Weekly Update: Gold, Silver, Bitcoin – 02.09.2017

Greetings fellow amateurs,

Over the past week we’ve seen continued strength in the GSB complex – with some fireworks in bitcoin overnight – despite the dollar strengthening during the same time frame. This tells us that the fundamentals are strong, but let’s quickly take a look at what’s supposedly driving these things in the first place:

We’ve seen talk of tax cuts and regulations coming from the Trump White House, most importantly from the President himself, and since Trump has proven to be perfectly willing and able to keep his word, markets and the dollar have jumped accordingly. Let’s leave aside the more rigorous discussion of whether or not the dollar should be strengthening on the back of these hypothetical policy proposals. Right now the theoretical economics take a back seat to price action and algorithmic trading.

There continues to be all sorts of standard commotion and political rancor. The leaks from inside the White House tell us that some of the holdovers are likely following orders and attempting to sabotage Trump from within. I don’t expect that to last long. Despite nearly everyone and everything in the governmental structure opposing him, President Trump marches on with his agenda. The confirmation of Jeff Sessions as Attorney General is a monumental development. One of the wild card catalysts to watch for is the breaking of a scandal so large that it shakes everyone’s faith in our institutions of governance and policy. That might just be the best chance for the swamp to be drained and for a real system of freedom and prosperity to replace it. There would still be pain, but there would be light at the end of the tunnel.

Maintain vigilance and continue to build your portfolio of assets that can make it through to the next monetary system.

Gold

gold-d-02092017

Gold has been able to break above the 100-day moving average and spent some time above $1,240 before dipping back down slightly today. A weekly close above $1,220 would be a constructive development, and I would expect to see that tomorrow barring a major announcement or smackdown. Since Trump took the reigns we haven’t yet seen the sort of massive, instantaneous dumping of gold contracts the way we used to see on a regular basis. This is, of course, only his third week in office, so it could just be chance and a lack of opportunities. The ability to manipulate the price through naked paper shorts still exists, but perhaps the marching orders are now to allow an orderly uptrend punctuated by accumulations. With the Trump administration openly discussing a weak dollar policy, this scenario doesn’t seem too far out on the speculative limb.

Stabilizing at these levels above $1,220 would be constructive for a move to put $1,300 in play. The momentum break above $1,240 mentioned last week hasn’t yet taken place, so in the absence of other material catalysts the status quo is for the steady uptrend to continue. We’re looking at potential resistance up towards the pre-election levels in the $1,270 area. If we get there before we go under $1,200 again then the strength will be more readily apparent. This rally is still almost entirely under the radar, but we’re dealing with price action where bullishness is self-reinforcing. Be smart in selecting your entries and your vehicles. After the election plummet I called out JNUG for those interested in leverage. If was at $7 in November and even got under $5 before almost touching $13 this week. There is more to come, but that is a highly leveraged play. When gold went up 1.5% in a day JNUG went up over 20%. The same action can take place in the opposite direction, so this is for the bold and the experts.

Silver

Silver D 02092017.png

Silver is in breakout territory getting close to $18.00, but we haven’t yet seen the breakout move higher. Perhaps we could see a repeat of the summer 2016 breakout back above the $18.00 level. My instinct is that the strength of silver in the face of the mild uptick in the dollar is a bullish indicator. The price action above $18.00 will be an interesting tell, with a large jump likely signalling a need to come back down and build a base above that mark. The slow and steady uptrend continues, but I’m getting the sense that it wouldn’t take much for silver to take a sharp turn higher.

Always beware of an obliteration sell order that could instantly move the price back to $17.00 or below. I continue to recommend silver as a buy at any price in this vicinity. Keep on stacking and watching for larger moves in either direction as momentum signals on the way up and better buy signals on the way down.

Bitcoin

btc-d-02092017

Bitcoin was again climbing the mountain back to $1,100 in a healthier fashion this time until China stepped in once more. Yesterday there were rumors of meetings between the PBOC and bitcoin exchanges. The immediate result was a $50 selloff that was reversed by the end of the day. Overnight we got the actual policy announcement. Here is what I said on Gab yesterday in response to the meetings:

I was halfway hoping for a smackdown to the $850-$900 area to revisit the 100-day moving average to pick up a bit more bitcoin at better prices. We didn’t get that quite yet, but prices can follow through quickly, so if you’d like to jump in you’ll need to set some price alerts.

Most importantly, here is some headline commentary on the update to Chinese bitcoin policy courtesy of Zero Hedge. After having instituted prohibitions on margin trading and initiating a probe of exchanges, the PBOC has now suspended the ability to withdraw bitcoin from exchanges. I think there are two major takeaways here. First, and most importantly, you should always keep your bitcoin in a paper wallet in order to have the transaction actually register on the blockchain and to avoid a Mt. Gox scenario or a regulatory curb. Second, the steps taken by the PBOC, despite the negative price reaction, are actually bullish long term.

The goal here is for bitcoin to be stabilized for use as a proper currency. The Chinese know that their New Silk Road / One Belt One Road initiative goes through areas where the vast majority of people are unbanked or underbanked. Bitcoin is one of the key components to a solution set that unlocks the economic potential of this project. By restricting margin trading and putting measures into place to control money laundering, the end game is clear. Some will cry that the Chinese are cracking down on bitcoin and that this is case and point of its irrelevance and lack of true autonomy. I believe that perspective to be shortsighted. If the PBOC wanted to crack down on bitcoin, then they would shut the entire operation down no questions asked. They certainly have the power to do that, and if that’s their goal then why don’t they accomplish it in one fell swoop?

Because they are intimately familiar with the potential that bitcoin has. These dips are completely buyable. China is forcing out speculators and attempting to clean up the marketplace. I wasn’t expecting this kind of announcement, but I will welcome the opportunity to grab more at lower prices. But back to the main point: store your bitcoin on paper wallets in your possession and not on exchanges! Here is a tutorial video again for those who haven’t seen it in previous posts.

I’m looking to buy in the $850 – $900 range and will be watching to see how quickly we get back above $1,000 and $1,100 as indicators of how strong bitcoin is through the rest of the month. Keep in mind that bitcoin is still up $600 after more than doubling on a year over year basis. Another collapse in price would be a welcome opportunity to grab more, but it’s more likely that the explosive upside moves will resume after some settling down.

Conclusion

Don’t blink. Don’t fold. The feeling that something has to give is in the air. Stick to the thesis: all ponzi schemes end.

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