Gold/Silver: creating energy alpha
It was another"hot" week in commodities, with the highest CPI reading since July2008, at 5.4% annually. Food inflation rose to 4.5%, the highest reading since2011 and showing no signs of slowing down. I cannot stress how important it isto have a "real asset" basket in your investment portfolio. Many ofyou choose Gold and Silver as your tangible assets to combat inflation (I havesome too); however, I suggest broadening those pure price plays across severalmarkets. Running down the numbers on the week Copper +10%, on the monthGasoline +12%, Platinum +12% and looking at the "Fear Gauge" the VIXis -25%, ultimately throwing caution to the wind.
After eight straight weeks ofgains, Crude Oil futures reached a new cycle high at $82.88. For those of youthat have never traded energy futures, we created the Energy Alpha program thathas half the annualized volatility of the S&P 500 and looks to seek valuein short and long-term fundamental expectations using a proprietary multifactormodel. You can request the performance sheet and more informationhere:GetEnergy Alpha
Daily Gold Chart
Monitoring the situation inGold, we saw the IMF come out with a "Stagflation" announcement whichboosted prices back up to $1800 oz. I had reiterated in many past articles thatstagflation is the best economic environment for Gold and second Deflation,where it acts as an asset placeholder. The problem Gold is facing right now isthe anticipation of a reduction in the loose monetary policy when the Fedbegins to "taper." What the Fed is going to fail to realize is thatthe "transitory" inflation will remain much longer than anticipated.The demand destruction from higher prices will reduce growth, cap treasuryyields, and create a floor under Gold prices. We have to play the waiting gameof how high inflation needs to run before the Fed becomes caught. Myanticipation is the earliest would be December but most likely the end of thefirst quarter. In the meantime, use corrections to add the 10 oz Micro Goldcontracts incrementally at critical levels of support. If you have nevertraded futures or commodities, I just completed a new educational guide thatanswers all your questions on how to transfer your current investing skillsinto trading "real assets," such as the 10 oz Gold futures contract.You can request yours here: Trade Metals, Transition your Experience Book.
By Phillip StreibleContributing tokitco.com
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phil@bluelinefutures.comwww.bluelinefutures.com