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CPM Trade Signal - Feb. 28, 2022

Commentaries & Views

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Time Stamp
Prices as of 11:15 a.m. EDT 28 February 2022 $1,908.50 (Basis the April 2022 Comex Contract).

Recommendation: Sell

Initial Target Price / Range: $1,890 to $1,975

Initial Timeframe: 28 February 2022 to 11 March 2022


Last Thursday when gold was trading at $1,895.60, CPM issued a sell recommendation. This was after gold has risen to $1,976.50 and then came down sharply. CPM had an initial sell target of $1,870. Gold fell to $1,878.60 later that day, 0.46% above CPM’s target. As the standard note at the end of these Gold Trade Recommendations always state, we use a +/-0.2% as the margin for our targets.

Since then the Russian invasion of Ukraine has met with stiff resistance, sustaining heavy losses, combined with somewhat more stringent international sanctions. It is unclear how this war will resolve, or how long it will continue. What is clear is the long-term costs to Russia. Interestingly one scenario being pointed out by western intelligence sources is the “Caesar scenario” as domestic Russian opposition also has been much stronger, and the Russian military brass has seen its much vaulted ‘rebuilt’ military suffering extremely heavy losses, logistical shortcomings, low morale, and apparent difficulty in ruling the skies over Ukraine. Before that happens, however, Russia may become even more aggressive in its attacks, as seen in Monday’s heavier Russian bombardments of Kharkiv. It all awaits to be seen.

In this environment gold retains the ability to rise sharply, even back to or higher than last Thursday’s spike of $1,976.50. However, markets have gotten over their first reaction to the Russian invasion last Thursday and now are taking more moderate postures toward the likely effects of all of this on global and regional economies, economic growth, inflation, interest rates, equity markets, currencies, precious metals, and other commodities.

Gold also retains the ability to fall. We have raised our target to $1,890, reflecting the higher prices today.

This is the perfect market for a hedged option position in which an investor either wants to stay long but participate in the increased volatility in gold prices, or wants to establish an alpha position.

  • Strangles and straddles would make sense
  • CPM has been advising long clients to buy puts and pay for them with out of the money call spreads, the strategy outlined in our Gold Trade Recommendation 22-14 prior to the invasion on 23 February, which could have yielded up to an 89% profit in 24 hours.

CPM has one-month, three-month ranges and eight-quarter quarterly price projections with greater discussion of the factors behind CPM’s analyses provided in CPM’s monthly subscription service, the Precious Metals Advisory

While short-term trade recommendations provide high risk – high reward opportunities for investors, it is difficult to capture the complex web of factors affecting precious metals prices and the nuanced CPM analyses of these factors that goes into our firm’s price projections. In addition to these short-term outlooks, CPM Group provides clients enhanced trade recommendations that include one and three month price projections, as part of our Retail Investor Program. Contact CPM at info@cpmgroup.com for details.

 

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.