Gold & Silver Break Out?


Gold & silver surged on Monday with follow-through momentum on Tuesday. The move higher makes sense for many fundamentals reasons. Escalating conflict in the Middle East, surging inflation with interest rates flatlined, a potentially risk-off development in the stock market, and a falling dollar are just some of the reasons gold & silver surged at the beginning of the week. That is to say, gold & silver are many things, including a hedge against uncertainty, a hedge against inflation, a safe haven asset, and the only true check against the Federal Reserve Note, commonly called the “US Dollar”, and otherwise known as unbacked, debt-based fiat currency dependent on exponential, unsustainable growth, so gold & silver responded accordingly to the developing fundamental backdrop.


The surge in gold & silver is coming off of moves that could be argued as becoming extended, and the commodities sector is currently in a correction. In other words, if the technicals on the charts matter, then gold & silver could very quickly exhaust the short-term bullish trend they’ve worked so hard to achieve, and seeing how gold & silver are not just money, but also commodities, with the aid of the mainstream media propagandists casting gold & silver in the latter’s light, a correction in the commodities could act as a headwind for gold & silver in the short-term as far as the financial spin goes.


Gold & silver also have to deal with the Fed and the Federal Government’s “transitory inflation” narrative. For now, the Biden Administration is passing the buck to the Fed when it comes to the “monitoring” of inflation, but essentially, that’s all that’s taking place - “monitoring”. Fed Chair Jerome Powell has said that the Fed is going to need to see lots and lots of data as evidence that inflation is not transitory before the Fed deploys its so-called inflation-fighting “tools”. Of course, data can be cherry-picked to craft any narrative desired, especially if the data is inaccurate at best, or an outright fabrication at worst. So in my opinion, assuming the Fed, working under the direction of the Exchange Stabilization Fund, the US entity that can manipulate any market it wants to manipulate, at any time, and for any reason, is in possession of the inflation wild card, just like the Fed manipulates interest rates nonstop, with the cover of correcting commodities, the Fed could go in and manipulate gold & silver prices to the downside, and as such, point to the falling prices of commodities as well as “selling” of gold & silver as data that supports the Fed’s claims. But what if some other entity is in possession of the wild card?


Last week, I said that I thought gold & silver needed a spark to really get moving. Perhaps the escalating conflict in the Middle East is, or was, at least for a day, that spark? In my opinion, sadly, since nations have been blowing things up and killing people in the Middle East for decades, especially over the last twenty years, escalating conflict between nations, groups, interested third parties, and more isn’t that much of a spark anymore. Of course, if there is some major, massive escalation in which several more nations not just choose sides, but actively join in on the death and destruction, then yeah, add-in rising fear premium to go along with a hedge against uncertainty and quite possibly a literal bug-out, and the Middle East could quickly turn into that spark. There’s this funny thing about sparks, however, in that they never really come from where one is expecting them to come from.


What’s the bottom line for this most recent move in gold & silver? The technical analysts have been saying that once gold breaks above $1850, it’s off to the races, and we’ve clearly broken that price level, but it has been anything but off to the races so far. Silver really needs to break out above $30, and the breakout above $28 was nice, but if there was ever a time that follow-through was needed, that time is now. Gold & silver have climbed an epic wall of worry to get to where they are today, and that’s putting it lightly. The bullish short-term trends that are clearly established could turn on a dime, and for what it’s worth, the move in gold & silver is approaching two months in duration, with gold up over 11% and silver up over 17% from the end of March. In my opinion, not gambling in a rigged casino is the best thing to do, but if I was trading or investing in a financialized paper market product, be it a futures contract, or an ETF, or an ETN, or a “trust”, or whatever, I’d be taking a “wait-n-see” approach right now. Furthermore, many people think silver’s launch “to da moon” is imminent, but have we even seen the washout capitulation as we did arguably see with gold?


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Paul Eberhart
Paul Eberhart
Senior Market Analyst and Columnist

Paul Eberhart has been actively trading and writing about precious metals for more than a decade. A U.S. Army Iraq War Combat Veteran, he holds 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...