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Blue Line Futures Research

Gold/Silver: 3 Scenarios YOU Need to Know!

Posted: June 6, 2022, 10:02 a.m.

It was an eventful week for U.S. Equitites, with inflation data hitting 40-year highs and consumer sentiment reaching an all-time low. One bright spot was on Monday, where Silver caught a small bid on news that the Biden administration announced tariff suspensions on solar panel components from four countries. More importantly, as the week progressed, we saw signs of "safe-haven" investment demand returning to the precious metals. Remember, Silver plays a vital role in producing solar cells and could be the trigger we need to start the next bull leg. It will likely take a one-two punch for Silver to get lift-off where the solar catalyst leads to increasing demand/shrinking supply, and then the investment demand kicks back into high gear as the traders begin to chase the move.

 

Daily Silver Chart

Looking at the week ahead, on Wednesday, we expect the Fed to raise 50 bps and remain hawkish for the remainder of the year. Following the rate hike, we are watching for one of three likely scenarios in U.S. markets.

Bear CaseFed continues to tighten while the economy deteriorates, leading to an extended sell-off in U.S. Equities for the remainder of the year.

Soft Landing - The Fed raises multiple times and sees inflation easing. The decline in inflation causes consumers to see their real incomes go up, and they begin to spend again. The Fed will feel they have done their jobs and pause on further rate hikes. Equities should stabilize and start a new uptrend.

Hard Landing - The Fed raises multiple times as economic growth deteriorates into "crash mode." The sell-off in Equities hits the consumer so hard that the Fed needs to pivot back to dovish and cut rates to undo the damage done.

 

Daily Gold Chart

Gold settled the week with fresh one-month highs despite the stronger U.S. Dollar and rising Treasury Yields. The rally gives new Gold investors defined risk parameters with Friday's low as your stop-out point. We have seen a series of higher lows with key supports just below each while knocking on overhead resistance. To help you with technical analysis, I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold but can easily apply to Silver." 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: 5-Step Technical Analysis Guide to Gold.



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Futures trading involves a substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

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