The opinions expressed in this report are those of Inspirante Trading Solutions Pte Ltd (“ITS”) and are considered market commentary. They are not intended to act as investment recommendations. Full disclaimers are available at the end of this report.

Executive Summary

In the October 24 report, Inspirante Trading Solutions unravels the headwinds versus tailwinds for commodities like gold, silver, and copper in today’s market, while the narrative about the global economy evolves, illustrating nuanced strategies that help us navigate the ever-changing market landscape.

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Barbaric brilliance

Upcoming economic events (Singapore Local Time):






ECB Interest Rate Decision



U.S. Core PCE (Sep)



BoJ Interest Rate Decision



Eurozone HICP (Oct)



U.S. ADP Employment Change (Oct)



Fed Interest Rate Decision



U.S. Nonfarm Payrolls (Oct)

The next two weeks are packed with central bank interest rate decisions, inflation numbers, and employment data from major economies.

Markets in focus

Figure 1: E-mini Nasdaq-100 Index futures

After breaking down from the eight-month rising channel, the Nasdaq’s retest of the channel support was rejected. We might see a more pronounced downturn if it fails to hold the neckline above 14500.

Figure 2: E-mini Russell 2000 Index futures

The Russell 2000 index has also broken down from its eighteen-month symmetrical triangle. With yields on the rise, financing becomes prohibitively costly for small caps.

Figure 3: Gold futures vs. Silver futures

Gold and silver have both charted a V-shaped recovery of late. While gold successfully breached a multi-month descending triangle, silver only managed to return to its previous support, which now could act as resistance. The horizon looks brighter for gold.

Figure 4: Gold/Silver Ratio vs. U.S. Recessions (Monthly)

Historically, the gold/silver ratio has invariably risen during economic downturns, showcasing gold’s superior performance over silver amidst financial turbulence and strains.

Figure 5: Copper futures (Weekly)

Copper has broken its pivotal trendline support established in late 2022. The current post-pandemic landscape mirrors the 2009-2013 period strikingly. If past patterns hold, with looming uncertainties and potential economic decelerations ahead, copper might have a significant decline yet to come.

Our market views

Since the onset of the current rate-hiking cycle, the Federal Reserve has been committed to combatting inflation. Their aim? To tighten financial conditions, cool down economic activities, and ultimately curb aggregate demand in response to rising inflation. Several factors influence financial conditions: short-term policy rates, long-term rates, the strength of the U.S. dollar, the prices of risk assets, and credit spreads. To date, short-term rates have shouldered the majority of this burden. Case in point: the Fed Funds rate was lifted by over 500 bps in just twenty months.

As we approach the conclusion of this hiking phase, other components are gearing up to assume this pivotal role, continuing the trend of tightening financial conditions. Given the robust and resilient data emerging from the U.S. economy, this shift seems even more probable and essential. For instance, long-term bonds have had a notable, persistent sell-off. The U.S. 10-year treasury yield recently reached 5%—a level not seen since July 2007. At the Economic Club of New York Luncheon, Chairman Powell remarked, “Financial conditions have tightened significantly in recent months, and longer-term bond yields have been an important driving factor in this tightening.” This statement underscores the Fed’s awareness of recent bond market dynamics and their tacit acceptance of rising long-term yields—a sentiment not necessarily shared by equity bulls.

The marked increase in both nominal and real yields, coupled with a strong U.S. dollar, were anticipated to challenge gold—a “barbarian relic” that doesn’t offer any yield. However, gold has demonstrated remarkable resilience in recent price movements. Given gold’s long-standing reputation as a hedge against geopolitical tensions and economic uncertainties, the metal has witnessed a pronounced surge in interest. The recent geopolitical tensions have infused a “risk premium” into select commodities, and gold is no exception. As potential headwinds seem to wane (e.g., yields and the U.S. dollar exhibiting signs of peaking), tailwinds gain momentum, making gold increasingly compelling for portfolio diversification.

Within the realm of precious metals, the gold/silver ratio offers a captivating strategy for those who might have missed their notable rallies in recent days. Investors can effectively hedge risks by taking a long position on gold and shorting silver—essentially focusing on their relative performance. This approach might insulate them from potential pullbacks, particularly if the “risk premium” dissipated unexpectedly due to positive geopolitical shifts. Furthermore, silver, in contrast to gold, serves a dual purpose: it’s not only a precious metal but also plays a role in various industrial applications. As a result, when economic momentum slows, silver tends to underperform due to its industrial ties. Historical trends support this observation; this ratio often rises during economic downturns.

Another strategic consideration involves juxtaposing a long gold position against a short copper one. “Dr. Copper,” as a reliable economic health barometer, usually underperforms when the economy cools. As the global economic narrative evolves, understanding these nuanced strategies empowers us to navigate the ever-shifting market landscape.

How do we express our views?

We consider expressing our views via the following hypothetical trades1:

Case study 1: long gold/silver ratio

We would consider taking a long position on the gold/silver ratio (GSR) by buying 1 micro gold future (MGCZ3) at the current level of 2,005, and selling 1 micro silver future (SILZ3) at the current level of 23.8 with GSR at 84.2. We would place the stop-loss below 80 for a maximum potential loss of 4.2 points. As shown in Figure 4, the GSR has the potential to reach 100, a hypothetical gain of 100 – 84.2 = 15.8 points. Each micro gold futures contract represents 10 troy ounces of gold, and each point move is USD 10. Each micro silver futures contract represents 1,000 troy ounces of silver, and each point move is USD 1,000. Both legs have similar notional values (2,005 x 10 = USD 20,050 for micro gold and 23.8 x 1,000 = USD 23,800 for micro silver). We can look at one hypothetical scenario to understand the approximate dollar amount of a point move in the ratio. Assuming silver price stays unchanged and the gold price drops to 1,980, the GSR becomes 1,980 / 23.8 = 83.2. The overall loss, which only comes from the gold position in this case, is (2,005 – 1,980) x 10 = USD 250. CME also offers margin offset for gold/silver ratio spreads.

Case study 2: short copper futures

We would consider taking a short position on copper future (HGZ3) at the current level of 3.58, with a stop-loss above 3.8, which could bring us a hypothetical maximum loss of 3.8 – 3.58 = 0.22 points. Looking at Figure 5, if the decline continues, copper price has the potential to fall to 3.1, a hypothetical gain of 3.58 – 3.1 = 0.48 points. Each copper futures contract represents 25,000 pounds of copper, and each point move is USD 25,000. Micro copper futures are also available at 1/10 of the standard contract size.

1 Examples cited above are for illustration only and shall not be construed as investment recommendations or advice. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. Please refer to full disclaimers at the end of the commentary.


The opinions and statements contained in the commentary on this page do not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs. This content has been produced by Inspirante Trading Solutions Pte Ltd (“ITS”). CME Group has not had any input into the content and neither CME Group nor its affiliates shall be responsible or liable for the same.



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