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CPM Group Trade Signal - March 1, 2021

Commentaries & Views

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Time Stamp
Prices as of 9:47 a.m. EST (14h47 GMT) 1 March 2021 $1,736.70 (Basis the April 2021 Comex Contract).

Direction: Buy

Target Price / Range: $1,770

Timeframe: 02-03-2021 to 05-03-2021

Gold prices fell sharply last week, giving up around $100. Rising 10-year U.S. Treasury interest rates were behind this move, as evidenced by broad moves in a wide range of currencies, equities, debt securities, and commodities. This was not a function of events isolated in the gold or precious metals markets.

The reason for the bond interest rate increases is critical to forming an opinion of future trends in interest rates, gold, and broad markets. The Treasury and Fed, as the supply side of the market, wants to and has repeatedly said it will work to keep rates low. Honestly, even after the increases in the past two weeks U.S. Treasury rates are at historically low levels, and remain negative when adjusted for inflation.

Thus, the upward pressure in rates appears to be coming from the buy side of the market: Investors, banks, and others are demanding higher returns in the face of the pending $1.9 trillion dollar stimulus package, plans to announce a $2 trillion infrastructure financing program possibly this week, and other indications of massive fiscal stimuli.

If it were just the deficits, however, then bond yields should be rising while the dollar might be expected to be weak. Since the dollar has been showing strength as well, it suggests that the interest rate market has been reflecting what CPM has written about repeatedly: Investors have been showing too much optimism about controlling the pandemic, economic recovery in the United States, and a reduction in international political tensions.

If it is over optimism behind the interest rate and dollar rise, and gold price decline, one would expect gold prices to rise as such optimism dissipates in the face of economic and political realities.

Thus, CPM expects gold prices to consolidate between $1,720 and maybe $1,780 in the near term. Gold may move sideways to higher this week. Any recovery in gold prices may be limited to $1,760 or $1,770.

Note: Discretion should be allowed at +/- 0.20% of the price at the time each TR is issued from the target. Recommendations are valid until the target date or a new Trade Recommendation or message is issued by CPM. 

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.