Gold/silver/copper: to each dog his day
It has been a “risky” week for US equities as commodities remain aggressively oversold. A change in mentality is happening and investors have moved away from inflation (commodities) towards deflationary-type assets during a recession. This surge took the US dollar to 20-year highs and the euro to 20-year lows. Year to date, copper has been the worst performing metal, down 20%, followed by silver, down 18%, and although they are down, they are not out. Account. This week China announced it was considering a $220 billion infrastructure bill that would help support the world’s second-largest economy, and it’s the same playbook I think the United States will use. once the recession hit.
The latest June jobs data on Friday added 372,000 new jobs versus 265,000 expected. Reaffirmed labor market strength cements another 75 basis point rate hike at the July 27 FOMC meeting. After this meeting, we should see a change in momentum where aggressive interest rate hikes will begin to fall, and smaller, more steady hikes will remain. The excessive tightening that the Fed will conduct in the second half of the year will ultimately lead to rate cuts in 2023, with 75 basis points of cuts already expected.
Copper daily chart
Daily Money Chart
While precious metals saw their biggest weekly outflow in over a year, it should be remembered that the bigger the outflow, the bigger the inflow as the cycle turns. We expect copper and silver to make substantial rallies once the Fed declares victory on inflation and turns to stimulating the economy. Therefore, positioning in these metals should be viewed as long-term investments in extreme washouts like what we are seeing now. Any new positioning should be done in December 2022 or in 2023 on the purchases of futures contracts.
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Gold daily chart
We remain bearish, taking tactical shorts in US equities on any significant rallies targeting the Nasdaq and Russell 2000. The leveraged stocks that make up these indices are most at risk during a recession. We also maintain our bearish stance on crypto and traditional currencies such as the British Pound, Euro and Yen. We have a bullish outlook on China as it continues to boost its economy, which will have a ripple effect on copper and silver. Crude Oil is expected to remain firm for the first few months while weakening over time as we sink deeper into the recession. Therefore, we will look at leveraged option bets to play a further correction. To help you identify different technical analysis formations, I’ve gone through 20 years of my trading strategies to create a new “5-Step Guide to Technical Analysis for Gold but can easily be applied to gold.” silver”. The guide will provide you with all the technical analysis steps to create an action plan used as a basis for entering and exiting the market. You can request yours here: 5-Step Technical Analysis Guide to Gold.
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