Precious Metals stumbled this week, led by a risk-off vibe in U.S. Equities, higher Treasury Yields, nine-month highs in the U.S. Dollar, and a relatively hawkish Federal Reserve. Platinum and Silver fielded most of the selling pressure after a flood of ETF selling sparked six straight days of lower prices. Weak economic data in Asia Pacific countries and little effort by the Chinese Government to reinvigorate growth spilled over into the Copper market, leaving the door open to lower prices. In my article last week, I suggested the lack of upside momentum makes me question the strength of Precious Metals at this time. I mentioned that those long Silver will want to use $23.79 as their stop-out point or short-dated put options such as the “week two, $24.50 puts” for protection, which expire tomorrow and are “deep in the money.”
Now, I don’t usually feel the need to protect asset classes through options, especially those perceived as “safe havens.” However, after trading Silver for 22+ years, I know that Silver can remain irrational longer than most people can remain financially solvent. The way I see Precious Metals at the moment is that we are in a waiting game, and I am not talking about waiting for Godot. We are waiting for a change in economic direction in the U.S. that will trigger a different view from the Fed or more accommodative measures by China that result in a wave of economic growth. We know it will come, it always does, and remember, It’s always darkest before the dawn, where every bull market begins with a short covering rally.
Daily Silver Chart
Silver futures came under significant pressure this week, falling for five straight days. Stochastics and momentum studies quickly reversed from last week’s positive reading and pushed back into oversold territory. The bullish trend breakout on August 29th set off “Red Flags” with August 30th’s weaker doji candle. The August 31st breakdown should have warned traders that this rally “has no legs.” Since we are now cycling lower, traders will want to be cautious when scaling into straight futures or shifting to more calculated risk strategies such as call options or bull call spreads. Overhead resistance remains at $24.12, and the trend reversal point is $24.97. If you want to learn more about longer-dated calculated risk strategies in the Silver market, don’t hesitate to contact info@bluelinefutures.com.
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Daily Gold Chart
Gold futures have suffered less damage than Silver and Platinum due to the direct relationship with interest rates and currencies rather than demand and uses. The technical perspective shows momentum studies in the “middle of the range,” leaving neither the bulls nor the bears in absolute control. Overhead resistance sits at the 200 DMA at $1978 and coordinates with our trend reversal point. A close above $1980 leaves the door open for another test of $2000 but can only happen on sustained weaker economic data or a significant breakdown in the U.S. Dollar or Treasury Yields.
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.