Gold/Silver: Interest rate decisions cannot produce more Silver
Phillip Streible

From a weekly performance standpoint, things seem better than they read. As of early Friday morning, Platinum, the worst-performing commodity, corrected 5%, Copper 4.9%, Crude 4%, Gold 3%, and Silver 1.5%. On Thursday, Gold and Silver futures attempted a recovery before the bell, but the Flash Services PMI number derailed all hopes after posting a number close to the highest level in more than two years. The Figure came in at 54.8, where a print above 50 indicates expansion and is a leading indicator of economic health. Hopes of multiple interest rate cuts faded in 2024, and swaps shifted to just one cut. Regardless of one cut, two, or three, one thing is clear: interest rate decisions cannot produce more Copper or Silver as supply deficits expand while demand improves. 

Many of you have been patiently waiting for a pullback to add or establish positions, while others "actively trading" in the market have been raising stop losses to try and protect gains and manage risk. The sell-off this week allowed for another wave of new market participants. I always say that the Silver Army is all about strength in numbers; the bigger the Army, the bigger the price explosion. From a strategy standpoint, many of you actively trading through Blue Line Futures have bought calculated risk call options and call spreads to avoid having the FOMO of missing out on another potential run to $50-60-75/oz, which has been wise. 

Last week, I wrote an article that gave an options example in Silver, and we are continuing to add and expand on that trade idea and thesis with our clients. Also, this week, for our subscribers of the "Metals Minute," we outlined a strategy for identifying scenarios where we utilize different durations and widths of strike prices with Silver options. Suppose you haven't seen our daily "Metals Minute" video, where thousands of people tune in to get key levels and actionable trade ideas in Gold, Silver, Copper, Crude oil, and the S&P 500 every trading day, you can Register for a free two-week trial here: Get the Metals Minute.

Example of a Silver Options Strategy

Many of you own physical Silver, and that is great; you are part of the one-percenters who recognize Silver as a store of value and hedge against inflation. The price of Silver tends to fluctuate with supply and demand and economic conditions with the number of participants, long or short, that drive price momentum. We firmly believe another "Commodities Supercycle" is underway, and we are constructing long-dated call spreads in the Silver market and recommending them to our clients.

For example purposes, one could purchase the September 2024 Silver futures $35.00 call option while selling a September 2024 Silver futures $37.00 call against it. The plan will create a calculated risk Bull Call spread and costs $1,200 plus any commissions and fees, while your maximum gain would be $10,000, less your initial cost, if silver futures close above $37.00/oz at expiration on August 27, 2024. We believe this strategy achieves a low-risk, high-reward profile. If you would like to be updated on the developments and techniques we are recommending to our clients, please register for a Free Guide by clicking Trade Metals, Transition your Experience Book. 

Futures trading involves a substantial risk of loss and may not be suitable for all investors. Therefore, carefully consider whether such trading suits you in light of your financial condition. 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. 

 

Phillip Streible is a Series 3 licensed Chief Market Strategist at Blue Line Futures and specializes in working with clients in developing futures and options strategies in the metals markets. As the Chief Market Strategist his goal is to show clients how to anticipate, recognize and react to bull and bear market conditions through the use of fundamental and technical analysis techniques that help them to define risk. With more than 16 years of experience working with clients, Phillip ran one of the largest retail commodities desks while at Lind-Waldock where he focused on metals, energies, currencies and agricultural markets.

 

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