Should Gold (GLD) and Silver (SLV) Be Trading Even Higher?

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Mike Hammer | February 27, 2020 10:58am NYSE:GLD

NYSE:GLD | News, Ratings, and Charts

Boy oh boy.  Watching the markets this past week might lead one to think investors aren’t rational.

Or that maybe the zombies had risen up and eaten their brains.

walking dead zombies










For a few days there, the US Dollar rose. Not unusual. But silver and gold also rose.  La-la land.

silver shares trust

Then someone who actually reads numbers noticed that Japanese traders were swapping the Yen for the USD. Probably a smart move, as their economy is still stuck in the mud, and at some point, you have to try something different.

Silver and gold were rising because people got scared about coronavirus and the havoc it is wreaking on the world economy. The only problem is we haven’t gone through a reporting period with coronavirus, so only those on the inside know exactly how it’s hitting their bottom lines.

It’s not hard to figure out though.  When you have a country of 1.6 Billion (with a B) people, and about 600 million of them are “quarantined in place”, production is gonna suffer.

Which means sales suffer.  Which means profit takes a hit, hard.

Sadly, some bright spark then noticed that silver and gold had run up while the USD was running up, and when the first lull hit traders started selling silver, gold, and even palladium.

For a short time – 2 days in fact – the world almost seemed normal. Silver rose as the USD fell, and vice versa.  But then – crazy pants time again.

With all the uncertainty and likely economic impacts by gosh you gotta think precious metals are underpriced right now.

But we can’t be sure.  So the safest play right now for silver is probably some call options, maybe a month or two out. A favorite strategy is to find calls priced about twice as high as you’re willing to lose. Then trade with usual trading rules – set your stop (mentally with options), and don’t be afraid to get back in if it finds a bottom and starts rising again.

Sometimes the best trades take a try or two.  Remember: Small losses, big gains is the goal.


The Gold Enthusiast

DISCLAIMER: The author holds no position in any mentioned security.  The author is long the silver sector via a small position in USLV. He may daytrade around this position but has no intention of trading out of this core positions in the next 48 hours. He may also take a new trade-in silver options as indicated in the article; if so it will be a small position, certainly not large enough to affect market prices.

The SPDR Gold Shares (GLD) was trading at $155.96 per share on Thursday morning, up $1.99 (+1.29%). Year-to-date, GLD has gained 26.13%, versus a 13.46% rise in the benchmark S&P 500 index during the same period.

GLD currently has an ETF Daily News SMART Grade of B (Buy) and is ranked #1 of 33 ETFs in the Precious Metals ETFs category.

About the Author: Mike Hammer

Mike HammerFor 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.

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