We had an eventful week in the markets with a Friday twist that will have me work overtime this weekend to sort things out. I can quickly figure out that the S&P 500 is heading to a new all-time high, while I cannot think of a 10-year yield dropping to a 3-month low. In addition, the dollar index rose sharply, bringing gold back below $ 1,900 an ounce, which made me believe the Fed was flexing its monetary muscles. Finally, the rise in platinum prices was halted by news that a shortage of microcircuits stopped car production, which temporarily led to an increase in supply and a decrease in the demand structure. The only metal that seems to have this right is silver, and prices are up 57% since last June, when commodities and inflation bottomed out, and technical indicators suggest this will set up another potential breakout. To further help you understand quantitative analysis of precious metals markets, we have created a free Macro Gold Trends Book, which has been enhanced with silver slides. You can request yours here: Free Gold Trends Macro Book.
Over the past 13 years at Kitco, I have spoken to many of you and you have pointed out that you are “physical handlers”. I respect that; I spent most of my 20s piling up small central bank bullion that eventually got so big that I currently have to rent a vault from a financial institution to house it. Will I ever sell? Probably not, it’s too painful, plus I’ll need to find a reliable buyer, deal with the variance in the physical market, and try to settle it with rapid price fluctuations. Heck, I’m lucky the Reddit crowd is targeting silver this Monday at $ 32 an ounce; we will see a rise to $ 40 by Tuesday, Wednesday. I will finally load the pickup. Then, trying to unload it somewhere, we’ll trade back at $ 28.50 when the newspaper arrives and sells daylight. So I assume that I will be a long-term “material gatherer” and will let my future children do it when I leave in 50 years, just like a boat, a car, a house, etc.
March Silver Strategy
Now suppose I wanted to take a different approach using the futures and commodity markets. Silver is one of the most liquid markets, traded almost 23 hours a day, and the bids are very similar to the spot market. With the firm belief that silver will continue to rise over the next nine months, we recommend our clients with a minimum capital risk of 5-10k. Position themselves within the calculated risk “call spread” with a risk of 1: 3 before the reward scenario.
We build the spread by buying the $ 29 2022 March call call and simultaneously selling the $ 31 2022 March call call. Since silver futures are 5,000 ounce contracts, each one cent move represents $ 50 and each dollar move represents $ 5,000. Since this spread is two dollars, its maximum value will be $ 10,000 and the present value of the spread is 50 cents or $ 2,500 plus any commissions and fees. This also poses your maximum risk. The maximum win would be if the March silver futures price closes above $ 31 an ounce after February 23, 2022. The maximum winnings are $ 10,000 minus $ 2,500 (value) minus your commissions and fees, resulting in about $ 7,425 (plus or minus your brokerage). … The spread at any time a futures contract is traded can be liquidated before it expires; however, it may not capture all of the maximum profit due to the remaining time. Whether you would like to learn more about the strategies we implement or learn more about technical analysis, we have created a guide that guides you through the steps to create an actionable plan to use as a basis for entering and exiting the market. You can request yours here: 5 Step Guide to Technical Analysis for Precious Metals.
Disclaimer: The views expressed in this article are those of the author and may not reflect the views Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee this accuracy. This article is for informational purposes only. This is not a call for the exchange of goods, securities, or other financial instruments. Kitco Metals Inc. and the author of this article is not responsible for loss and / or damage arising from the use of this publication.