We're off and running in what will surely be a week not for the faint of heart. If you like volatility and uncertainty, this week is right up your alley. Fortunes will be made and lost while my cute little stack of gold shines in the sun, indifferent to all of the Keynesian madness.
As this pertains to gold and silver, here's what you must remember. The only reason there is a TFMR is because of our recognition that the precious metal "markets" are wholly manipulated by the trading desks of The Bullion Banks, often acting as agents for the devious Central Banks. So, as you look at the charts, you must always remember to look at them through this prism. Ask yourself, what kind of picture is being painted in order to "trick" the other market participants (Specs) into taking the position that the Bullion Bank desks would like them to be in?
With this in mind, let's examine the charts below....and let's be clear about this...they are undeniably bearish. Though gold is up a couple of bucks today and clinging above $1105, this is mainly due to a mildly strong yen. Nothing more. As sentiment ebbs and flows through the week, gold will slip back below $1100 as the yen trades back lower. The intraday breakdown below $1100 back on Friday nearly assures this. Below $1100 and only gold almost certainly tests the $1080 area where it had found support back in July. It is very hard to imagine that gold won't come close to testing $1080 sometime before Friday morning.
And silver's no picnic, either. The action Friday and today almost certainly projects a test of the 8/26 lows of $13.95:
So, again, here's what I'm driving at...
Think of how many times just this year that gold (and silver) were set up right at key technical levels just before some major economic news (like the BLSBS or GDP) was due to be released. And here we are, three days from the "most important FOMC Fedlines in years" and gold (and silver) is being walked down toward critical support again. The undeniable conclusion is the the BB desks are positioning gold (and silver) for a major smash at 2:00 pm EDT on Thursday.
And what kind of Fedlines would cause a sharp gold and silver smash (into which the BBs would be buying and covering)? A rate hike.
Again, this makes no sense from a traditional, Keynesian point of view. The U.S. economy is in shambles so there's no need to "tap the brakes" and try to achieve a "soft landing". That's all bullshit. Instead, the primary reason that The Fed might hike rates can be seen below:
As we've discussed for weeks, the fate of the U.S. stock market is now inexorably tied to the USDJPY. Knowing this, The Fed must realized that the only way to keep the stock market afloat is to raise rates. Why? Higher rates make the HFTs buy the dollar. A higher dollar weakens the yen. And a weaker yen pushes the stock market back up.
Look, I hope I'm wrong about this. The day is coming when the Central Bankers will finally be exposed as the liars, bluffers, spinners and mopers that they are...AND I'D LIKE THAT DAY TO BE THURSDAY. However, in their arrogance and their desperate attempts to keep the plates spinning as long as possible, here's how I expect this to play out:
The FOMC does nothing. The market assumes that rate hikes are indefinitely postponed due to market volatility, deflation, China devaluation, etc etc etc. The dollar weakens vs the yen despite all of the BoJ efforts to beat the yen back. The stock market declines on the news as HFTs sell index futures vs the falling USDJPY. Gold rallies with the rising yen.
And this is what I think is going to happen. The FOMC raise the fed funds rate by 15 or 25 basis points. The stock market soars as the USDJPY ralliess with the dollar strengthening against the yen (a happy BoJ, too.) Gold, silver and all commodities get taken to the woodshed. However, all of the market hysteria soon fades as we move into late September and October due to:
- The rising dollar forces even more yuan devaluation from China
- This intensifies global currency wars
- Fed rate hike exacerbating commodity plunge deepens fears of global deflation/disinflation
- Serious stress in companies like Glencore and nearly all emerging markets
- Global liquidity crisis resumes/deepens causing liquidations and global margin calls
- Fed forced to quickly react and "dovish" talk begins about FOMC cuts and even renewed QE to stem #5 above
- After re-testing 80ish bottom, yen begins to soar as dollar melts down in anticipation of renewed QE etc to "save the global financial system"
- After failing from somewhere back near S&P 2050, S&P begins collapsing just as "Death Candle" predicted it would
- Chaos and panic set in
- FOMC cuts rates and promises QE or "whatever measures necessary to restore calm and order to markets".
And the world finally sees that the emperors have no clothes.
Sounds like it's going to be an interesting couple of weeks, doesn't it? The point is...The Fed, the ECB, the SNB and the BoJ are doomed either way. All remaining credibility will be lost as the world finally recognizes that there is no plan and there is no normalcy. Quantitative Easing and unlimited currency creation and devaluation is all that they have.
As this pertains to the metals, any new paper price low found over the next few days or weeks will be The Final Low. What that price will be and when it occurs hardly matters. What does matter is that...if this all plays out as outlined above...you're about to live through some unprecedented and historic times. I hope you're ready. It all begins on Thursday at 2:00 p.m. EDT.