RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Metals

Silver Showing Upside

Posted 07/24/2019 2:13PM CT | Frank D. Cholly

Precious metals appear to have found a bottom. While silver has rallied $2 per ounce over the last two months, roughly 13%, it is still relatively cheap with the potential for substantially more upside. There are a few factors fueling this fire. The stock market sitting at all-time highs with a lot of uncertainty on china and interest rates is making buyers cautious. Based on the fed funds today, the probability of a rate cut at the next FOMC on July 31st is priced in at 100%. The odds of a 25pt cut is 74.6% with the odds of a 50pt cut at 25.4%. Over the last month, these odds have been all over the board. With investors cautious to purchase stocks and bonds, where will the money go? Precious metals. Investors are historically bullish on metals and now have a reason to start buying again after getting burned over and over. One of the benefits of investing in the precious metal futures is that you don’t have to get out if this isn’t the bottom. Traders have the ability to take delivery and hold it till the prices increase, where this is something that they cannot do or not easily do with other commodities. 

I believe silver has the most upside potential out of the metals complex.  Silver has been lagging gold and is starting to play catch up. The price ratio of gold/silver reached 93:1 and is currently at 87:1. I believe this ratio will narrow to at least 75:1, with silver trading $20 an ounce and gold at $1500 ounce.  I recommend limited risk long term bullish option strategies. This not only limits risk but increases the leverage and gives you more bang for your buck. The monthly chart broke out above the $16.20 double top from back in January and February of this year. The next upside target is $17.41 with $19 above that. 

Silver Monthly Chart
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Frank D. Cholly

Senior Market Strategist
<p>Frank has been involved in many aspects of the futures business, from taking and placing orders to providing high-quality order execution service. As a second-generation participant in markets at the Chicago Board of Trade, Frank spent his early years working in the Treasury bond pit servicing both institutional and retail clients. He then expanded his brokerage duties and began covering a wide range of markets, including stock index, metals, grains and the balance of the interest rate sector. Ultimately, he turned his full-time focus to the grain market, dealing primarily with proprietary and commercial business. Frank was a senior commodities broker at Lind-Waldock prior to joining RJO Futures in 2011.</p>
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