Gold Market Wire
News, analysis and commentary for gold traders and investors
Silver Market Update
Stock Markets Unwind and Take Metals with Them
July 19, 2021 - (Gold Market Wire) - Stock markets are being hit hard in the early European a.m., and are taking the Precious Metals down with them. Almost all European equity markets are off by about 1.3%, and Silver has fallen a little over 1%. Volatility os back with a vengeance. The Dollar is now firmly trading under 1.18 to the Euro (inverted quote, equalling rally), and that has contributed to pressure on the metals. It looks like we could be in the early stages of serious sell-off in just about all assets, as the equity euphoria takes a pummeling.
As if Friday's sell-off wasn't enough - we have follow through today, and the outlook is getting ugly. Technically our $26.40 failure last week was identified properly. We failed to get over it and now we have a serious sell-off ensuing. We certainly thought that the increasing geo-political chaos would keep us firm, but when equities take the hit, everything goes out the window with it. Such was the case Friday, and today.
As we zoom out of the picture, we can see that the Silver market is at an important crossroad.
This is confirmed by looking even longer-term.
We are entering a bad period for the markets - August, September, October... the season when equities swoon. If we get a pullback, one shouldn't expect it to be a mild affair. We could take a 10%-20% hit in global stock markets without the slightest effort - so overbought are they. That will certainly bleed through to the metals. The current situation is such that unless the metals recover quickly we are going to see a protracted sell-off occur. Gold has done well to hang on to $1800, but it may not last. To the consternation of the Goldbugs, the safe haven is still cash, and like it or not, the market is telling us that that is the US Dollar. We maintain our bullish outlook on the Dollar, which has always balanced our Metals positions. More and more as each trading day passes, the failure of the Euro to clear 1.2350 during its last rally is looking ominous. Sterling looks like the high for the year has already been put in. As readers of this site know, we (still) think shorting the British pound is going to be the trade over the next two years. It looks ugly. As far as our Silver positions go, this market has to recover quickly or we are closing out just about everything. That includes the core positions we took back in April as well. That's how bad the prognosis now is. Yes, we know: core positions are to be held with an iron grip. We have several, going back years - but right now, the most recent ones are getting ready to be cut. The trading positions we have in Silver are getting ready for the chopping block as well. If we get a decent rally today or tomorrow, we will cut the first half and take the pain. The profit in the core will offset and will also be close in tandem. This sell off could be months in the making, and we have no intention of riding a full book lower. The chart damage is significant, and the metals are highly vulnerable to a serious correction if the equity markets finally take the bath that everyone has been talking about for over a year now.
The first admonition in this situation is to realize that trading is a tough place to make money and humility helps. Cutting losses is part of the discipline. The second is that judicious core positions can be a real boon when trouble comes a-callin'. And lastly:
..."if you're going to panic, panic first."
Bottom Line: We are looking for a rally to start cutting length - April core positions included. Then, a reassessment.