Gold/Silver: the Fed screwed up, again
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
It was an exciting week in the markets, with Equity investors able to finally have a sigh of relief and catch their breath from what has seemingly been a never-ending sell-off. Since the start of the year, the S&P 500 corrected nearly 1000 points putting the index down almost 15%, while Gold remains up 1.5%. Whether you are long Gold, Silver, S&P, or the Nasdaq, these markets are all trying to decipher the direction of inflation, policy moves from the Federal Reserve, the effects on the economy/global economy, and the underlying currencies. Now I can tell you that the Federal Reserve screwed up with the utmost confidence. They should have front-run the foreseeable inflation and began raising rates in the third quarter of 2021. Corporate confidence would have remained elevated as the base effects and comparables would have outshined year-over-year in specific sectors while growing in the fourth quarter of 2021. At that point, Crude Oil was trading in the mid-'70s, and U.S. Equities were comfortably above their pre-pandemic highs.
So you have to be asking yourself, when will the Fed come to the rescue?
When the Fed pivots "neutral," that occurs when inflation has subsided. The consumer, at this point, will have had to deal with several quarters of inflation along with multiple interest rate hikes causing borrowing costs to skyrocket. The Fed will realize its mistake at the expense of the consumer and, similar to December 2018, pivot to a more dovish tone and make its first rate cut. Until that time comes somewhere in 2023, we recommend staying defensive in your portfolio, using bear market rallies to reduce/short U.S. Equities in markets such as the Nasdaq and Russell, while using corrections to add to Gold and U.S. Treasuries. To help you with technical analysis and identifying trends, 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 Gold Chart
Daily Wheat Chart
What are we watching?
Several markets are on the radar, with Gold signaling a higher low from the recent decline down to $1785/oz. You can use this level as your "floor" from a risk management strategy and build position into it using products like the 10 oz Gold contract. Other markets with favorable setups are Wheat, as demand continues to outstrip supply while global rationing has curbed exports. 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.