Gold and silver plummet, creating a huge opportunity and a second chance
Both gold and silver pricing plummeted as they were in a virtual freefall from the recent new all-time record highs, in the case of gold, and the near tripling in price of silver since mid-March. As of 4:40 PM EDT gold futures basis the most active December contract is currently fixed at $1918.10, after trading down by $121.60 today, or a net drawdown of 5.97%.
Just as silver outperformed gold during this recent rally, the price reversal that occurred today showed that silver lost roughly 3 times the percentage drawdown of gold today. Silver basis the most active September 2020 Comex contract is currently fixed at $24.96, which is a net decline of $4.29 in trading today, for a drawdown of 14.66%.
With such a rapid price decline in a single day one might ask why am I so optimistic and believe that this recent move has created huge opportunities for current traders, and more so, a second chance for those that did not participate in this last rally in both gold and silver?
The vast majority of analysts as well as seasoned traders have been waiting for the shoe to drop so to speak. Anticipating a rapid move from recent highs to dramatically lower pricing. Simply put the marketplace became too crowded. The writing was on the wall, however there was no date to accompany the memo. As I have said in many of my daily letters, at some point, which can be concurrent with a fundamental shift or no change at all. The parabolic rise meant we were likely to see both gold and silver dramatically retrace from these record levels.
That being said, the fundamental factors which have moved both gold and silver dramatically higher are uniquely different from the recession created from the banking crisis in 2008. In both cases the economic contraction and recession was followed by massive quantitative easing by the Federal Reserve and other central banks. However, in the case of the financial crisis there was an endgame, and a defined timeline because the issues which fueled the financial crisis were able to be curtailed and controlled, and any quantitative easing by the Federal Reserve had a timeline and more importantly an exit strategy.
That is not the case in this crisis. Globally we are faced with a pandemic which has no end in sight. With a daunting endgame, i.e. a vaccine which is being developed by multiple companies which show promise, but as yet to prove effectiveness. As the death toll climbs and infections continue to spread worldwide.
We also have a Chairman Powell of the Federal Reserve stating that the Federal Reserve is in this for the long haul with no limits as to the amount of capital it will use to reach its goal. During the July 29 press conference Chairman Powell said, “At the Federal Reserve, we remain committed to using our tools to do what we can, and for as long as it takes, to provide some relief and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.”
The current round of quantitative easing has been not labeled with a number such as QE1, QE2, or QE3, but rather this round of quantitative easing has no cap on vast capital needed to achieve financial stability in the United States. Also, unlike the financial crisis the Aid packages by the U.S. Treasury Department could easily swell to $5 trillion. As such it has created the largest deficit in the history of the United States adding fuel to the already raging fire.
It is for the reasons we spoke about above that the global pandemic has challenged governments and central banks worldwide to stave off a recession, or even a depression which is why we have seen the safe haven asset class gain so much value in such a short period of time.
It is that short period of time that created a very small window for market participants and investors to rebalance their portfolios appropriately. As such there are investors in market participants that were unable to rebalance their portfolio with a heavy weight on the safe haven asset class through physical accumulation, electronically traded funds such as SLV and GLD, as well as participants in the futures market. These individuals have now been granted a second chance to do just that.
For those individuals that made the proper moves, and as we recommended to our clients last week, enabling them to repeat the process. Last week our subscribers were told to exit their positions and take profits, or move protective stops higher, locking in more profits. In either case today’s sharp decline has offered investors another opportunity, or a second chance to enter the markets once this correction concludes.
I am truly excited by the opportunities that will be available to the investment community once we see both gold and silver pricing find support and consolidate. It is clear that the fundamental factors which have been at the root of the recent and dramatic price gains in gold and silver have not changed at all. That being said I am extremely certain that this decline will conclude at some point in the future, and more importantly this will be followed by yet another leg of the historical rally in both gold and silver to challenge the recent gains.
Wishing you as always good trading and good health,
This report is now free and publicly available to everyone
Gold Forecast: Proper Action
We are currently flat with no active trades in Futures or Forex Gold and Silver, or the ETF's GLD and SLV
Thursday August 7th, we sent out this - Trade Alert: Time to raise stops and lock in profits -
Trades We Closed on August 7th
NUGT – we sold all shares and took profits of $33.19 per share
Long December gold at $1997, we covered the trade @ $2035 for a profit of $3800 per contract
Long Forex gold at $1977, we covered the trade @ $2017 for a profit of $40.00 per ounce
Active Trades we Closed Today August 11th
Long September silver at $24.40. Our stop was hit @ $25.99 for a profit of $7950 per contract
Bought GLD @ $166.74. Our stop was hit @ $$183.00 for a profit of $16.87 per share.
Bought SLV @ $18.00 Our stop was hit @ $23.80 for a profit of $5.80 per share.
Gold Market Forecast
On today’s video report we will discuss our current trades in which we exited and pulled profits from today, as stops were hit and market orders were executed. More importantly we will look at potential price points that gold and silver good trade to before finding support. Our technical studies indicate that the recent decline has signaled a conclusion to an intermediate third wave.
This will be followed by a fourth wave correction. It is his fourth wave correction that we will look at in detail so that we can properly position ourselves for the next series of trades. Once the fourth wave correction has completed we will have all of the necessary information to complete a model which will project where the final fifth wave rally could take both gold and silver price and to.
The sad truth is that the recent gains in both gold and silver have come on the back of a global pandemic which has affected over 20 million people globally according to the John Hopkins coronavirus Resource Center. However, the saddest part of this pandemic is that it has resulted in the loss of 738,000 souls around the world.
I mention this because while many investors are profiting from the recent moves in gold and silver, it is my hope and belief that these profitable investments have made life easier for those were able to take advantage of it. These investors (icluding you, our subscriber) are not only the very wealthy, but rather many individuals that are working with their retirement accounts or investment portfolios to supplement lost income due to their job loss.
With that in mind it is it has not escaped me that my trade recommendations at this time of crisis have a profound and increased possibility that it could mean the difference between individuals living in scarcity or having the available resources to effectively get through this crisis..