Webster Dictionary states that the definition of transitory is "not permanent," this week, we had CPI (the change in the price of goods and services purchased by consumers) come in at 5.4% Y/Y, its highest level since the 1980s. In addition, PPI (the change in the price of finished goods and services sold by producers) had the most significant Y/Y change since the data was re-configured at 7.8%. In my opinion, the best way to track inflation is by looking at the CRB Index. This week, it ramped back up near contract highs, with Agricultural and Livestock prices breaking out to the upside while Energies and Precious Metals recovering from their latest selloff. It is not too late to position for higher inflation through agricultural commodities, and with the tightest Wheat crop in a decade, the inflation party is just getting started.
We firmly believe that Silver presents one of the best opportunities on the heels of the seasonal tendency for Gold to rally the second half of August into the first week of September in 12 out of the past 15 years. 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.
Weekly Silver Chart
After the correction this week, we firmly believe that the long-term fair value of Silver is $35, and there will be periods where it trades below and above it, and now has fallen 33% below fair value. If you are looking at positioning in Silver for the long run, we suggested using Two Mini 1000 oz March Silver contracts per $25,000 and buying ONE at $23.50 and ONE at $22.25, with a stop at $19.50. Doing such would ideally risk $6,750. We would look to a Silver target of $35/oz, which would allow for a profit of $24,250. 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.