Gold/Silver: An Attractive Opportunity for Long-Term Investors – Metals Minute w/ Phil Streible
Phillip Streible, Chief Market Strategist
[TRANSCRIPT]
Good morning. It’s Wednesday, February 14th, Valentine’s Day. Looking at that year to date performance on the cocoa market, up 36%. Looking at year over year. So one year ago today, last Valentine’s Day to this year, cocoa is up 113%. So going to be a little bit expensive if you’re buying chocolates. I suggest considering something like a Palladium ring, which is palladium trade that 872 and out.
So looking at the metals overnight bit mixed here on the picture you got April gold 2005 down about two bucks you have March silver 2208 down $0.07. Yeah March copper slightly higher 3.71 and then platinum up ten bucks 89, about $29 higher than the Palladium contract right now. So look at it yesterday here, the CPI, the core and headline CPI number rose 0.4 and 0.3% respectively in January.
Now, this was 0.1% above the consensus expectations. That slight increase was driven by shelter, food, electricity and airline fares. So we expect the electricity and also the airline fares and the food all a bit more seasonal here. I think shelter prices are starting to come down as well. So this was a slight disappointment in the markets, and I really believe it was a slight disappointment.
I think it was a big overreaction in the markets. So you’re seeing that. Remember on gold, it’s always the pace, the timing, the trajectory, the depth of interest rate cuts. And now what happens is, is those Federal Reserve rate cut expectations, they shift from March and they really go out to June. So you see adjustments here on, you know, Treasury yields, those rose significantly.
And we saw the downward pressure on the equities like the S&P 500 gave up about one and a half percent. I saw one point. The Russell was down about 5% and a lot of pressure across the board in ago, of course, the precious metals. So it represents kind of a small detour in the trend is what I’m thinking here.
And I would use that material weakness for an opportunity to add. I really believe that Treasury yields, they have peaked. We’re not going to go back up to these all time highs. There’s not going to be a massive reacceleration. I don’t think that the Federal Reserve’s going to come out due for interest rate hikes of 75 basis points in 2024.
It’s just not really going to happen. So it’s a small detour on the current trend and this is where position sizing really comes into play. If you were blown out on that sell off here, you were probably slightly overweight or just freak, frankly, a pig by not removing some of your equity exposure specific quickly as some of these are record highs in near all time highs.
So I do believe, though, that the pullback, especially in products like silver, platinum, palladium, gold a little bit may be still too high. But I think that these represent an attractive opportunity for longer term investors at this time. So you look at the gold market reached a three month low. Silver reached a four month low here yesterday. The gold silver ratio, it is rebounding a bit worried about 91.
The high was 92 for 2024 and the January highs, we came down to about 88 here and I think that aligned a little bit more with expectations. So you look at the CME Fed watch tool, that March interest rate cut zip from about 15 and a half percent down to about 8%. You go out to the May interest rate cut, 58%, now 36%.
Interesting note is that if you go out to like June and July, those expectations for an interest rate cut had picked up a little bit. That’s why I’m saying that I think it’s more of a longer term opportunity here. Your resistance points here on the gold market probably around 2025 when you get volatility surges. We tend to overshoot.
We tend to overblow on to the downside. Your near-term supports going to be above 1998, which was the low of the overnight session here. We’ll see what happens. We do have a couple of things coming out. We have an annual revision to PI. Not a lot of chatter about that whatsoever. We’ll also have the Chicago Fed president will speak and that particular person is a bit dovish here.
So if they see that we keep getting data like we are, that we’re probably going to normalize monetary policy and rates. Looking at the outside markets, big snapback in Bitcoin, up about 2000 bucks, up 4% here on the day. Etherium tacking on $120. That’s a pretty good move here. I think the contract size a little bit too small.
They’re both 10% on those think the ethereum’s got to be just a touch bigger should be closer to one one for a Etherium in my opinion. Now looking at the dollar index slightly weaker two year Treasury yield, slightly weaker, small rebound coming back in the U.S. equity markets. You got a question? Give me a call 3128587303. Remember, futures option trading does well.
Risk loss may not be suitable to all of us. Good luck. The trade.