Key Macro Chart: Key Differences in Silver Breakout Compared to May (2024/9/23)

Oil Price

Analyst: Long-term quarterly charts show that oil prices, after breaking through important resistance in 2021, may be establishing a historical support level. This development is crucial and may provide an opportunity for oil prices to find a bottom, despite the uncertainty brought by the U.S. election.

Currently, investors' long positions in WTI contracts are at the lowest level in the past decade, indicating a market bias, which may create conditions for a significant rebound in energy prices in the near term.

Furthermore, the Federal Reserve has decided to further ease monetary policy as financial conditions have fallen to a two-year low, which may exacerbate inflationary pressures. It is worth noting that there is a close relationship between oil prices and breakeven rates, as energy prices have a significant impact on inflation expectations.

Rate Cuts vs. Gold

By analyzing the performance of various assets after the first rate cut by the Federal Reserve, the easing cycle is divided into two categories: "accompanied by recession" and "soft landing", showing vastly different returns for assets.

Take a look at gold in the chart below: it initially rose in the first few weeks after the first rate cut, but the returns diverged significantly between the recession scenario and the soft landing scenario thereafter. If you believe that a recession is imminent, then you should definitely consider buying gold aggressively.

Silver

Analyst: Human nature remains unchanged. Traders often buy too early during intermediate corrections and sell too quickly during intermediate uptrends, trying to catch the market's bottoms and tops.

Looking back to May of this year, silver finally broke through the long-standing $30 resistance level. The issue is that this breakthrough occurred in the late stage of the intermediate cycle, breakthroughs in the late stage of a cycle often fail to sustain and easily form bull traps or false breakouts.

However, as shown in the chart below, this breakthrough is currently happening in the early stage of the intermediate cycle, which means it could lead to a sustained price trend. Now is not the time to sell cautiously, but a moment to actively position oneself.

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