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Gold/Silver: This party is just getting started

Gold faced a tough week as waves of liquidation occurred, with many participants from hedge funds to managed funds giving the precious metal the cold shoulder. Unfortunately, silver also saw the pressure while its sister metals copper and platinum took off like a rocket and left everyone else behind. The good news is that weakness coincides with a bullish seasonal trade setup in the second half of December that could spill over into a highly inflationary environment in 2021.


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So why did so many people throw in the towel this week on gold and silver? Well, I picked up the phone and reached out to some of my colleagues, and they mainly gave me the same responses. "They believe with a rollout of Covid-19 vaccines; the global economy will recover faster, curbing the appeal for Government bonds; therefore, pushing yields higher and chasing riskier assets." What occurred from that narrative was the outflows from gold-backed exchange-traded funds spiked significantly, leaving their holdings near the July lows when gold fell over $200/oz in just a few sessions.

I have to say that I do not blame them; however, I will predict that they eventually come crawling back into the market at much higher levels. They forget that policymakers will provide additional fiscal and monetary support, in return pushing inflation expectations much higher.


They also forgot that the U.S. dollar would most likely fall another 5-10% against its currency peers, leaving the Euro/USD at 1.25. They also forgot about the pledged Green spending plans in China, Europe, and the U.S., along with its impact on the price of silver. So if the long-only party cleared out and I am left with just a few gold/silver buyers at these lower levels, so be it. I love buying things on sale!


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PHILLIP STREIBLE

Chief Market Strategist


www.bluelinefutures.com

Main: 888-441-8555

Direct: 312-858-7303

Fax: 888-370-2221


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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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Futures trading involves substantial risk of loss and may not be suitable for all investors.