Gold/silver: are you buying the dip part 2?
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
It is no secret the most popular trade this year has been to buy strategic commodities while selling high beta, high short interest stocks. For example, Crude Oil is up 16% year-to-date, while the Nasdaq is down over 13% coming into Friday morning. The reality in the equities markets is that if the Fed tightens in back-to-back weaker quarters, the sell-off will accelerate and if you don't believe me, look at a chart of Q4 in 2018 (I'll post one below). Hopefully, those of you independently trading on your own rather than working directly with us had "sold the rip," as I indicated in the last Kitco article. Here's an excerpt in case you missed it, "We advised our clients to take profits near key resistance levels this week. The chart pattern for Gold continues to form coiling action suggesting that the most likely scenario is that we continue to remain in a trading range between 1785 on the downside and 1855 on the upside. Silver has been much more constructive however, it needs a continuation above $25 to add fuel to the rally."
Monthly S&P 500 Chart
The big news this past week was the Fed meeting. Jerome did little to calm the markets, indicating a rate hike in March and beyond while shrinking the balance sheet later. The Gold and Silver "chasers" (those that buy tops) had begun to panic sell out of their long positions throughout a three-day period just after. That is great because we will be happy to take the Gold off their hands at a handsome discount. What drove Gold lower was an acceleration in the 2-Year U.S. Treasury Yield, raming up to a new cycle high. Ultimately, I believe the Fed will make the same mistake it did in 2018 when they overtightened into a slowdown. If you do not think the Fed makes mistakes, remember they called inflation "transitory" for about a year before throwing in the towel and accepting it as permanent.
Monthly Gold Chart
The daily Gold chart suggests that we stay within a $240 range. As ridiculous as that sounds, it's our current reality, and remember, we have to play the game we are in, not the one we want. Trust me; I want Gold at $2500 oz and Silver at $50 like everyone else. Therefore, our strategy is simple, we will be scaling into the 100 oz, 50 oz and 10 oz futures contracts on the way down and scaling out on the way up. I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold but can easily apply to Silver." The guide will provide you with all the Technical analysis steps to create an actionable plan used as a foundation for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.
Daily Silver Chart
Silver fell a bit harder than Gold this week, dropping 8% while the latter 2.5%. The sell-off occurred on the fall of solar, technology, and EV vehicle stocks (At least that's what Wall Street is saying is the reason). Just like Gold, I'll look at this price decline as another gift from the precious metals gods. We will be scaling into the 1000 oz contract on this decline while pricing out longer-dated call spreads. 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.