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    Gold and Silver Are Hedges for War - Technical Analysis

    Technically speaking, gold and silver are still not out of the woods despite a few rallies and positive signals since their consolidation pattern began in Aug. 2020. Before addressing the charts, there are important news items and fundamental information that are worthy of a mention tonight.

    At the top of the list is a heightened geopolitical risk due to Ukraine and Russia. If you are not familiar with that situation, a good place to start is my article “The Surge of ‘Little Green Men,’ and Metal is Poised to Strike,” published on Apr. 7 with an ongoing Twitter thread. Do not ignore this evolving crisis. It is not a coincidence that gold is rising in lockstep with recent headlines about the potential for a regional or world war over Ukraine. The potential for NATO involvement and tactical nukes on the battlefield is real, as the situation is deteriorating between allies and borders at the diplomatic level.

    Russia and Ukraine expel diplomats as tensions soar… “Moscow claimed the Ukrainian diplomat had been caught ‘red-handed’ trying to obtain sensitive information… The Russian foreign ministry said Saturday it had summoned Ukraine’s charge d’affaires Vasyl Pokotylo and told him that the Ukrainian diplomat had 72 hours to leave the country ‘beginning April 19’… Foreign ministry spokesman Oleg Nikolenko said Russia had ‘crudely’ violated diplomatic conventions and sought to escalate tensions. ‘In response to the above-mentioned provocation, a senior diplomat of the Russian embassy in Kiev must leave Ukrainian territory within 72 hours beginning April 19,’ Nikolenko told AFP… The US on Thursday announced sanctions and the expulsion of 10 Russian diplomats in retaliation for what the White House says is the Kremlin’s US election interference, a massive cyber-attack and other hostile activity. Russia said Friday it would expel US diplomats and sanction US officials in response while recommending the US envoy leave Russia ‘for consultations’… On Saturday, the Czech authorities announced it would be expelling 18 Russian diplomats identified by local intelligence as secret agents of the Russian SVR and GRU services… On Thursday, Poland said it had expelled three Russian diplomats for ‘carrying out activities to the detriment’ of Poland. And earlier this month Italy expelled two Russian envoys after they said an Italian navy captain had been caught handing over classified documents to a Russian agent.” – AFP, Apr. 17

     

    “U.S. ambassador to Russia John Sullivan reportedly doesn’t want to leave Moscow & go back home ‘for consultations’ as the Kremlin told him to do. Russian press and their diplomatic sources say that Russia might force the U.S. Ambassador’s departure, for the first time since 1952.” – Julia Davis at the Daily Beast

    On the fundamental front, a hot headline alluded to China allowing a substantial increase in gold imports through domestic and international banking operations.

    Exclusive: China opens its borders to billions of dollars of gold imports… “China has given domestic and international banks permission to import large amounts of gold into the country, five sources familiar with the matter said, potentially helping to support global gold prices after months of declines. China is the world’s biggest gold consumer, gobbling up hundreds of tonnes of the precious metal worth tens of billions of dollars each year, but its imports plunged as the coronavirus spread and local demand dried up.” – Reuters, Apr. 16

    That is good news for gold price support. Jan Nieuwenhuijs wisely pointed out to anyone whose panties were in a bunch over that news, that it’s basically a non-event. I’ll add that gold’s late spring and early summer seasonality uptrend is fast approaching and will be a coincidental factor with any near-term surge in price.

    “What we are simply seeing is that when the gold price declines the East is backing up the truck again. I have explained “The West-East Ebb and Flood of Gold” (an 80-year-old pattern) in my article from January 2020.” – @JanGold, The Gold Observer

    Here is gold’s 20-year seasonality pattern as of Dec. 31, 2020…

    Gold Futures 20-year Seasonality Pattern

    Silver had some of its own fundamental data come to light last week. A Singapore dealer is preparing a vault for 15,000 tons of silver, and the London Bullion Market Association (LBMA) published its Silver Investment 2021 Report. Here is a teaser from the report:

    “As the social media frenzy gathered pace in late January, demand for coins, bars and ETPs all jumped. For the latter, global holdings surged by 119 mn ozs in just three days. This was concentrated in the iShares fund (SLV), where holdings rose by 110 mn ozs. Given that most of this metal was allocated in London, fears emerged as to whether there was enough silver should demand continue at this pace… The demand for silver may temporarily exceed available supply that is acceptable for delivery to the Trust, which may adversely affect an investment in the Shares… It is possible that Authorized Participants may be unable to acquire sufficient silver that is acceptable for delivery to the Trust… The events of late January/early February this year have almost become folklore in the silver market. It is worth recalling how this emerged and its impact on retail buying even after the social media storm faded… Although the silver price achieved a six-year high of $30…  dynamics in the silver market are quite different to those behind the GameStop trade. In essence, there were no massive short positions in silver to force out.”

