now wants to label any criticism whatsoever as Fake News:

To any of the pundits or talking heads that do not give us proper credit for this great Midterm Election, just remember two words – FAKE NEWS!

— Donald J. Trump (@realDonaldTrump) November 7, 2018

Even Trump supporters should take pause with a statement like that.

Regardless, the President’s base thinks the President has done, and is doing, all of these great things to MAGA, and whether he has, or he has not, the President was not able to keep control of the House. That is the bottom line and it is a loss no matter how you spin it. Is that what the President means by “proper credit”? Probably not, but that is what happened.

Since we have now peaked in my Peak Trump theory, the $1167 August 16th low in gold and the $13.96 September 11th low in silver should hold.

We’ll see.

On Monday, this was my call for the first part of the week:

Here’s what I think: I think the market manipulators on Team ESF are going to attempt to control today and tomorrow’s market action with a sort of “goldilocks” feel to it.

Which means, in no particular order:

Stock market slightly up

Dollar slightly up

Yields slightly down

Volatility not spiking

Gold and silver down

Commodities an afterthought

What did I get right?

The stock market, gold, silver, volatility and the commodities.

What did I get wrong?

The dollar and yields.

Not bad for the call if you ask me, but I’m biased like that, so let’s just go ahead and dive into the charts.

Here’s the surge in the stock market:

Are we en-route to new, all time highs, or is this a dead cat bounce?

I think its a dead cat bounce.

Volatility came down, but check out the moving averages:

That’s right! The 50-day moving average has crossed up and through the 200-day moving average. That makes sense, because I have been saying more volatility is ahead of us, not behind us.

The dollar has fallen for two days, plus overnight and into this morning:

That was a part of the call I got wrong. Has the dollar finally topped? I still think the next major move in the dollar is down, not up.

Yield on the 10-Year Note has spiked back above 3.2%:

Yield is fast approaching the level where the stock market starts puking. Will the stock market start puking again?

Copper fell on Monday and Tuesday, but rebounded overnight:

I would expect some volatility in the commodities, such as copper, to close out the week.

Crude oil has been struggling lately:

Are we getting low enough to the point where the price of crude oil would be concerning for gold and especially silver prices? The price of crude oil has acted as a price floor during this brutal run in the metals over the last several months, and a drop in the crude oil price into the mid-$50s would be concerning enough that I would re-assess my call for the bottom in gold & silver.

That said, since I think the next major move in the dollar is down, I would expect the price of crude oil to start recovering. If that is the case, the downside in crude may be limited here, and, by extension, gold and silver may not make new bottoms.

It certainly is interesting!

Platinum is looking more and more encouraging by the day:

Platinum is poised to do battle at the major moving average of the 200-day.

Palladium has been choppy:

If the metals are going to run, however, palladium is going to run too.

The gold to silver ratio is still screaming “buy silver”:

At 85 to 1 this is the best way for the stacker on a budget to make a long-term play of converting ounces of silver into free net-gain weight in gold.

It’s formally called the “gold to silver ratio arbitrage”.

So with gold and silver, along with the call, I also mentioned the week could be one marked by “sell the (election) rumor, buy the (election results) news”.

It looks like it could be shaping up that way with gold:

Could we even get above $1250 to close out the week?

It is also looking that way with silver:

Could we even get above $15 to close out the week?

I think we could, both for gold and for silver.

Why?

I have been talking about my expectations for an “upside surprise” for some time, and while I have been wrong, with the results of the election and the democrats taking back the house, we might have found our catalyst for the move.

Bottom line: The results of the election may not be fully priced-in, and we may see a rally in gold and silver because of it.

Add in any kind of uncertainty in the market regarding the physical supply of gold or silver because of the RMC bankruptcy, and that only supports the case I am making for an upside surprise.

There is one caveat, however, and that is the Fed.

Tomorrow at 2:00 p.m. EST, the Fed will release its November, 2018 FOMC Statement. While nobody expects a rate hike, and while there is no press conference following the statement release, the Fed could still come out hawkish, and that hawkishness could be the cover needed to smash gold and silver. On Monday I asked whether the cartel would want to save that dry powder for a more important (to the cartel) smashing down the line, and I think they actually might hold on the smashing tomorrow.

Why?

It circles back to Republic Metals and actual physical supply. We don’t know how loose or how tight physical gold and physical silver supplies are, but we do know that one of the major players in the refining and minting space is now going through bankruptcy proceedings.

Is that a big enough event to have an impact on supply?

We’ll know by watching those premiums.

Stack accordingly…

– Half Dollar

 

About the Author

U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.

Paul’s free book Gold & Silver 2.0: Tales from the Crypto can be found in the usual places like Amazon, Apple iBooks & Google Play, or online at PaulEberhart.com. Paul’s Twitter is @Paul_Eberhart.

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