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CPM Group Trade Signal – February 11 2020

Commentaries & Views

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Time Stamp
Prices as of 9:48 a.m. EST (14:48 p.m. GMT) 24 February 2020 $1,684.40 (Basis the April 2020 Comex Contract).

Direction: Stand Aside, Wait to Sell

Target Price / Range: $1,640 - $1,720

Timeframe: 25-02-2020 to 6-03-2020

Do not stand in front of a runaway train. Gold has risen more than $120 in five trading days as financial markets worldwide have woken up to the economic consequences of supply constraints throughout the global manufacturing system due to interruptions in Chinese parts shipments in a just-in-time economy due to the coronavirus. As a result stock prices have plunged in the past five days, along with petroleum and industrial metals prices.

Gold and silver prices have risen sharply during the past five days. They may move higher before they move lower, but clearly the upward and downward spikes in prices across markets over the past five days is as much an over-reaction as the previous calmness was an under-reaction to the reality.

Other factors have had less dynamic effects. It primarily is the coronavirus’s effects in disruption the global supply chain throughout and across all industries that has been driving these markets. This has been compounded by the computerized nature of investment decision making and trading, which kept things quiet until the algorithms flipped to excess buying and selling mode.

Ultimately, the virus will be contained and economic trading patterns will return to the less-than-normal pre-virus crisis levels stunted by Trump’s various tariffs and trade wars. In the interim, monetary authorities will inject liquidity to protect from the short-term economic consequences of the coronavirus.

CPM’s short-term 5 – 10 day trading view of gold in this environment is to stand aside for now. Prices may rise, and the adage of never jumping in front of a runaway train applies now. When the train stops, however, prices should be expected to drop sharply. That will be the time to sell. The initial targets may be $1,650 or $1,640, but over the next couple of months we would expect gold to move back to trading between $1,550 and $1,620.

Note: Discretion should be allowed at +/- $0.50 from the target.

Disclaimer – Past performance is no indication or guarantee of anticipated future profits, and neither Kitco Metals Inc. nor CPM Group can accept any liability or responsibility for any loss suffered as a result of gold price fluctuations. Gold as a commodity is not a specified investment for the purpose of giving advice under the Financial Services and Markets Act 2000. Therefore this trade recommendation does not give rise to rights to claim compensation under the Financial Services Compensation Scheme. CPM Group is a registered CTA with the U.S. NFA and CFTC. At times the principals and associates of CPM Group may have positions in the precious metals, commodity, and equities markets. CPM Group also manages investment and industrial positions in markets for its clients.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.