Podcast Link: https://michaelmelissinos.podbean.com/e/an-update-on-precious-metals/
Precious metals have been beaten down since their 2011 peaks. Remember when Gold and Silver shot up to $1,900/oz and $50/oz? 2011 was the final thrust in a multi-year bull market for precious metals, but over the past five years, Gold has fallen -19%, Silver -45% and Platinum -40%.
Trend Followers have been playing these markets mostly from the short side over the past five years. Since 2016, however, prices have stopped going down. Gold has been leading the way higher, but we haven’t seen a massive trend evolve – yet.
With the U.S. Dollar and government bonds in decline, investors may be looking for “safe” assets to park money into – especially if inflation is making a comeback.
Over the past year or so, long term trend followers have been initiating long positions in Gold and more recently in Platinum and Silver (some are probably still short Silver). These positions are fairly young and the trends haven’t displayed strong momentum. It remains to be seen if they will evolved into strong uptrends or if prices will fall back into their ranges of the past several years.
Five Year Precious Metals Performance
Prices are still far off their 2011 highs, but have been slightly rallying off of 2016 lows. As a trend follower, I don’t care if they recoup their recent years’ losses or not. Prices can fall another 50% for all I care. What I care about is aligning with the trend, and right now the downtrend has stopped and it appears a new uptrend is trying to take shape.
Ten Year Precious Metals Performance
Gold has held up better than Silver and Platinum over the past 10 years. Outside of the major trends sandwiching the Financial Crisis, there hasn’t been much opportunity for trend followers since. Since mid-2015, prices have virtually flatlined and such price action presents a problem for trend followers.
In my experience, markets tend to oscillate back and forth between smooth trends and choppiness. There’s no way to know when trends will start and stop, but the trick is to be in business to take advantage when they pop up.
Right now, trends might be popping up in precious metals.
Long Term Trend Following in Gold
Long term trend followers get long Gold at various points in 2017. Prices have trended higher over the past year or so, but major resistance sits above at ~$1,380/oz. If prices can punch through and hold above that level, I think that could help prices gain momentum and accelerate even higher.
Time will tell. For now, and always, we follow the trend and protect our capital with sell stops below. I’ll provide another update in a few months.
Thanks for reading.
Article written by Michael Melissinos. Michael Melissinos is the Founder and CEO of Melissinos Trading, a Managed Futures asset manager specializing in identifying and capturing price trends in global commodity and financial markets. He also maintains a blog at michaelmelissinos.com where he writes about various investing topics.
Past Performance is Not Necessarily Indicative of Future Results. There is always a risk of loss in futures trading.
This communication is for information purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy any financial product, an official confirmation of any transaction, or as an official statement of Melissinos Trading LLC. All information is subject to change without notice.
These charts show examples of trends. Inclusion of a chart as a trend example does not imply any kind of recommendation to buy, sell, hold or stay out.