After a solid start to the week for Gold and a lackluster performance from Silver, we continue to maintain our bullish stance and position for a substantial second-half recovery. The focus will remain on interest rates, monetary policy, and the strength of the global economy. The covid variant and uneven job recovery should cause the monetary policy to stay accommodative longer to support the global economy.
Adding a tailwind to risk-assets early Friday morning was China's Central Bank. After signaling for the last two months, they want commodity prices to cool; the PBOC cut their Reserve Requirement Ratio for banks by 50 bps. They then said, "the central banks will not resort to flood-like stimulus." From my experience, this is a standard Chinese routine, "panic when prices become too hot," then "wack the market," followed by 'buying the dip." The Fed is using a similar strategy, and most recently, the ECB is now acknowledging that they will allow their inflation targets to run hotter, longer.
Over the past few weeks, many of you have reached out to find out more about our positioning in the Gold market. First, I want to say that my own belief is that you should have some form of physical metals as long-term wealth protection; however, I do not find physical metals as very capital efficient. We use the CME Group's world's leading futures contract that trades approximately 27 million ounces daily while giving you nearly 24-hour electronic access. The contract sizes range from 10 oz, 50 oz to 100 oz, and 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.
Last week I wrote that "We continue to add to our strategy below as Gold and Silver are trying to solidify a technical bottom" while this week we are quite excited about the strong finish. Here we reiterate our strategy below and do not feel as though you had "missed the boat" as we can always adjust the strategy. In addition, we come to a seasonal tenancy where the second half of July historically has acted favorably to both Gold and Silver. Remember you can always email me if you would like me to give you the details on the seasonal pattern of precious metals. If you are one of our clients and have been working with us and are looking to position in Gold for the long run, we suggested 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,
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.