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CPM Group Trade Signal - July 8, 2021

Commentaries & Views

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Time Stamp
Prices as of 10:05 a.m. EDT (15h05 GMT) 8 July 2021 $1,816.90 (Basis the August 2021 Comex Contract).

Direction: Sell

Initial Target Price/ Range: $1,780

Initial Timeframe: 9 July 2021 to 16 July 2021


CPM issued a Sell recommendation for gold on Tuesday 6 July, when gold was at $1,795, testing $1,800. The view was that gold had the capacity to trade back down to $1,780 over this week and next week, before rising later in July.

Gold prices broke above $1,800 on each day this week so far: 6, 7, and today, 8 July. Prices are now testing $1,820. The major factor behind the move appears to be the sharp drop in 10-year Treasuries. The dollar is mixed against major currencies, and there are no fundamentals readily visible at this time. Silver meanwhile remains below $27, continuing to be unable to mount a significant rise.

This supports CPM’s view that gold may drop back below $1,800 and possibly test $1,780 or even $1,770 in the next seven trading days. From that short term trading perspective, we would remain short.

If prices break forcefully above $1,820 - $1,824 there could be a wave of stop-loss buying and fresh long buying that could take prices sharply higher. CPM continues to expect higher prices in the second half of July, but it may be too early for such a move. Thus, we would expect gold prices to subside before mounting such a larger move. (And, we would expect gold prices to subside in August after any such a move, as has been the experience in 2019 and 2020.)

Investors also could buy August or October call options to protect their short positions and to benefit from any further price increases. Based on the August Contract at $1809 earlier this morning an August $1,830 call option was offered at $13.50. An October call is more expensive, but gives invstors both more time to protect any shorts and also the potential to benefit if CPM is correct about a late-July price increase. The October $1,830 calls were priced at $28.50 asked.

Notes:

Initial Target Prices and Timeframes are just that: Initial. If CPM does not issue a new Recommendation during or after that time it indicates that CPM is maintain the posture in the most recent Trade Recommendation.

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.

CPM’s preferred investment strategies use physical, futures, forwards, and options.


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.