As The Markets Sell-off The Precious Metals Rebound

To the surprise of many investors, the precious metals have rallied while the broader markets continue to sell-off.  Currently, both gold and silver are solidly in the green while the major indexes were all the red following a huge sell-off yesterday.  The Dow Jones Index has lost nearly 1,000 points in the past two days while the gold price is up nearly $25.

However, even though we could see a late-day rally in the markets, and even higher stock indexes over the next few months, the bear market for stocks is still coming.  The Dow Jones Index has now suffered two large sell-offs in the past ten months:

In January, the Dow Jones Index fell by more 3,000 points, and the current correction is only one-half of that amount.  So, I expect to see a continued correction over the next month.  Because October is the worst month for market Crashes, this could be one hell of a blow for not only the economy but also, for investor confidence.

For example, according to the Zerohedge article, Used-Car Prices Plunge Most In 15 Years:

Looking deeper at the core inflation print, it reflected a 3% monthly drop in prices for used cars and trucks following increases in each of the last 3 months, and the biggest drop in 15 years…

And then, of course, the continued disintegration of the U.S. Retail Market, Sears Creditors Push For Bankruptcy Liquidation As Vendors No Longer Paid:

Amid recent reports that Sears is set to file for bankruptcy as soon as this weekend ahead of a $134 million debt payment due on Monday, the only question is whether the filing will be a Chapter 11 debt for equity reorganization or a Chapter 7 liquidation. And contrary to the desires of Sears CEO and biggest creditor, Eddie Lampert, who would like to preserve the core business, others are pushing for an outright liquidation.

According to the WSJ, a group of Sears’ biggest lenders, including Bank of America Corp., Wells Fargo & Co. and Citigroup Inc., are pushing for the company to liquidate its assets under a chapter 7 bankruptcy filing, as opposed to reorganizing the business under chapter 11, this person said.

Interestingly, Sear’s major lending institutions (Blank of American, Wells Far-gone & CitiCorpse) are pushing for a complete bankruptcy liquidation rather than a reorganization.  I gather they believe the “brick and mortar” retail industry is likely heading for the dustbin as the Amazon’s of the world takeover.  I can assure you that “Amazon Economy” won’t last for much longer especially when the U.S. economy and shale oil industry collapse.

Don’t Expect The Precious Metals To Sell-off With The Markets

As I mentioned in several articles and videos, the precious metals will likely RALLY during the major market correction.  And we are seeing evidence of that today.  Gold is up over $20 and Silver, $0.23:

When I did this chart, the Dow Jones Index was only down 100 points but is now down more than 200.  So, why aren’t the precious metals selling off with the broader markets as they did in 2008?  The reason for the rally in gold and silver is because the precious metals have continued to trend lower over the past six years while the broader markets climbed higher.  Thus, they have already “SOLD-OFF.”  

Now, I am not saying that gold and silver can’t spike lower, but according to market sentiment and the COT Report, the precious metals are closer to a LOW while the broader markets are still trader near their HIGHS… even with the last two-day correction.

Once the major stock indexes head into a sustained bear market, you can count on investors “ROTATING” out of stocks and real estate and into the precious metals and the gold and silver miners.  I expect the precious metals and miners to be one of the HOTTEST in the entire market during this time.

The U.S. 10 Year Treasury Hitting Major Resistance Level

Due to the fact that investors trade based on technical analysis, the 10-year U.S. Treasury just hit a KEY LEVEL:

As we can see, the 10-Year U.S. Treasury rate has hit up against its 200 Month Moving Average (MMA, in RED). Typically, it will bounce off this and head lower, but if it doesn’t, then it could spike even higher.  We must remember, higher interest rates aren’t good for the U.S. Government’s ability to service its debt.

In my previous article I posted the 2018 fiscal interest expense for the U.S. Government debt:

The U.S. Treasury had to fork out an additional $65 billion of interest in 2018 versus 2017.  The annual interest expense jumped from $458 billion in 2017 to $523 billion in 2018.  That’s nearly a 15% interest expense increase in just one year.  If the average interest rate for U.S. debt only increased to 3%, up from the 2.3% currently, its interest expense would balloon to $648 billion, based on $21.6 trillion of debt.

So, as we can see, the fundamentals for the U.S. economy and market are in serious trouble.  I imagine President Trump, the Fed Chairman, and U.S. Treasury Secretary will do all in their power to keep the markets from imploding, but eventually, the fundamentals kick in.  And when they do… they will do so in a BIG WAY.

