“Don’t ever trust the Fed,” is what I told clients this week after Jerome Powell’s “hawkish pause.” The Federal Reserve makes its policy decisions using a rearview mirror approach by means that if they were driving on the interstate doing 90 mph, they wouldn’t be able to see the traffic jam up ahead. They would only know they were in a collision after it was too late from the debris behind them. The Fed is playing a dangerous game, and another interest rate hike will likely happen by year’s end. The Fed also projects that monetary policy will remain significantly tighter throughout 2024. What does that mean? According to the CME FedWatch tool, the first interest rate cut will happen in September 2024 rather than May 2024.
Precious Metals saw a significant selloff as the U.S. Dollar rallied to multi-month highs while 10-year Treasury Yields hit the highest level since 2007. Next week, we will see consumer confidence on Tuesday, durable goods on Wednesday, GDP on Thursday, and personal income along with Chicago PMI on Friday. As a Precious Metals trader, GDP is the one to watch, with Jerome Powell citing “GDP growth exceeded expectations” as one of the catalysts for keeping interest rates higher for longer. You want to see a number lower than expected and a downward revision on the previous data to get Gold to threaten the upper boundaries of the recent range.
Daily Gold Chart
Gold futures remain tightly bound between the downward-sloping trend line and the rising support line. Very rarely do we see this type of organized bullish wedge pattern occur, and once it breaks, prices could see a violent move. The technical perspective shows momentum studies correcting from overbought territory, giving the edge to the bulls. Overhead resistance sits at our trend reversal point at $1969, where any close above that level will shift the bears back more of a “neutral stance.” 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.
Daily Silver Chart
Silver’s wedge pattern is slightly different, stretching back to the 2011 highs just north of $50/oz. Futures have traded in a range where anything above $25 allows the mining companies to come in and press their short positions. At the same time, any price action below $23 welcomes new physical buying from the retail investor. It will take a move back above $24.37 to spark a short covering rally. We recently saw the Gold/Silver ratio drop to 81 from the recent high of 83, giving Silver the edge over Gold. If we have some “short covering squeeze,” traders working closely with me have added bull call spreads into March 2024. If you want to learn more about longer-dated calculated risk strategies in the Silver market, don’t hesitate to contact info@bluelinefutures.com.
We have recently updated our “5-Step Technical Analysis Guide,” which 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.