Gold/Silver: Was that the bottom?
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
You did not think that after 12 straight days down in silver and an article on why silver is so terrible, I would throw in the towel on client longs and go short, did you? No way. However, as a silver trader, we must continue to monitor any sign of further deterioration in the Chinese economy, the strong correlation to copper, rising rates, and the U.S. Dollar now trading at 20-year highs. That is why balancing and managing your risk is crucial, especially when silver is tracking copper so closely in a declining economic growth environment that should run throughout the year. Never forget that silver is not gold, and gold is not the same as gold miners. Those products have different risk characteristics and perform differently in various economic conditions.
Fourth-quarter 2018 S&P chart
Current S&P chart
What happened this week
The Federal Reserve met, and there were two key takeaways. The first was taking any chance of a 75 bps rate off the table ( a narrative created by the media) and then mapping out two 50 bps rate hikes at the next two meetings, followed by 25 bps hikes and a 10% reduction in the balance sheet. The reaction in the market was a massive bear market bounce. The problem with that plan is the Fed is not looking at the deteriorating economy. Take labor, for instance, which is deteriorating at an alarming rate, as shown by Wednesday's ADP report that came in at 247k down from 479k the previous month, while small businesses (less than 50 employees) are turning negative 100k jobs. Thursday, an abrupt about-face occurred, and the Nasdaq dropped 5.1%, the most since September 2020. Many major financial institutions readjusted their client portfolio holdings by reducing exposure to Europe, small caps, and tech while increasing cash, defensive and fixed income. Additionally, 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 Levels
What we are watching
As a precious metals and real assets investor, paying attention to outside markets is essential. As I outlined earlier, the correlation between copper and silver has never been stronger. The U.S. equities setup shown in the fourth quarter of 2018 chart above should act as a road map for the remainder of 2022. Those economic headwinds will limit gains in industrial metals while providing more of a tailwind behind the gold market. We expect to see an additional divergence in the gold/silver ratio; therefore, we will continue to add to gold at critical levels of support using the 10-ounce futures contracts. 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.