Lastly, while the gold and silver miners are still wholly out-of-favor with most investors, don’t be surprised to see serious gains over the next several years as the broader markets head into the toilet.  I know this sounds counter-intuitive, but there just won’t be much for investors to protect wealth during the next major downturn.

For example, First Majestic Silver is now coming off its lows of $5.00:

While First Majestic reached a high of $25 in 2011, I wouldn’t be surprised to see it at least five times higher during the next bull market.  

IMPORTANT NOTE:  I just picked First Majestic as an example of the primary silver miners market.  So, do not trade or make any investment decision based on this information.  Do you own due diligence before making and investment decisions.

However, common sense tells us that the past ten years of propping up the markets with more paper money and debt will not bode well for most stocks, bonds, and real estate.  Gold and silver have been stores of wealth for thousands of years even though the typical investor has been hoodwinked by Wall Street and the Central Bankers.

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54 Comments on "As The Markets Sell-off The Precious Metals Rebound"

  1. Funny you should mention Sears. I was on my way to see one of my customers and on the way I drove past a Mall that lost J.C. Penny and now it’ll lose Sears as well. I think you’re dead on with regards to the impending economic crisis as the Fed wants a 2% inflation rate but wages are not keeping up with inflation for the common folk. So lots of people of suffering and more is on the way.

    So what happens when more retailers close their doors? More job losses and i’m not in the camp of “It’s Amazon’s Fault” for the retail apocalypse. I think a lot of retailers are suffering because there’s way too much debt in the system and people are tapped out. The Global economy is driven by consumer consumption. Though I do agree with Steve’s premise that the Amazon business model will be severely hurt as Energy issues become more of a problem down the road.

    • And I don’t believe for a minute that we have less than 2% inflation. Going by John William’s from ShadowStats.com our inflation rate is probably a lot higher than 2%. Prices have been going up while package sizes have been going down. There’s your real inflation.

    • Agreed, consumers are tapped out and more and more people are heading towards a “buy less” mentality.

  2. Michael Kohlhaas | October 11, 2018 at 11:15 am | Reply

    All those FAANG guys got a warning shot across the bow today. Let’s see if they will acquiesce to reality.

  3. But what about Zippto’s … I mean Crypto’s ?? I thought they were going to $100k ?
    Maybe in Bolivars. Oh well there is still time …. to STACK !

    • Michael Kohlhaas | October 11, 2018 at 12:12 pm | Reply

      Market value of cryptos is over $200,000,000,000! What do you think will happen when they go to frigging zero? Can’t wait to see that piece of shite going down!

  4. RATIOS.

    While collating economic ratios something frightening becomes starkly evident. The market fundamentals are unbalanced and very fragile to ANY exogenous shock.
    Ratios:
    Debt to income
    GDP to debt
    Loan to value
    Margin debt to market cap
    I could go on and list many more, but what would be the point? They ALL say the same thing. We are very close to, if not in a major market correction, or outright crash.
    Hence the flight to the ultimate safe haven – precious metals and their miners.

  5. infinite growth, meet finite planet

    • Yep, infinite debt growth (a.k.a. fiat money creation), meet 180k mt of fizzical gold that is growing at rate of about 2% max.

  6. Things are under more control than you people imagine. Yes, there’s a correction going on now, which is natural.

    But the big picture? No change, and there never will be. They will continue to suppress metals, they will continue to support stocks, bonds, and real estate. They’ll just give you people a “scare” and then they’ll lower interest rates, loosen the money a bit, and things will rebound in another 6 months, year.

    Mark my words, there will be no change in our system for at least another 20 years. And at that time, they’ll just shut down the casino and it will be back to every man for themselves. And we’ll see how far your metals get you when there’s very little in the way of food, employment, healthcare, or anything else for 8, 9 billion people.

    • I enjoy reading your comment dolph. They always make me laugh. I’m so glad you visit and comment regularly at a site you completely disagree with.

    • dolph,

      I see you follow the “Wizard of Oz Mentality”. Like Dorothy, just tap your shoes together three times and say, “Everything will remain the same for 20 years.”

