On Wednesday, the FED, in their own genius ways, hiked rates 75 basis points, which triggered a relief rally in equities, commodities, and precious metals. Markets soared after the announcement but have fallen back this morning, matching the trend.
Gold and silver saw a solid rally on Wednesday and are seeing some follow-through this morning. The trends remain the same, up in gold, down in silver. The pundits will give many reasons why you should be long or short either. However, there is no substitute for the price action.
There is no doubt that over the long haul, gold and silver will go higher, but they can go either way from here. Remember, there are paper metals and physical metals. Although they are supposed to be the same, they are not. Paper is exactly that, a representation of an asset; however, there is nothing like holding the real hard asset.
It has always been my contention that there are not enough physical metals to cover the amount of paper assets that are represented. Paper gold and silver are more like big options that decay over time. Invest in physical and trade paper.
Precious metals should be owned on a physical basis with capital that is not needed tomorrow or anytime soon. Trading should be done with paper, knowing we can trade either side without emotions.
In all markets, price action determines what will happen in the next day, week, or month. Keep the two strategies separate. The worst trade anyone can make is turning a trade into an investment hoping for a way out. Traders must learn to take their losses and move on to the next trade.
Patience, discipline, and money management always win the day. Let the map of the markets show you the way.
Join me Monday, June 20, for our Monday Night Strategy Call at 4:30 est.
