After being involved with futures and commodities for 20 years and as another year comes to a close, it's time to write my favorite article. Writing a 2023 year-end prediction is like trying to drive across the country using a foldout paper, "Rand McNally Map." Some general guidelines help, such as interstates that end in 0, like "I-80," stretch across the country from East to West, while odd numbers like I-65 run North and South. Before I set out for the drive, I want to check the tires, and fluids, fill up the gas tank, have some cash for tolls, and hope it goes smoothly. Going through those checks and balances for a road trip is no different than investing. You need to have an account, choose the product you want to trade, and check to ensure you have proper risk management and enough "fluids" (funds) to handle any unwanted drawdowns or incidentals. If you have traded with me for any significant time, you know I always preach that you should "plan your trade and trade your plan."
So let's get into it. While precious metals are finishing the year on a solid note, it's no secret that they have fallen short of my predictions year after year. Logically, $2,500 Gold, $100 Silver, $2,000 Platinum, and $5 Copper on December 31, 2023, would make even the Grinch himself happy. The reality is just like any road trip, we will run into some traffic jams, a couple of detours, and, if we are lucky, just one flat tire. Last road trip I was on, the "service engine soon" showed up about 300 miles in on a 600-mile trip.
Key Takeaways
2023 should show declining inflation, lower corporate profits, and periods of varying degrees of recession in the United States and Europe. The labor market should begin to suffer, causing the Fed to pivot when yields peak around 5-5.25% after three additional interest rate hikes in February, March, and May. Historically, when the last rate hike is in place, the equity markets have already bottomed, and a new bull market rally begins over the next 12 months. Investors will start rotating into natural resources, base metals, industrial metals, and precious metals in anticipation.
Monthly Gold Chart
Depending on how the 800-pound gorilla in the room known as the Federal Reserve voices its opinion on inflation can have a direct impact on U.S. Dollar strength/weakness, leading to either a headwind or tailwind for Gold. For example, we have seen one meeting where Jerome Powell says, "I don't want to overtighten, and it makes sense to moderate the pace of interest rate hikes," leading a $50 rally. While at the same time, at a later meeting, Jerome used a different tone, stating, "we are taking forceful steps to moderate demand so that it comes into better alignment with supply." This type of two-sided talk swings Gold $50 back to the downside. 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 Gold.
Monthly Silver Chart
Our Predictions
Copper remains in a holding pattern until we come out of this recession and have concrete clarity on how China perceives Covid going forward. By year-end, inflation should decline to 3-3.5%, leading to Gold prices averaging $1950/oz with extensions up over $2000 at different periods. We should see the 2's vs. 10's yield curve flatten while Silver could easily see "green shoots" up into the mid-high $ '30s, settling back to $28 by year-end. Silver now lacks the level of short interest it has had in the past to get it ripping to the upside. Most of the shorts right now are producers and swap dealers. If they can catch the swap dealers holding the bag, this is the most straightforward chance for an explosive move higher. Platinum has one of the best setups due to the EV craze and limited supply, leaving a potential move back over $1500 while averaging $1325 in 2023. 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.
