Gold/Silver: Good News is Bad
Posted: Aug. 5, 2022, 12:22 p.m.
The rising recession probability and an even more hawkish Federal Reserve were all the chatter this week. Inflation remains well beyond the Fed's target, and after Friday's strong payroll data, it appears they will have to further tighter into an economic slowdown. As a result, Equity futures are operating under the thesis that good news is bad for the stock market. After the strong recovery from the July lows, Precious metals are also digesting the impact of additional rate hikes. The market expects a 70% chance of a 75 bps rate hike in September, up from 25% at the start of the week.
Daily Gold Chart
From a Geopolitical risk stance, Gold will be monitoring if there is any escalation in tensions between the U.S. and China. Additionally, monthly economic inflation data gets released in the back half of the week. The technical setup remains firm as we would be conservative buyers on sudden drops in price while adding more aggressively on a breakout above the 50 DMA. To help you identify additional long-term support and resistance levels, we created a Free "5-Step Technical Analysis Guide that 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.
Daily Silver Chart
Similar to Gold, Silver continues to struggle with the 50 DMA leaving the market susceptible to a correction back to the mid-19s. We would follow the same process as Gold on adding to weakness while considering calculated risk call options or bull call spreads three to six months out. Silver should also benefit from the sudden tightness in Shanghai Copper inventories due to its strong correlation. Also bullish, Platinum futures have experienced a 15% rally off the July lows, and with auto sales continuing to make monthly highs, we can expect that we have seen the bottom. If you have never traded Silver futures, we completed a new educational guide that answers your questions on transferring your current investing skills into trading "real assets," such as the 1000 oz Silver futures contract. Additionally, you will receive a free two-week trial to our flagship report, "The Morning Express," giving you critical levels of support in resistance in the Gold and Silver. You can request yours here: Trade Metals, Transition your Experience Book.
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