RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Metals

Gold Futures Have Established a Solid Floor

Posted 08/16/2019 7:56AM CT | Joshua Graves

It seems hard to find a reason to be short on gold these days, so why not look at where the near-term bottom is and play the upside? Let’s look at the core reasons to be long. The first, and a little shocking, is the 2/10-year yield curve finally inverted which has a perfect 50-year track record of predicting a recession. Once this inversion happens a recession follows on average 18 months later with a 100% accuracy according to history. German and European economic growth has come to almost a halt with the UK and German GDP numbers posting negative growth numbers recently. World famous hedge fund manager Ray Dalio recently stated that a recession before the end of 2020 he sees at 40%. There is little to no reason to be short gold right now other than a pure chart play betting that we should see a correction just below 1500 before we take off once more. I would be positioning for a longer term move higher in gold well beyond 1600 given the warning signs we are already starting to see abroad.

The one factor that makes me think otherwise is that the economic data here in the U.S. continues to be strong with retail sales and jobless claims recently coming in much better than expectations, along with a revision up in the next quarter GDP. Things seem to be plugging along just fine despite a trade war raging on. Investors should look at building a long position in outright futures, or calculated risk call spreads with various ways of structuring the trade to keep costs down and leave upside open. If you would like more information on how to play gold please contact me directly.

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Joshua Graves

Senior Market Strategist
Josh began his career in May of 2013 after graduating from Purdue University, West Lafayette. He received a degree in Agricultural Economics, with a Certificate in Entrepreneurship. He started at Paragon Investments in Kansas, the heart of wheat country. While working there he developed long term relationships with corn, soybean, and wheat producers, speaking with them on a weekly basis. His goal was to market their physical production more effectively through tracking basis, as well as hedge their exposure in the grain and cattle markets through a variety of futures and option strategies. He then moved to Florida to work for PFL Petroleum, a physical biofuels brokerage, and gained significant exposure to OTC and physical energy markets. Trading has been a passion from day one of his career. In his free time he stays active in downtown Chicago, attends sporting events, and holds an FAA Private Pilot’s License and flies Cirrus and Cessna aircraft regularly.
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