      LOL,

      steve

    • Its EXXXXXTREEEEEMLY unlikely there are actually 8 or 9 billion people.That is a DEPOP fallacy.The entire worlds population can fit into half of Florida (without packing us like sardines either).A single seed (which no man can even create a single 1 of)can spread food clear across the earth given time ,the right atmosphere etc.SATANISTs rule.SATANISTS want depopulation,love to create holocausts of human sacrifice for SATAN,theyr god.The SATANIC religions of evolution & GLOBALISM are forced down the throats of every man woman and child (like CHEMTRAILs)from birth to death.We R not on a globe.see “200 Proofs Earth Is Not a Spinnig Ball”and “100 Reasons Evolution Is Stupid” 144 Bible verse prove earth is a flat plane.

  7. Gold and silver aficionados. Today was a good day for you. Gold blasted through a long time support and resistance level. And silver maintained it’s uptrend with an engulfing pattern.
    See charts here. http://learnpowertrader.weebly.com/

  8. Steve,

    You said ” Because October is the worst month for market Crashes, “. I think you meant to say ” Because October is the BEST month for market Crashes,”

  9. Comment #1
    I learned something a couple weeks ago that I should have known a long time ago. Maybe it’s common sense to many here, but I’d like to pass it on.

    I’ve been buying junk silver from coin shops for the past year. There have always been two problems: high premiums and they are always “sold out”. A month ago I found a numismatic coin swap meet by accident. I went in and guess what? low premiums and bag after bag of “junk”. Bags of Mercuries in very good shape. Lots of reasonably priced tubes and single American Eagles. Also, lots of non-numismatic gold Eagles from the 1920s at 100-150 over spot. I may never go to a coin shop again.

    This is probably not news to many of you, but a revelation to me. You can find out where the swap meets are by contacting local coin clubs. Best prices, lots of stock, no hassles.

    Back up the truck!

  10. I’d like to make a comment to all the “precious metal deniers” out here.

    If you don’t like silver and gold, no problem. It’s a free country.

    But one knee-jerk comment you always hear is the idea that “you can’t eat silver and gold” (actually you literally can). Of course this is a figurative statement, i.e. you can’t buy food with it when the Schumer hits the fan because there won’t be any food, or gas, blah, blah, blah.

    Most famines in history were caused by crop failure, natural disaster or war. But in almost every case, there was enough food around (or obtainable) to keep the vast majority of people from starving. The problem has usually been lack of MONEY to pay for it.

    History shows that the majority of people in most places in the world in most eras were generally poor. Most people were farmers or those that depended heavily on those that farmed. When a crop failed or was destroyed, the people lost the vast majority of their money that they would have received from selling their harvest or their ability to barter the crops they grew for the things that they did not grow or make themselves.

    In most cases, not all, but most, there was food enough to be had from the next village, the next valley, the next country or from those that somehow had a surplus of something stashed away. Livestock. Can and smoked meats. Fish and fowl. Wabbits and Bambis.

    The problem has usually always been MONEY. Even Dolphe has to admit that you can get anything you need if you have enough money. Believe me, people will even sell food that they need to eat themselves for money. Maybe they will sell those cans of meat they have for money and just use half the money they get in exchange for oatmeal and beans. Maybe someone has a junk car with 20 gallons of gas in the tank that they will exchange for some Mercuries to buy powdered milk for the kids or corn from farmer John.

    Silver and gold are money. If the Schumer hits the fan, you can always get something to eat with it from somebody. Or you can get something else you need that you can use to barter. Maybe it will get you and your family a warm place to sleep. If you have some dimes to trade, maybe someone knows someone who knows someone else who has some extra chow. Even if there is absolutely no food to be had, at least you would have SOME peace of mind that when it did appear, you would have something to exchange for it.

    If a community had some silver and gold, maybe they could leverage it to purchase food from another location. If there is money to be had, food might literally “come out of the woodwork” so to speak. There might be food someplace, but with no money to exchange, there might not be trade at all. A little bit of silver might be the oil that slowly starts the wheels of trade and industry. Just sayin’!

    Even if you don’t believe in silver and gold as investments, it is still a good idea to have a few rolls of silver dimes and quarters “just in case”.

    • Roger that. And you can’t eat a buck either, unless its fizz buck or a real buck buck 😉 On a more serious note, in most countries you can’t buy a loaf of bread with a Fed reserve either. Across Europe it won’t be accepted as payment; you will have to go to a bank or a currency exchange office and swap it into €s, £s, Swiss Franks or whatever before you’ll get any food for your “buck” at a local store. Gold as crisis-proven base (real) money has been used for commerce and settlements for hundreds and thousands of years around the globe… So Nixon was right when he uttered his abominable “temporarily” in August of ’71. “Temporarily” just took longer than many thought possible, but is about to come to an end within the next few years. And I doubt it will take more than a decade… If so more time to stack. GLTY+A and thanks to Steve for a fabulous blog where he shares his insights with us.

