Weekly Gold and Silver Futures Recap with Mike Seery

It's time for our weekly commodity futures recap with our trading partner Mike Seery. He has been Senior Analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets. And frequently appears on multiple business networks including Bloomberg news, Fox Business, CNBC Worldwide, CNN Business, and Bloomberg TV. He is also a guest on First Business, which is a national and internationally syndicated business show.

Gold futures in the April contract are currently trading at 1,277 up around $21 an ounce with extreme volatility after selling off more than $30 in Thursday’s trade while settling last Friday at 1,293 going out this Friday afternoon around 1,276 finishing down $17 in a wild trading week. Gold futures topped out slightly above $1,300 as profit taking ensued as prices are still trading above their 20 and 100 day moving average and I’m still recommending a bullish position and if you took that original trade place your stop loss below the 10 day low which now yesterday’s low at 1,252 risking around $24 from today’s price levels or $2,400 risk per contract plus slippage and commission.

As I’ve talked about in many previous blogs I do think gold is now being used as a currency due to the fact that the Euro currency and many foreign currencies are absolutely falling out of bed as interest rates in many countries have gone negative so who wants to place money into a bank and lose money as investors now prefer gold which has no dividend but still it’s better than a negative return. Volatility in many of the commodity markets is very high at the current time especially the precious metals and I expect that to continue despite the fact that the U.S dollar hit an 11 year high continuing its secular bull market in my opinion as I do think 100 is on its way in the next several months as the United States economy is doing much better than any economy worldwide.

Gold futures have rallied from a contract low of 1,130 all the way up to about 1,310 in the last several months as money is finally starting to come out of the S&P 500 sending money flows back into the precious metals also sending high volatility which I think is here to stay especially with all of the worldwide problems
Trend: Higher
Chart Structure: Solid

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Silver futures in the March contract are up $.50 this Friday afternoon in New York currently trading at 17.30 an ounce settling last Friday at 18.30 finishing down about $1.00 for the trading week with extreme volatility as Thursday’s trade pushed silver lower by over a $1.25 as I’ve been recommending a bullish position in this market when prices broke above the 17 level and if you took that trade continue to place your stop loss below yesterday’s low around 16.71 still risking around $.60 from today’s price levels.

Silver volatility is extremely high at the current time so make sure that you use the proper amount of contracts risking only 2% of your account balance as I like to trade the mini contract which is $10 a cent versus $50 a cent on the large contract as high volatility has also entered the S&P 500 and the currency markets in recent weeks.

The stop loss will remain at that level for the next 8 trading sessions so you’re going to have to be patient if you are long this market. As I talked about in previous blogs I believe silver is now being used as a currency due to the fact that interest rates around the world are so low that investors are looking at silver and gold as a currency replacing traditional paper currencies as nobody wants to own anything in Europe.

Many of the commodity markets continue to head lower however silver and gold are the only 2 commodities that I am bullish but the problem here is if the rest of the markets continue to head lower silver and gold gains could be limited so just place the proper stop loss and if we are stopped out look at another market that is starting to begin another trend.
Trend: Higher
Chart structure: Solid

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Mike Seerys Trading 101...."When Do You Enter A Trade"

What are your rules to initiate a trade on the long or short side of the commodity market? I have been asked this question many times throughout my career and my opinion is simply to buy on a 20-25 day high breakout in price on a closing basis only or sell on a 20-25 day low breakout to the downside also on a closing basis. Many times the price will break the 25 day high and sell off later in the day only to have your trade be negative very quickly.

I would rather buy the commodity at a higher price on the close because that gives me more confidence that the market has truly broken out. However there are more ways to skin a cat and this is not the only answer because some other trading systems might rely on different breakout rules that have also been reliable.

Remember always keeping a 1%-2% risk loss on any given trade therefore minimizing risks because the entry system I use always goes with the trend because I have learned over the course of time the trend is truly your friend in the long run. I also look for tight chart structure meaning a tight trading range over a period of time with relatively low volatility. I try to stay away from a crazy market that hit a 25 day high in 2 trading sessions versus the 25 high that actually took 25 days to create.

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Tony Hall: Gold, Platinum and Brent Oil Will Lead Gains in Commodities

Gold, platinum and Brent oil will lead gains in commodities as investors seek to protect their assets and shortages emerge, according to Tony Hall, the hedge fund manager who earned 33 percent for his clients this year.

Gold may climb 21 percent to a record $2,200 an ounce by the end of 2011, platinum may gain 10 percent and Brent could rise 25 percent to $140 a barrel in six months, said the London based chief investment officer of Duet Commodities Fund Ltd., which manages more than $100 million of assets. Its eight month gain compares with a mean return of 0.6 percent across commodity hedge funds tracked by HedgeFund.net and beat larger rivals such as Clive Capital LLP and Fortress Commodities Offshore Fund Ltd.

“The fear of recession, the fear of worse economic numbers is weighing on commodities and stopping gains from fundamentals from coming through,” said Hall, 31, who spars as a heavyweight boxer. “We still believe in the gold story. If you believe the world is in trouble or in further economic growth disruption, then gold is a good safe haven. If you believe that the world is going to come out okay, then it’s a good inflation hedge.”

At a time when the MSCI All Country World Index of global equities declined 10 percent this year, the Standard & Poor’s GSCI measure of 24 commodities advanced 2.7 percent, led by silver, gold and energy.

Investors held about $431 billion in raw materials by July, an almost fivefold gain in six years, Barclays Capital says. As equity holders contend with losses of $8.5 trillion since May, speculators made their biggest wagers on higher commodity prices in almost three months in the week to Sept. 6 as they anticipated that even weaker economic growth will mean shortages. Read the entire Bloomberg article.