Overnight, the Precious Metals are getting hammered after yesterday’s relief rally.
As we discussed in the Thursday Metals Minute, part of yesterday’s rally was partially technical. Where Gold punched through a series of consolidations, Silver maintained a bullish trend, and Copper failed to follow through from the June 4th sell-off and continues to hug the 50-DMA. The uptick in initial claims threw “fuel on the fire” and helped spark an explosive rally.
So what happened?
Overnight, news broke from Chinese sources that the PBOC (People Bank of China) would end its Gold reserve purchases after 18 straight months of inflows. This reminds me of Monty Python when the Black Knight gets his arm chopped off and says it’s “Merely a flesh wound.” We must take this development seriously and reflect on when those purchases started and the price the futures were trading at 18 months ago.
*November 2022 $1650-1700 an ounce
The sell-off also brings back the old saying that there are old traders and bold traders, but there are no old bold traders. It becomes far easier for traders to hold onto a losing trade with the hopes of a turnaround rather than admitting that they are wrong and that the trade did not work out.
Simply put, remember to practice active risk management. A quick lesson: traders must remember that there are Big, Mini, and Micro contracts, as well as calculated-risk option strategies. Traders can define losses through stop losses at key technical levels, and one example based on time frame is to use the “10-day low or 20-day low for your stop” or 2x the Average true range.
Today, we will see the non-farm payroll, which could cement when the Fed Makes its first interest rate cut.
Expectations are for 182,000 vs 175,000 last month.
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