    • This is a great response, I agree with you. Thanks for taking the time to say it to people who need to hear it!

  11. In Central NY I have never seen so many businesses with help wanted signs and offering much higher starting wages. I can’t see how anyone willing to work can’t find a job. Many do refuse employment because they are on the Dole and don’t want to lose benefits, that is not the economies fault.

  12. I don’t see why the gold and silver community is so hateful of Crypto’s? They can both exist in the same world. PM’s = money and cryptocurrencies = currency. There will always be currencies, you will never go down to the grocery store and buy things with PM’s. You will first transfer your PM’s into a currency and then make a purchase.

    I personally love trading crypto’s and have used the profits to buy PM’s. I’m not saying sell all your PM’s for crypto’s, but if your looking for something to trade while we wait for the inevitable PM rise they’re not a bad option. If you look at my PM/crypto ratio it’s about 95% PM’s and 5% crypto’s, so I’m definitely in the PM camp. I just think they both have their place. Crypto’s are far better than the current hyper-inflationary currencies we have today. Just my 2 cents.

    • Cryptos have no place in any society since it will only benefit the few who create the currency. Not to mention cryptos can easily be replicated very cheaply. There is no value in these assets. And if you are still holding cryptos you are going to lose all your money.

      I have a lot more to say on this, but that can be a later time.

      • With such volatility it’d be a sin not to have some small amounts in crypto’s. Some amount that you don’t care about, i.e. if your net worth is 1M, then anything up to 50K (eur, usd, whatever) is just a drop in the sea.

        I had a “heart attack like” experience last year with bitcoin, but I’ve changed my mind.

        Crypto is like a never expiring option. Put or call, whichever you want.

        Feel free to run a Monte Carlo simulation over bitcoin, dogecoin or other top market cap coin data and you’ll get wild trajectories.

        If you lose 5% of your net worth you won’t hang yourself. But that 5% can generate 1000x returns.

        BTW, crypto’s aren’t useless. One can transfer any amount very quickly and cheaply, no banks involved.

    • Kyle,

      The reason that the PM community is so hateful of cryptos:

      Simply, they can’t think with an open mind. Crypto stands for Cryptography but since some are “currency” the PM boyz freak out and talk about the mark of the beast when the irony is that fiat is the perfect mark of the beast system because it can be shut down with the flip of a switch shutting down any isolated account they want to.

      The same trading pattern happened to the tech stocks in 2000.
      ( check out a Bitcoin Log chart and see the real story ) There was a large rise, then a steep correction, then the tech stocks with utility went up big time, Apple, Google, Microsoft, Facebook…..the PM community won’t benefit from the next crypto phase…and they deserve NOT to. ( I still have ALL my physical PMs and many of my PM stocks i.e I own BOTH PMs and crypto..because I choose to think….)

      • For me the crypto versus gold & silver as money is simple. Crypto currencies are not money, they are fiat, by definition. They have no backing whatsoever other than “proof of work,” which isn’t tangible either. It would be like expecting the fact that I went into my backyard and dug 50 holes in the ground, to be worth something just because of the energy that I put into it. Until they are backed by something tangible, they will continue to be fiat. If they were to be backed by precious metals, or lumber or anything real and in demand, I would participate in purchasing them.

        The technology is interesting, and I’m all for it. I think it is a definite part of our future. But to think that it be worth 10,000 per “coin”, or 50,000, or whatever people say it is intrinsically worth, is absurd to me.

        It’s an easily to replicate digital technology. 1000’s of new crypto currencies have hit the market in the past few years. What makes one worth more than the other? What is to say that once you buy one, that it will have any lasting value? What happens when the newest and greatest crypto comes out? To say that they are scarce and therefore “money” is false. While one particular coin may be scarce, you can just as easily create a whole other coin as simply as copy/paste.

        Cryptography has it’s uses, and it’s future. I’d love the idea of implementing it in voting to prevent fraud. But as for money, no thanks, I’ll stay with precious metals that have existed, with universal confidence, as long as there has been civilization.

