Call me "pessimistically optimistic" or "optimistically pessimistic," depending on a particular day, but after trading over 100 million ounces of Silver over 20+ years, you tend to look at markets with a watchful eye. Coming into the week, Silver was down 3.5% year to date, and on the heels of a softer read on Wednesday's Consumer Price Index report (CPI), Silver went on to rally 7.5% taking it up 4% on the year. Does Silver have what it takes to go on an extended bull run into the $ '30s, $ '40s, $ '50s, or even north of $100/oz in this environment? That is where the great divide between technicals vs. fundamentals, bulls vs. bears, and trending markets vs counter trending markets becomes the argument.
Beyond the price of Gold and the value of the U.S. Dollar, fundamental market dynamics, economic conditions, supply/demand, industrial demand, geopolitics, and investment flows from hedging activity, large funds, managed money, small speculators, and ETFs all come into play. If you have not tuned in yet, I cover all these essential topics daily in a 2-3 minute video on the Blue Line Futures Youtube channel "The Metals Minute."
Daily Silver Chart
While it may be too early to call an end to the downtrend seen since the Covid highs, I believe we are setting up for another assault on the upper boundary of the downtrend line. Traders will want to use $26.50 as their next breakout point and assume that a series of closes above will mean the "train has left the station." Our long-term thesis remains that tightness in the physical markets, a decline in mining supply, and solar and E.V. demand should offset any potential for prices to decline below $22. If you have taken profits on the most recent surge, you will want to use a sell-off down to $23.75 as your first level of support for re-entry and $22.50 below that. Our thesis remains that over the next 18-24 months, we expect Copper to make new all-time highs and Silver to break $35/oz and $50/oz.
As of this week, we updated our "5-Step Technical Analysis Guide" and also integrated our "Top 5 trade ideas for Q3." Please download and review our Copper, Gold, and Silver strategies. 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: New 5-Step Technical Analysis Guide.
Daily Gold Chart
The U.S. Dollar Index traded down to 15-month lows this week, giving Precious Metals the "bottoming action" we have been looking for. Following our research, our recent hunch proved correct, and the bargain hunters that emerged at the 200 DMA have built themselves an excellent long-term position. The critical level we will watch next week will be $1972, where Gold futures need to break through to threaten $1985. You will want to watch the psychological $2000 level and ultimately $2008 as your breakout level. Any close over $2008 should trigger a wave of buying up to all-time highs and eventually extend to our long-term target of $2500/oz. We anticipate that the Fed's reckless acceleration in interest rates will ultimately catch up with them, leading to a reversal in policy once a contraction in U.S. GDP occurs in Q1 2024 while an acceleration in the Euro Zone and China pressure the U.S. Dollar and Interest Rates.
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. If you are interested in speculating on the rise and fall of the price of Precious Metals on a shorter-term basis, such as two weeks or two months, or If you have never traded futures or commodities, check out this 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.