    Silver Investment Demand 2008 to March 2021 via LBMASilver Investment Demand 2008 to March 2021 via LBMA

    The LBMA touched on a few points I mentioned in “A Robbin-da-Hood ‘Silver Squeeze’ Requiem,” published on Feb. 6, and “Gold and Silver Squeeze Post-Mortem Technical Analysis,” published on Feb. 24. A couple of Tweets included in those articles are noted below. The paper strategy was flawed from its outset and had the opposite effect on price after a very brief spike. The silver squeeze movement got it right when they shifted to buying physical silver instead of challenging a complex paper market. The process may take longer, but the upside impact on price should prove to be sustainable.

    “SLV, GLD etc… none of them set the price of gold or silver. That is not how the PM market functions. They have to kill real physical supply, or out-buy the Futures market. Now, if real players in Futures decide to have some fun?… not let a good crisis go to waste.” – TraderStef, Jan. 28

     

    “The spread between Silver Short & Long in CoT was FLAT before Robbin-da-hood fools: Net Long 74,393 (Small & Large Speculators aka Hedge Funds) vs. Net Short 74,392 (Commercial’s aka Bullion Banks). A balanced picture. There was no huge short squeeze to attack.” – TraderStef, Feb. 1

    Let’s move onto a brief overview of the gold and silver charts, and references from “Gold and Silver Rise in a Disastrous Domestic Situation,” published on Mar. 11. To view a larger version of any chart, right-click on it and choose your “view image” option.

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    “Note: this morning is the first time in many weeks, that gold was bought on steady volume in both London & U.S. COMEX while breaching the 50 EMA to the upside on the hourly chart. Scalp opportunity brewing in the least, caution remains for swings or layering  core positions .” – TraderStef, Mar. 9

    Gold Spot hourly chart as of Mar. 11, 7:15pm EST close…

    Excerpt from the Mar. 11, hourly chart analysis:

    “The pivot was significant because it occurred at the lower trendline drawn up from the Jun. 2019 and Mar. 2020 low… The StochRSI  is oversold and threatening to turn positive… a poor DMI-ADX set-up, and weak Volume are not cooperating this evening. The price may weaken a bit more or chop sideways until buying returns… The chart is not very bullish, but is making progress with a lot of technical damage to work through… Gold is in the same trading predicament as last month. The chart is ripe for intraday scalps, with caution until $1,980 is taken out.

    Gold Weekly Dragonfly Doji Apr. 4, 2021 - TraderStef Twitter Technical Analysis

    Gold Spot weekly chart as of Apr. 16, 5pm EDT close…

    The Dragonfly Doji that completed an Adam & Adam Double Bottom was significant, as it occurred at the confluence of a lower trendline drawn up from June 2019, a lateral support from an Inverse Head ‘n Shoulders pattern in June 2020, the Half Staff Flag’s lower trendline drawn back to Aug. 2020, and the base of a Falling Wedge drawn back to the Jan. 2021 high. The first bottom was due to significant buying in London and COMEX on the same day, and the second low printed with significant buying over a two-day period that began at the 9am EDT algorithm on both days. Overhead resistance occurred at the 50 Exponential Moving Average (EMA) around mid-day yesterday following the close of European markets for the weekend.

    The StochRSI is breaking to the upside, Volume is steady and solid, but the DMI-ADX set-up is not yet indicative of a upside power trend move. If the low $1,780s at the 50 EMA is taken out with conviction and increased Volume, the next bus stop will be $1,820 in the near-term, then $1,860 at the Flag’s topside trendline. The price action has a lot of resistance to work through and is ripe for intraday scalps, with caution until $1,980 is breached.

    Silver Spot hourly chart as of Mar. 11, 2021 7:30pm EST…

    Excerpt from the Mar. 11, hourly chart analysis:

    “The silver price tumbled in lockstep with gold since the end of February. On the bright side, it printed a third higher low since Sep. 2020, which was $25.10 on Mar. 5, whereas gold printed a lower low since its Aug. 2020 high… The StochRSI and DMI-ADX are not positive and the overall Volume has trended downward… The bigger question is whether the price action will return to $29 in the near-term sooner than later… Silver is ripe for intraday scalps, with caution until $29 is taken out with decisive buy Volume.”

    Silver Spot weekly chart as of Apr. 16, 2021 close…

    The silver spot chart is more bullish than gold, as it has printed higher lows and remained above the 50 EMA since decisively breaking above the $21.49 Fibonacci level in Jul. 2020. Last week’s candlestick printed a breakout from the Falling Wedge drawn back to the Jan. 2021 high of $30, and might morph into another Half Staff Flag before challenging the all-important $29 to $30 resistance zone. The StochRSI is working its way out of an oversold condition, the DMI-ADX is only showing a hint of an upside shift, and the Volume is unremarkable despite having a slight boost last week. Silver is still ripe for intraday scalps, with caution until $29 is taken out on decisive buy Volume.

    Jim Rickards: Fed Stops M2 Data That Shows Money Supply Skyrocketing – Stansberry Research

     

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