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Gold/Silver: Silver investors this is how you play Wednesday's FOMC meeting

Blue Line Futures - Fri Jan 27, 2023

We saw another strong week for Gold as it continues to outperform the other metals with tailwinds set in place to push it through the $2,000/oz mark, led by the end of Fed rate hikes and a declining U.S. Dollar. At the same time, optimism and uncertainty surrounding the Chinese reopening and weaker economic data have started to damage industrial metals. That has led to the increasing divergence between the spread between Gold and Platinum while also creating a floor under the Gold/Silver ratio.

Gold/Silver Ratio


 



Gold/Platinum Spread


 



Looking ahead to Wednesday's "volatility-driven news event," the Federal Reserve is set to raise interest rates again. Everyone is looking for whether the Fed will take a stance similar to the Bank of Canada and indicate that this is the end or whether it will maintain a hawkish stance and keep its foot firmly on the gas pedal. In either case, Silver could break out of its month-long consolidation pattern in a big way.  To further help you develop a trading plan, I went back through 20 years of my trading strategies to create a Free New "5-Step Technical Analysis Guide to Gold that can easily apply to Silver." The guide 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 Silver.

Daily Silver Chart


 



Silver Options Strategy 


Silver truly is the sleeping giant right now, and while the chart pattern has been sideways, most traders are not paying attention to the daily "Average True Range" (ATR). ATR measures volatility, taking into account any gaps in the price movement over a specified time period, typically 14 days. Currently, Silver is experiencing a 77.5-cent average true range. Historically, the breakout is often violent and directional when we have seen this heightened volatility within a tight trading pattern.

Using Fibonacci analysis to conduct a probable outcome once the floor or ceiling is broken leaves a breakout objective of $28 on the upside or $20.50 on the downside. Much of the direction will be determined by comments from Jerome Powell, order flow from large funds, and stop-loss triggers from speculators. A strategy a trader could consider would be a "long strangle" and is constructed by purchasing a Call and a Put option. For example, buying the March $25 strike Silver call and simultaneously buying the March $22.50 put option for a net premium of 50 cents. Since Silver futures are 5,000 ounces, the total cost of the strangle is $2,500 (plus any commissions and fees). That leaves your breakeven with either a move below $22 or an upside to $25.50. If a downside move to $20.50 were to occur, the trader would gain $10,000, while a breakout to $28 would show a $12,500 gain. For these shorter swing moves, futures contracts are the best investment vehicle for attempting to profit from a short-term rise in precious metals. If you have never traded futures or commodities or would like to learn more about taking delivery of Silver, I just completed a new educational guide that answers all your questions on transferring your current investing skills into trading "real assets," such as the 1000 oz Silver futures contract. You can request yours here: Trade Metals, Transition your Experience Book.

 


 


 

PHILLIP STREIBLE

Chief Market Strategist

www.bluelinefutures.com
 

Main: 888-441-8555

Direct: 312-858-7303

Fax: 888-370-2221

Blue Line Futures LLC

141 W. Jackson #2845

Chicago IL 60604

Futures trading involves substantial risk of loss and may not be suitable for all investors. Therefore, carefully consider whether such trading is suitable for 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.

Blue Line Futures is a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that the NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. Therefore, carefully consider whether such trading is suitable for you considering your financial condition.

With Cyber-attacks on the rise, attacking firms in the healthcare, financial, energy and other state and global sectors, Blue Line Futures wants you to be safe! Blue Line Futures will never contact you via a third party application. Blue Line Futures employees use only firm authorized email addresses and phone numbers. If you are contacted by any person and want to confirm identity please reach out to us at info@bluelinefutures.com or call us at 312- 278-0500 


 


On the date of publication, Phillip Streible did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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