GOLD, SILVER & THE MARKETS: What’s Next For 2019

The big question on the minds of most investors is what will happen to the markets and precious metals in 2019.  Well, the answer depends mainly on two factors, the oil price and overall weakness in the economy.  If the oil price continues to decline, it will indicate a deflationary outcome for the economy and markets.

While this sounds counter to the notion that falling oil prices will drive higher consumer demand, we also must remember that it will negatively impact the U.S. shale oil industry.  A lower sustained oil price, as I wrote about in my previous article, IT BEGINS… Rapidly Falling Oil Prices First Guts Tar Sands, Then Shale Oil will begin to destroy the oil industry, especially the unconventional oil industry.  I don’t believe Americans or the investors realize the tremendous amount of economic activity it takes to produce shale oil.

Now, the last U.S. economic bubble in 2007-2008 was based on a highly leveraged housing market. However, the present economic bubble is being propped up by the U.S. Shale Oil Ponzi Scheme.  Some energy analysts don’t believe the U.S. shale oil industry has that much of an impact on the market, but I disagree.  Since the 2008 market crash, the U.S. shale oil industry has brought on nearly 7 million barrels per day (mbd) of tight oil.  U.S. oil production has surged from 5 mbd in 2008 to 11.7 mbd currently.

So, to understand what happens to the markets in 2019, we need to focus on the number one driver of the economy… THE OIL PRICE.  In my most recent video, GOLD, SILVER & MARKETS: What’s Next For 2019, I discuss what is taking place in the broader markets, gold-silver, and the oil price:

In the video, I describe the oil price market and where it will likely trade early next year.  Through my recent research of the Day Trading Markets, I have learned how prices move up and down around certain key technical levels.  Thus, market prices are set by two factors, FUNDAMENTAL and TECHNICAL ANALYSIS.  While I have focused primarily on fundamental analysis, technical analysis provides sort of a “Crystal Ball” where the prices of stocks, energy, metals, and commodities will trade,

It is important to understand that Day traders, Swing Traders, Investors, Hedge Funds and Institutions set the stock market prices based on momentum and technical analysis for the most part.  On the other hand, fundamental analysis is a more prominent factor in determining the market value of energy, metals and commodities prices.

Let me explain.  A stock like Amazon, which reached $2,000 this summer, is not based on fundamental analysis.  Rather… Day traders, Swing Traders, Investors, Hedge Funds and Institutions have bid up Amazon’s stock price to a stunningly high bubble level.  Thus, momentum and technical analysis have provided the principal traders and investors with the desire to follow Amazon’s stock price to the top.  But, because fundamental analysis of realistic price ratios (such as PE Ratios) are overlooked, the crazy market continues to push stock prices like Amazon to insane levels.

But, if we look at what is taking place in the oil market, it is more based on fundamentals, even though technical analysis provides us with a partial “Crystal Ball” of what lies ahead.  In the video, I discuss several oil charts and how the price trades in between these technical levels and what the is in store for 2019.  However, this chart shows the overall oil price trend… WHICH IS LOWER:

Furthermore, I explain what is going on in the gold and silver price charts.

Interestingly, gold and silver are much closer to their BASE PRICE LEVELS than are the broader markets.  Which is why I don’t believe we are going to see a crash in the precious metals prices along with the broader markets.  However, if the oil price does continue to fall lower, which seems likely, then it could pull down the gold and silver prices a bit more in the short-term.

Although, I believe the key difference between the precious metals and the broader markets is that the fundamentals will oppositely impact each other.  If we look at the next chart I discuss in the video, it shows why the gold price hasn’t fallen to new lows as some analysts have suggested:

While the gold and silver prices are close to their base support levels, due to the cost of production, the broader market valuations are in bubble territory and will likely start to correct violently in 2019.  Thus, as the markets continue to crack (crash), FEAR will motivate investors to rotate out of Stocks and Estate and into the precious metals.

With very few assets to protect wealth, the amount of momentum from Day traders, Swing Traders, Investors, Hedge Funds and Institutions into gold and silver (and the miners) will push their values to new record levels.

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29 Comments on "GOLD, SILVER & THE MARKETS: What’s Next For 2019"

  1. Fractional Gold/Silver Markets

    Based on published data from the Comex and the LBMA, it can be seen that what passes for gold trading, is nothing more than unallocated, fractionally-backed, speculative trading on the daily gold price, that has very little to do with physical gold bullion movements into or out of vaults in New York or London.
    As with gold, the silver markets of the Comex and the LBMA are trading predominatly unallocated and fractionally-backed synthetic positions in silver.

    • Personally I think this is a function of the demand for gold or silver. If people can realize greater return on investment in equities than they could with precious metals, they will choose equities.

      But, if the markets break from this cyclical boom bust caused by excessive debt issuance, then more people will choose to invest in gold or silver. Meaning, they can play their re-hypothecation games in precious metals as long as people don’t stand for delivery, as long as less than 1% of total invested capital is devoted to precious metals.