  13. R. Stephen Dorsey | October 12, 2018 at 10:09 am | Reply

    Pardon this splash of cold water but all the depiction of PMs making big moves upward and promising to exceed our expectations based on a pitiful few dollars and cents increase strikes me as just silly. Silver’s top was $50 some time ago. $50. Today, it’s $14 and change. Why all the blather, the charts, the hyperbole? Silver would have to go up over 344% to get back to its previous high. And I keep reading about gold going up to $2000. That isn’t impressive, either, considering the state of the world and local economies. The economy, energy, the incessant push for US hegemony over everyone else, international debt, our uncontrolled borders – these are issues, not PMs and possibly for some time to come.

    • R. Stephen

      The market caps in metals is small compare to other assest. Won’t take much to push them through the levels you mentioned. Think cryptos on roids.

      • Commercials will decide, not the asians clowns…

        • Your “Asian clowns” will have all the fizz gold and THEY will impose the rules on something they possess, not some paper casino ponzi called LBMA/CONeX that is levered 200+++ ounces for every fizz ounce available, which is, on top of everything, likely re-hypothicated many times over. but yes, while the current tune is still playing it looks as if the commercials decide… Just remember, your “clowns” have the kill switch in their hands to pull the rug out from underneath the band anytime they want…

          • Kill switch : you forgot to mention who that “kill swicth” would then kill ? And my bet is that china would be included with the “west” as it would look to a pyrrhic victory.
            By the way, you assume that if LBMA/COMEX would make default, it would ring the end of the financial west, that’s pure conjecture, it would have been certainly much more important during the gold standard.

          • RD, by saying “you assume that if LBMA/COMEX would make default, it would ring the end of the financial west” you put words in my mouth. I don’t pretend to know what will happen when the CONeX/LBMA paper sham is called out. Compared to other markets, especially the bond market, it is still tiny. So no, it would not cripple everything as you said I said but I didn’t. But it will IMHO for sure create quite some havoc and *maybe* be the bell that announces the last (“un-victory”) lap of the Western financial race. The default wave that is to come due to higher interest will likely have much more immediate effects, but the following gaps in the balance sheets will have to be absorbed one way or another. IF CBs (think PBOC or SNB) has gold in quantity, they have the ability to fill these gaps by forcing a MUCH higher gold price… My thinking goes in this direction, but time will tell if anything along those lines will come into play or not… As always, time will tell.

  14. Incredible on the rise in the gold open interest of 30 000 contracts in one day, it was the mirror of the last (today COTs report) where commercials increased their net long position by 20 000 contracts as of tuesday 09th october.

  15. Consolidation of Sentiment appears to be approaching a crescendo. Bitcoin just tapped a major resistance trend-line for the 6th time. The more times it hits the weaker that resistance becomes. Around the end of October Bitcoin will probably begin impulsing again. Bags open.
    Hobbiest Elliotician:
    https://www.coinigy.com/s/i/5bc1422f47a5d/

  16. Cool thanks.

  17. When was the last time there was a new asset class? Thousand years?

    • Do you include the piles of different derivatives that banks create constantly to circumvent whatever regulation exists at the time? 😉

  18. Remember the TV show “Twilight Zone”.
    You know the one with Rod Serling?
    Historically going all the way back
    to the Persian Empire and all the way forward to Nov 2016
    When ever there has been a depletion of resources there has always been a ___; what?
    You know
    when “wood” was depleted “regionally” we went to ____?
    when “coal” (which replaced wood) was depleted “globally” we went to World ___ 1
    As “oil” replaced “coal” “regionally” we went to World ___ 2
    As “oil” was depleted “regionally” we went to ____?
    Now as “oil” is depleted “globally” we should be in a global ____; What?
    What is missing?
    Hmm it is as if someone or “something”
    just changed the game
    and we don’t know the rules.
    Welcome to the REAL “Twilight Zone”.

    “Ladies and gentlemen, we have just been cleared to land.
    Please make sure one last time your seat belt is securely fastened.”

  19. “When oil is depleted we went to “solar”.”

    um, unless you are talking about photosynthesis, solar pv is 100% dependent on the underlying, hydrocarbon powered industrial mining and manufacturing foundation.

    sorry, no free lunch!

  20. woah… watch out. either this is a joke, or you are mentally ill:

    “SATANISTS want depopulation,love to create holocausts of human sacrifice for SATAN,theyr god.The SATANIC religions of evolution & GLOBALISM are forced down the throats of every man woman and child (like CHEMTRAILs)from birth to death.We R not on a globe.see “200 Proofs Earth Is Not a Spinnig Ball”and “100 Reasons Evolution Is Stupid” 144 Bible verse prove earth is a flat plane.”

  21. How true, TC. I think what it meant is this; “we went solar” is we all go dust.

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