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Precious Metals

Precious Metals Weekly Component Report PDF-09.20.2022

Precious Metals Weekly Component Report Spreadsheet-09.20.2022

Comments:

Platinum moved higher since September 14, while gold, silver, palladium, and rhodium prices fell. Gold and rhodium led the way on the downside with over 2% declines.  

Gold and silver mining shares moved lower, underperforming the metals since September 14. The price action in the mining shares was bearish for the metals as the market expects another substantial interest rate hike. Gold fell to a low of $1,661.90 on the active month December COMEX futures contract over the past week, violating short and medium-term technical support levels as the precious yellow metal fell to the lowest price since March 2020.

Trends:

The short-term trends are lower in silver, platinum, and palladium futures markets remained mostly steady, while gold continued to decline in a bearish trend. The action in the mining shares was bearish since last week. Open interest in gold edged higher, while the metric moved lower in platinum, silver, and palladium, with platinum leading the way lower with a 7.92% decline after last week’s 12.77% drop. The precious metals sector faces rising interest rates and the highest US dollar in two decades, which has caused gold to break to the downside. However, the price action has been calm as the market awaits the September 21 Fed meeting results.    

Recommendations:

  • We are long the SILJ ETF product that holds junior silver miners. I rate SILJ a hold at the $8.93 level.
  • I recommend holding 5% to 10% of portfolios in gold.
  • Keep GDX, GDXJ, SIL, and PPLT on your radar. On a significant dip, I recommend a scale-down buying approach leaving room to add on further weakness. We are flat most of these ETF products as of September 20. Higher interest rates and a rebound in the dollar index do not support gains in the precious metals futures market but the recent price action could be the sign of bottoms.
  • I remain mostly bullish from a long-term perspective but have been on the sidelines over the past weeks. I would consider dipping a toe into the precious metals and mining stocks on a downside spike over the coming weeks. There is no change from past weeks reports. Keep an eye on the price action after Wednesday’s Fed meeting for a clue about the future path of least resistance of prices.

A Final Note

Tomorrow, the Federal Reserve’s Open Market Committee will increase the short-term Fed Funds Rate by a minimum of 75 basis points, and any surprises will be on the upside. The central bank has not been shy about sacrificing a recession to push inflation to its 2% target rate.

However, some of the issues causing rising prices have been caused by the war in Ukraine and the overall geopolitical landscape. Higher food and energy prices are demand-side economic issues, and the potential for higher prices remains a clear and present danger. The bottom line is the war in Ukraine and relations between the US, and the Chinese-Russian alliance is far beyond the Fed’s pay grade. The third quarter ends next week, and markets across all asset classes remain on shaky ground. Approach any investments or trades with a clear risk-reward plan and stick to the program. As we move into October and Q4, expect lots of price variance in all markets as uncertainty breeds volatility.

I will be away until October 3. Be careful out there, as conditions could be treacherous.

The schedule for upcoming reports is as follows:

  • Friday, September 23 – No summary report
  • Wednesday, September 28 – No commodity report
  • Friday, September 30 – No summary report
  • Monday or Tuesday October 3 or 4 – Quarterly commodity report
  • Wednesday, October 5 – Weekly commodity report covering September 20 through October 5
  • Friday, October 7 – Weekly summary report covering September 16 through October 7

I will return to the normal Wednesday/Friday report schedule on October 5.

Thank you for your continued support!

 

Warm regards,

Andy Hecht

 

Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal.  This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.