      A bust in this debt super cycle that began in 1971 will change the investment paradigm. The bust would come from realization that they can’t keep dropping interest rates continually lower forever to roll unpaid debts. Negative interest rates can’t work, because it destroys capital. Even a negative 1% interest rate on a 10 year bond destroys capital by

      (1-0.01)^10 = .90 or 10%

      Nirp would be highly deflationary.

      • SS, your first paragraph appears to miss Outlookin’s point. On ther other hand your second paragraph rebutts your first.

        Outlookin’s point, an important one if I understood correctly, is that gold/silver are not true markets. This is already known from the manipulation perspective. And Steve’s original work essentially confirms it. I mean, what kind of market operates at break even prices? Not capitalist.

        To complicate this even further – as cross boarder contracts for petroleum proliferatie, as more oil contracts are in yuan, and as the dollar is increasingly rejected – the oil market in dollars is also becoming less of a true market. Oppologies to Simmons, it’s Twilight Zone in the Desert.

        We need to also keep in mind that massive/ultra/stelar money printing is not hyperventilation (although it usually leads to it). Hyperinflation is a currency evert. The printing to cause it, may have already taken place. It’s like currenty in silos ready to be emptied. I prefer the analogy of charged capacitors waiting for a short to ground.

    • The dynamic of realizing that there is no silver to be had has got to be a cataclysmic event based on the overwhelming disappearance of the physical in a very short period of time. Presently an unbelievable amount of distraction in the form of Wallstreet paper, algorithm, derivative, and all other paper and digital trading activity combined with huge demand based on the physical for industry and technology, the physical price hasn’t a chance to find true representation until the final slam. No telling how many more years peel by based on the smoke and mirror conditions. Better to be 1 year too early than 1 day too late regarding physical holding of this PRECIOUS metal.

  2. Still you need to keep in mind that all these technical analysis is not a holy dogma.
    Geo political stress can just overnight spike the oilprice.

    Same the usd of 2000 is not same as the usd in 2018. So you need to take in account the loss of purchasing power of the usd.

    You be surprised how cyclicly the oilfield is and was, so I expect much higher oilprices
    even without geo political stress. Just look around globally the plans to explore huge projects in for example in Brazil, Russia, Azerbijan etc, etc.

    Last but not least each day 100 mio bbls are used, and the old reserves need to be replaced. There is a excellent book called twilicht in the desert by Mathew Simmons it is about Saudi Reserves. If you want this book in pdf just let me know.

  3. It is interesting to me that the cost of production for gold and silver are not influenced at a 1:1 ratio by the increase, or decrease in the cost of oil. As you said Steve, when the cost of oil has dropped in half, the cost of production for precious metals did not halve.

    So what is the difference? What factors involved in the cost of production are causing the cost of production for precious metals to rise over time as oil fluctuates up and down? Is it regulatory costs, increasing regulatory costs or overall inflation of the economy as the dollar is debased by money printing?

    Again, thanks for the videos I find them fascinating.

    • The increase in production costs is likely to be the devaluation of the dollar between 2008 and 2018. We see production costs go up roughly 60%. 60% would match the rate of inflation of the past decade according to shadow stats. Costs of production for PM’s would include machinery, repairs, labor costs, insurance, environmental protection, lobbying etc…

      I remember seeing somewhere that a single giant tire for those huge bulldozers that move the rubble cost $40,000 each.

  4. Somethingtoconster | December 5, 2018 at 7:42 pm | Reply

    One note JP Morgan has massive shorts on silver which can never be calculated into the chart, they have a perfect record for silver trades for the last 10 years, why because they have an agreement with the government for 10 year which ends in 2018. The agreement was to absorb Bear Sterns in the collapse of 2008 and in turn the government would look the other way on all trades thus the perfect record of trades in the last 10 years. Moreover, JP Morgan has massive shorts that they have been buying back and have been accumulating the largest stock pile of silver in US history. What does JP Morgan know that we don’t A LOT, no chart can calculate insider information, no chart can predict human greed, and no chart can see the predictable government involvement in the manipulation of the dept. Fortunately and unfortunately we are the best of the worst in the global economic movers so the world does really revolve around the USA, WE ARE THE CONSUMERS, and all counties know this. But I diverse and just say charts a great to look at but by the time you look at chart its TOO LATE!

  5. Gosh, Steve, I thought that the huge Debt Wall the major oil companies were facing, as you showed us over a year ago, would be having a crippling effect on them by now.

    • I am starting to call BS as well. Just admit you could be partially wrong on your theories Steve and keep up your great forum but dont cling to this collapse that isnt happening in oil until the stock market crashes first as usual.

      • Marc T,

        The situation in the U.S. shale oil industry is much worse than you realize. Let’s just say, the Shale Oil Industry is the next ENRON or DOT.com2.

        steve

  6. There are several prerequisites to maintaining world reserves currency status for the dollar, all of which are and have been in the process of crumbling. The two most important though, is oil priced in dollars AND a high price for oil.

