Analysis

GoldCrypto

Trader thoughts - a stealth rally in Crypto and Gold

Chris Weston
Head of Research
7 Feb 2022
There’s been a stealth creep in Crypto and precious metals of late, but they've kicked onto the radar and commanded more airtime on social media and trading floors.

I will refrain from saying either market have been bought as an inflation hedge as there is simply little correlation between crypto/gold and expected inflation – I certainly see Gold as a better portfolio hedge against a central bank pivoting in their stance and a potential walk back of rate hike expectations. I guess when rates pricing is so rich across the whole developed market spectrum and yield curves are flattening out (some see this as a rising chance of a future recession), perhaps buying some insurance, within a broad portfolio, against repricing makes sense.

Either way, Gold and Silver are finding buyers despite higher US real rates and a modestly stronger USD.

On the daily, Silver (XAGUSD) has found so much buying support of late between $22.40/00, with price subsequently consolidating before the buyers have now stepped up their game – we pushed through the 38.2% fibo of the late January decline and $23.60 should now be the near-term target. Gold wants to have another sniff at downtrend resistance at $1847, a level that seems so important for the gold market. Clients are largely feeling gold has had its fun, with 60% of open positions held short now.

Gold weekly chart

Preview

(Source: Tradingview - Past performance is not indicative of future performance.)

Staying in the commodities scene and Soymeal was my ‘Play of the Day’ in last week's The Trade-Off and that is trending nicely, as is the case in several commodities I watch. There’s a reason why CTAs (trend-following funds) often have so much exposure to soft and agricultural commodities – for swing and position traders, these markets trend better than any other market. The move is now quite mature, there is no doubting that, but this is why we use a trailing stop – for these types of plays we can use an ATR trailing stop loss.

Preview

(Source: Tradingview - Past performance is not indicative of future performance.)

Crypto has traded in a similar fashion as Gold and Silver, and as we’ve been only too accustomed to for many years, with a higher percentage move. XRPUSD has seen the bigger move in the coins we offer, but Doge and Dash have also seen outsized moves. I don’t mind the shape of ETH, but Bitcoin looks interesting here, with price breaking the 44k mark and the supply zone seen throughout January – this looks strong, having rallied for five straight days and the best run since September.

Bitcoin is a momentum vehicle for me – I only take longs when it's rallying and short when it's falling – simple but when Crypto is a pure flow type instrument hitching a ride and aligning with the collective thoughts of the market serves me well.

Ready to trade?

It's quick and easy to get started. Apply in minutes with our simple application process.

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.