Gold/silver/commodities: where is the bottom?
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
The selloff this week began when President Biden nominated Fed Chair Powell to a second term leaving precious metals struggling to digest his hawkish monetary policy and aggressive stance on tapering. The news had boosted the U.S. Dollar and Treasury Yields. Traders that hold precious metals then begin to weigh opportunity costs for maintaining non-yielding assets, and the Gold liquidation begins. The non-trending volatility spike further accelerates the panic liquidation, which is how $1 selloffs occur in the Silver market. So where is the bottom again? Our models show that the 10-Year Treasury Yields will face enormous pressure between 1.75-2%, and with CPI holding above 2%, negative real yields pressure will build on U.S. Equities, and funds will flow back into Gold. To further expand your knowledge on Gold, we cover the economic backdrop and all the quantitative analysis in our "Gold Trends Macro Book," You can request yours here: Free Gold Trends Macro Book.
Technical view of the Gold market
Above is a chart of the continuous gold futures contract over the past two years. Many of you ask why we prefer the futures over other trading vehicles? The short answer is that futures trade nearly 24/hours, closely mirror the spot price, offer capital efficiency, have a more favorable tax treatment, and significantly more liquidity and volume than direct ETFs. To learn more, we completed a new educational guide that answers all your questions on how to transfer your current investing skills into trading "real assets," such as the 10 oz Gold futures contract. You can request yours here: Trade Metals, Transition your Experience Book.
With Gold down 3.5% on the week, finding support will be like catching a knife. That is why we are going to use the micro contracts to scale in. If you have been working with us and are looking to position in Gold futures for the long run, we suggested that our clients consider using FOUR Micro 10 oz April Gold contracts per $25,000 and buying TWO at 1780 and TWO at 1725 with a stop at 1665. Doing such would ideally risk $3,500. We would look to a gold target of 2000/oz, which would allow for a profit of $9,900. We are currently building a similar strategy in the 1000 oz Silver futures. I went back through 20 years of trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold." The guide will provide you with all the Technical analysis steps to create your own actionable plan to use as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.