    I think Steve’s forecast of a falling oil price is as accurate as it is dire. And there are many reasons for it to continue, for now. But the falling price of oil, in dollars, is a kill shot to the dollar itself. Therein lies the Catch 22 for when money dies.

  7. Apologies for the typo storm. I got to stop pecking this shit out from a damned iPad; two hours per sentence.

  8. The supernova is coming in few weeks , January will not be good for Gold unfortunately.

    • DisappearingCulture | December 6, 2018 at 11:51 am | Reply

      Why will January “not be good for gold”?

      • I found 4-5 years ago very interesting Gold chart , that time I didn’t think much about it because I thought we would have big crush earlier but we survived and now 2019 is approaching. It’s getting very hot around the World.It’s very probable that gold will go towards $1000 or less. We will have 2009 again.

        • DisappearingCulture | December 6, 2018 at 2:55 pm | Reply

          If so, it would be VERY brief, before a massive buying surge pushed the price up higher than it is now. One of the functions of the COMEX is to keep the gold price in a range; not just capping the price. Equally disastrous for the current financial/economic system for the price to drop too low.

  9. Good video Steve….
    I will be interested in the next one on debt…

    On charts and technical analysis;

    Charts tell you where the money is; being a small retail investor I can get out of the market in seconds under normal circumstances. The big players can take weeks, months and years. I always believe if there is a major move in the money you will see it in the charts first, subtle it might be BUT it will be there to be seen, algorithms or no algorithms.

    Steve’s previous article on “COST OF PRODUCTION”; I thought was a very good explanation as to why some commodities were supported or resisted at certain levels.

    A good book for those interested “How Charts Can Help You In The Stock Market” by William l Jiler. Released initially back in 1962

    https://www.amazon.com/How-Charts-Help-Stock-Market/dp/0071426841/ref=sr_1_1?s=books&ie=UTF8&qid=1544077018&sr=1-1&keywords=william+L+Jiler

    BTW, if you have a look at the #Dow Jones Industrial in a YEARLY “Candlestick” pattern you will notice that pattern so far for 2018 is a SPINNING TOP. Being a YEARLY chart reflects this pattern being a very strong indicator.

    From Investopedia;

    “A spinning top is a candlestick pattern with a short real body that’s vertically centered between long upper and lower shadows. Often times, the candlestick pattern is a sign of indecision about the future direction of the underlying asset”.

  10. I saw this chart referenced on a Martin Armstrong article. IMO the oil price decline seems to be playing out as foretasted by the Hill’s group. This chart shows what the price of oil needs to be for oil producing nations to balance their budgets. Example Saudi Arabia needs $77 Dollars a barrel for oil. As of today WTI is $51. Saudi Arabia has a negative $26 Dollar delta.

    https://infographic.statista.com/normal/chartoftheday_14365_how_much_does_opec_disagree_on_oil_prices_n.jpg

  11. Hey everybody. its kine of cool to look charts, but technical analist got too much IF inside. let say Dow now it looks like doble top now, but IF it move up now it will look like ascending triangle and (everybody from the books) this is bullish, and bull trend got three phase. smart money 2009-2015 informer money 2015-2018 and greed money 2018.., And instead bear double top, bull triangle. And why exacly 18000 on Dow was resistance, Dow never before was worth that much or 24. And IF Dow go up, where is next resistance line and why there? technical analist It disturbet me coz you always can draw some trend or support or resistion line in two ways. technical analist it always good for what it was, but for what it will be its always 50:50. So whatever you draw on chart its always just your idea. technical analist its true but its a psychological game for wall street to extract money from home made day traders. Anyway. Big respect to your work Steve

  12. Try using The Fibonacci Retracement Tool. It’s really weird. Has me thinking that maybe we are not really in these bodies and the DNA/Brain is just an antenna. Maybe we are all just playing our part on the grand stage. Bizarre.
    Buy Silver

    • The Writing On The Wall.

      For those interested in a no nonsense market view.

      Michael Oliver of Momentum Structural Analysis in a short video titled;
      “A Sea Change In Market Momentum”. Expert view.
      http://www.olivermsa.com

      Also see wwwjsmineset.com An article by Michael Oliver.

  13. At any rate the gold/silver ratio is bumping the very top of the ten year average now, 86.37…
    Anyone see potential for silver here? I’ll take my chances. The stock market just lost all gains for 2018, the US debt CANNOT stop rising and accelerating now, even if Congress tried. The FED is in the position in December that 1. The (indebted) markets can’t stand anymore rate increases. BUT…2. Backing off raising rates would be seen as major weakness.

  14. My concern with shale oil is the wasting/ polluting of water in the southwest to export oil to China or other reasons, not to help people but to prop up the industry /the state/ other. Look at the situation with Lake Mead for example and tell me what is being done that is seriously addressing the problem. Nothing imo. I think “Watergee” will be a new word in the future.

  15. Now a Headline Article on ZeroHedge!

    Congratulations Steve. Well done.

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