Garner talks silver futures trading with Dukascopy
Silver futures bulls have been rewarded in 2017, can it last? Carley Garner, a commodity broker at DeCarley Trading, recently discussed this with Dukascopy TV!
Here is a transcript of the discussion between Carley Garner, an experienced futures broker, and Dukascopy TV regarding the silver futures markets:
1. Silver prices rose on Tuesday after a soft start to the week, as the U.S. dollar headed for its first decline of the month. However, with Janet Yellen saying the US Fed will likely need to raise interest rates in an upcoming meeting will Silver's price rise be short lived?
The metals markets, and the financial markets for that matter, seem to have little concern over the Fed. It is a little ironic; for years the biggest story has been the Fed and interest rates but in today’s environment it is all about fiscal policy and the Trump administration. Even more out of the ordinary, in recent weeks the metals and the US dollar have been going up together. That said, the Fed Funds futures markets have priced in a roughly 30% chance of three interest rate hikes by the December 2017 meeting, so we suspect metals traders are already accounting for much of this. After all, both gold and silver futures are well below their November highs despite a respectable recovery in recent weeks. That said, we’ve noticed that seasonal patterns call for weakness in silver prices starting in late-February to early-March, so we do believe the upside will likely be limited to the $18.50 to $18.80 area.
2. Silver has been outperforming stocks in 2017, with the price up nearly 11% already this year. Do you forecast this trend to last for all of 2017, or similar to last year, could the end of 2017 trip Silver up again?
Based on historical data provided to us by Moore Research Center Inc, the most likely annual high for the price of silver is has occurred over the previous 30 years in the middle of February. Thus, the market has an inherent tendency to trade firmer early in the year only to lag as the year progresses. In fact, the most probable annual low in silver is around November 1st. Of course, these are simply broad guidelines but they do provide some insight into the silver market’s propensities. Nevertheless, commodities and particularly silver futures are still relatively cheaply priced whereas US stocks are arguably over-priced. Thus, I suspect silver has a good shot at outpacing the equity market this year.
3. What are you looking out for when trading Silver? Has your strategy changed considering how strongly politics is influencing the markets?
To be honest, we tend to encourage our clients to trade gold rather than silver because both gold futures and options offer more liquidity to speculators. With that in mind, when it comes to the metals complex it is naïve to completely ignore politics in market analysis. Particularly because the metals attract safe-haven dollars during times of turmoil. As much as the equity market has been celebrating Donald Trump’s proposed fiscal policy changes, the metals markets seem to be pricing in some risk premium just in case there is a foreign affairs mishap. In the absence of an unforeseen disaster, this risk premium will likely diminish as time goes on and traders become more comfortable with the new administration. By the end of the year, the markets will likely have shifted focus away from politics and toward the next new and exciting story. In other words, we believe precious metals futures traders will gradually return to traditional fundamental analysis leaving politics aside as the luster wears off.