Gold: Our 2021 Strategy

Finally, some volatility in the markets this week, with the federal reserve turning "hawkish," indicating that they may need to raise interest rates two times in 2023 to combat rising inflation. I wonder if Jerome finally went down to the BP and filled up his gas tank, shocked by the prices, he immediately went to the local Mcdonald's for some comfort food. Upon arriving, he saw the franchise was drastically understaffed, and when he went to pay for that Quarter Pounder extra value meal, he found out it was double the pre-pandemic cost! That is at least how I envision it.

The real story is that the Fed set an inflation target last March at 2.4% with the hopes that an overheated economy would ultimately drive workers back into the labor market and bring the United States back to full employment. At that point, we would resolve shortages and supply chain issues, and the "transitory" price spikes would abate. The problem now is that labor will take a full 12-14 more months to achieve full employment, meaning inflation will run hotter and longer. Hence, they had to come up with a strategy and threaten a rate hike while discussing tapering bond purchases to shock the market. What I believe will happen is that the Fed will be unable to raise rates due to a stall in growth, leaving them with another "stagflation" environment.

Do you know what asset class generally performs the best in stagflation? Answer: Gold, and remember, when precious metals begin to take off again, silver moves typically much faster than gold. Conversely, when a gold correction happens, silver falls twice as fast; therefore, manage your position size appropriately. It is going to be a wild ride. To further help you understand the quantitative analyses of the precious metals markets, we created a free "Gold Trends Macro Book," updated with silver slides. You can request yours here: Free Gold Trends Macro Book.

Daily Gold Chart

Our gold strategy

If you have been working with us and are looking to position in gold for the long run, we suggested that our clients consider using FOUR Micro 10 oz December Gold contracts per $25,000 and buying TWO at 1775 and TWO at 1685, with a stop at 1640. Doing such would ideally risk $3,600. We would look to a gold target of 2100/oz, which would allow for a profit of $14,800. If you would like to learn more about the strategies we are implementing or learn more about technical analysis, we created a guide to provide you with all the 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 Precious Metals.

Good luck and good trading,

Phillip Streible

Chief Market Strategist


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Futures trading involves 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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