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Gold/Silver: The next bull wave begins

Commentaries & Views



It was a turning point for Precious Metals this week as Gold, Platinum, and Silver all rose after six straight down weeks. The rally came on the heels of a stronger U.S. Dollar and another cycle high in Treasury Yields. The physical buying this year has been robust, and once the Fed concludes hiking rates, news of the pivot will spark an additional buying frenzy. I expect Gold to take a forward-looking approach as it begins its recovery while the long end of U.S. rates makes another lower high.

Daily Gold Chart

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While the upside momentum has been strong, it will take a move back through $1891 to neutralize the downward trend and, ultimately, a move through $1900 to get the bulls back on track.  $1785 is where the 200 day moving average comes in and acts as long-term support.  To further help you develop a trading plan, I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold that 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 Silver.

Our Strategy

By systematically purchasing regular intervals of the 10-ounce Gold contract or 1000-ounce Silver contract, you can layer in over time and preposition for the next rally. One example with a $25,000 account size would be to focus on the December 2023 10-ounce Gold contract and use a dollar-cost average approach by purchasing 10 ounces of Gold at 1850/oz, 10 oz at 1800, and 10 oz at 1750 with a year-end target of $2100/oz.

If filled on all three contracts, your average price will be $1800/oz; therefore, every dollar move Gold makes on the three contracts will be $30 since you control 30 ounces. If the $2100/oz price objective is achieved by year-end, this will result in a gain of approximately $9,000 (30 oz times $300 rise). Traders should also consider proper risk management while using a dollar-cost averaging approach, such as a hard stop on three contracts at $1700. If that were to occur under this scenario, it would likely result in a loss of $3,000.  If you have never traded futures or commodities or would like to learn more about taking delivery of Silver, I just completed a new educational guide that answers all your questions on transferring your current investing skills into trading "real assets," such as the 1000 oz Silver futures contract. You can request yours here: Trade Metals, Transition your Experience Book.

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.