Watch Out Below! This Move in Crypto, Gold and Silver is Not Sustainable

Let's Be Careful Out There!

From my latest article at Seeking Alpha:

This week we saw a dramatic breakout in both metals alongside Bitcoin and the cryptocurrency market in general. It started on Monday morning, an option on futures expiration day, and did not let up despite some very hincky intraday trading in the metals.

But, then again, what else is news?

Gold closed just shy of $1330 and silver just shy of $17.75. These are very important closes, both from the weekly perspective and from a monthly closing one (August closed on Thursday).

Both metals looked stymied by strong resistance at $1300 and $17.32, respectively, in the past few weeks, but burst through on Monday to unleash a vicious short-covering rally that kept up all week. But with a surprisingly strong August close it sets up a run in gold to the post-Brexit high of $1377 in September.

Silver has a lot more work to do. It first needs to clear $17.82 before it can even consider a move back to the post-Brexit high. And this tells me that Gold is responding far more as a political asset than Silver is, which is still weighed down by commodity concerns.

Resistance for silver in September starts at $17.82, the June high. That should be no problem, especially since Friday was an upside violation of the August high. Resistance then moves up to $18.72, April high.

That would need to occur for silver to put in a quarterly reversal, whereas gold simply needs to hold above $1318.60, the November high, to setup for a continued move higher.

The metals have been setting up for this breakout for weeks now thanks to a weaker U.S. dollar (UUP). But, that’s the interesting part. The USDX was also up for the week.

It looks like we may finally have a spike-bottom in the USDX and an interim top in the euro (FXE). Even the weak U.S. jobs report couldn’t stave off euro selling on Friday.

Is market positioning simply lopsided in the short term and that needed correcting? Possibly. Have the headlines played up the chaos surrounding President Trump’s administration? Yes.

Is the market worried about a nasty debt ceiling fight that could create even further chaos in the last half of September? Yes.

Is there a threat of war in the air? Yes.

All of these things point strongly towards the results we saw in the markets this week, including further safe-haven buying in cryptocurrencies with Bitcoin flirting with $5000 on Friday evening and Ethereum pushing back to challenge its all-time high at $400. Litecoin exploded to over $90 as well.

For Steemian Eyes Only

The war premium is the thing you have to be wary of here. Europe is pushing this idea that Merkel and Macron are unstoppable, which is bullshit. She's more vulnerable than the headlines let on and he's already on the same path that his predecessor Francois Hollande took.

The Crypto-market looks over-stretched right now and a bit of a corrective period for the leading coins would be good. I expect Litecoin to hold onto most of its gains, on simple rotation. Those that are taking profits in Bitcoin are not moving back into dollars. They are booking profits in Litecoin and other alts. In fact, I would watch that rotation carefully in the next few days.

However, I also feel that there is a strong manipulative effect in these markets. The crackdown is coming for sure and it will come both legislatively and financially. A lot of this move up has likely been from gov't spooks bidding up the price and then looking to undercut the market by crashing the exchanges by selling all at once.

Companies like Coinbase do not have billions of dollars in liquidity to cover those kinds of redemptions. And guess what? Once the selling starts and the reports of people being unable to get their money out spreads, the whole market seizes up.

If you value your cryptocurrencies get them off the exchanges ASAP. This smells rotten to the core.