Precious Metals diverged this week from other safe-haven assets and showed incredible performance against the U.S. Dollar, Japanese Yen, and Treasuries as the market casts doubt that the Fed will continue down its hawkish path. The banking crisis was last week's news item, and global risk sentiment improved, driving the Nasdaq back into breakout territory. The U.S. Dollar reached a one-week low and helped slow the sell-off in the Gold market, allowing traders to re-enter back to the long side with tight stops below the 38.2% Fibonacci from the recent contract highs. Having the flexibility to enter and exit the market quickly makes it essential for Precious Metals investors to have a futures trading account alongside their core Physical Precious Metals holdings.
Daily May Silver Chart
The technical backdrop shows Silver shows an extension to a "Bull flag pattern" we identified several weeks back while continuing to achieve new swing highs and chewing through the consolidation seen from December through February. The first level of support is just below the March 30th low at $23.37, and the second critical support is at $22.96. We suggest using that level for "stop-loss" protection for clients currently long Silver. Looking at the stochastics, they have pushed into "over-bought" territory indicating that the current bull market is alive and well.
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Daily June Gold Chart
The technical backdrop in Gold shows a crucial double bottom at $1835/oz, and the market is well above the 200 DMA at $1826/oz. Stochastics are rising into overbought territory, and DMI+ is crossing back over DMI- indicating a healthy mature bull market. A critical level we are watching is the March 21st low downward spike to 1955.9, now the first critical support. A break below 1955.9 will begin signaling a near-term failure. Therefore, we would be only cautiously Bullish and reevaluating upon such a move. For those working closely with us, most of you had re-entered the market on Monday's correction and are working stops below the $1955 level.
Our Strategy
The near-term macroeconomic backdrop is regaining upward momentum, while the long-term outlook should entail a series of rate cuts into the fourth quarter of 2023. We recommend that clients increase exposure in metals such as Copper, Platinum, and Silver while maintaining limited exposure to the Gold market with an exit strategy.
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