SD Midweek: Overnight Strength in Gold & Silver Has Cartel In BIG TROUBLE
The Internet is one massive bail of copper wire, copper is used in power lines, phone lines, and there is countless real-world need for copper right here and right now as rebuilding the hurricane damaged areas of the country begins. Crude and copper look set to converge on the daily. If this is the case, we would see more downside action in the base metal and higher prices for crude oil.
Fundamentally, these commodities will be important to watch moving forward, and it ties in with other fundamental unforeseen costs. The post-hurricanes rebuilding will depend on several things, including the price paid for raw materials, but that’s not all. Labor, hotels, insurance premiums, and all sorts of other fundamental costs added into the mix could add up to more than initial estimates are guesstimating, and if Irma’s wrongly forecast path is a sign of things to come, the cost to rebuild will be different than expected. Now may be the time to dust off the old cliche that “building always costs more and takes longer than expected”. We shall see.
The dollar has shown strength over the last couple days, but let’s not get it twisted:
There is no meow in that dead cat. The trend in the US dollar/Japanese yen supports this assertion. Looking at the trend since the Trump Trade hype, USD/JPY looks ready to catch down to the dollar, not the other way around. A falling USD/JPY indicates yen strength and dollar weakness. This is further bullishness for the gold & silver prices. If there are any sharp drops, this could indicate price surges in the precious metals. Adding a little confusion to the mix is the yield on the 10-year:
The yield moves over the last two days have been massive. Can bond prices tumble and yield rises as the “risk-on” trade post-TEOTWAWKI? They certainly can, but there are at least two caveats. First, the long-term trend on the daily is lower yields. Secondly, there is an even sharper downtrend line (not shown) since July 7th. So while price can rally and yield can fall, the two trends will be looking to stand in the way of that TNX move. Looking at the stock markets, we really knew this was coming. In fact, just on Monday we alerted the move again: