While working in futures and commodities for the past 20 years, one of the most important concepts that I learned is that if you can nail the right "commodity" in the correct "cycle," you can come out very well off, states Phillip Streible of Blue Line Futures.
Now each commodity is going to have a different cycle based upon the variables that impact them. For instance, corn prices are affected by supply, demand/exports, weather, and fluctuations in the underlying currency. For gold, it's a similar set, supply, demand, interest rates, and underlying currency changes. While it's simple for corn and gold, mining stocks tend to get complicated. You have to consider what metal they are mining, the price of the underlying metal, interest rates, fuel costs, labor costs, management, what country they are mining in, the correlation with the stock market, and I'm out of breath.
Keeping it simple, this week, we are starting to see the exhaustion of rising yields, declining dollar, and the deceleration within price sell-off in gold. Therefore, I am transitioning from a bearish stance on gold to more of an "opportunistic" approach looking for spikes in "gold put option volatility premium" as well as buying deep corrections when the public "panic sells." We will still maintain other asset classes such as energies, industrial commodities (copper, silver, platinum); however, gold's recent washout will justify tactical purchases at critical levels.
Technicals: As sentiment turned too negative through the end of last week, gold quietly held major three-star support at 1671-1680. Yes, headline sentiment had turned extreme, and the Commitment of Traders released last Friday, before the break below $1700, showed the lowest Managed Money Net-Long position in gold since May 2019. The last time the CoT was here was before gold broke out above its $1300 ceiling and when believers were few and far between coming out of the US-China trade war's dismantling of the metals complex. I ask myself, "If everyone has sold, who is left to sell?" In this case, there are a lot of traders on the sidelines that could carry this recovery.
Learn more about Phillip Streible at Blue Line Futures.
