In futures trading, there’s an old saying: “When they’re crying, you should be buying. When they’re yelling, you should be selling.” That ideology pops into my head not often but in certain occurrences, i.e., Crude Oil trading at negative $30 in 2020 or Silver trading above $50 in 2011. Either way, you better be buying one and selling the other. In 2011, when Silver reached $50, most of my client base was heavily long Silver futures, along with $30-$40 call spreads and others with the $35 strike outright. The amount of money many of these clients made was life-changing, but there were those few who refused to exit under any circumstances. Many whose lives changed sold “some” of the positions, took the money and bought second houses, paid off debt, or rolled it into new investments. For the few who refused to sell any, I watched as their personalities went euphoric as prices rose, then profit taking took place, followed by disbelief and finally panic as markets crashed.
The environment we are currently in does not justify a move to $30-$40 or $50, but neither did the months or years ahead of 2011’s dramatic rise. I talked to one potential client who indicated that he wanted to open an account to go “all in” on Silver due to the potential for an imminent market crash. While I agree there is peace of mind in holding a hard asset (over 5000 oz, the CME offers a loadout for delivery), the prospect should consider “Dollar-cost averaging” Silver futures while having an options overlay similar to my strategy in 2011. The prospect should also consider owning Gold and S&P put options and determine the catalyst for the crash itself. Perhaps they should also own Crude Oil calls if it is the “higher for longer” theme due to rising energy prices. Once a “crash” finally happens, someone might want to consider 10-year Treasury calls because as the Federal Reserve goes into “panic mode,” they will be forced to cut interest rates, driving the price of Gold and Treasuries higher. Now, this is not investment advice; these are my random thoughts on where we are price-wise, knowing that the prospect is most likely right, a crash is ahead of us, but pinpointing that exact date has been challenging.
Daily Gold Chart
Gold futures have broken below the psychological $1900/oz and have opened the door for lower prices. Last week, I drew a simple line of support and resistance, indicating where I believe a “violent” move would occur. Unfortunately for the bulls, it was a breakdown in prices. While we welcome lower prices for Q1 2024 positioning, there is no specific “hard bottom” to look for, and only a close above $1962 will switch the current trend from bearish to bullish. 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:Â Trade Metals, Transition your Experience Book.Â
Daily Silver Chart
Silver’s wedge pattern broke to the downside this week, and the critical $23 support level was violated. The trend reversal point remains at $24.16, and only a close above will negate the current bearish trend. The Gold/Silver ratio has pushed back up to resistance of 83:1, indicating that Silver has fallen into “oversold” territory. We recommend beginning to scale into the Silver market by Dollar cost averaging for core long-term positioning. 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.
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