Table of Contents
I. The Core Philosophy: The Dual Nature of Metals
First, you must understand what you are trading. Gold and silver are not stocks. They are unique assets with a dual personality:
Monetary Asset (The "Fear" Trade)
They are ancient forms of money and a store of value. They have no counterparty risk. This personality thrives on:
- Low/Negative Real Interest Rates: The single most important driver. When government bonds yield less than inflation, gold becomes attractive.
- Currency Debasement & US Dollar Weakness: A weaker dollar generally means higher gold prices.
- Geopolitical Instability: War, political crises, or financial collapse fears increase safe-haven demand.
Industrial Commodity (The "Growth" Trade)
Especially true for silver (50% industrial use). This personality thrives on:
- Global Economic Growth: A booming economy increases demand for products using these metals.
- Technological Trends: Green energy transition (solar, EVs) is a massive tailwind for silver.
Our strategy must profit from both personalities, understanding which one is in the driver's seat at any given time.
II. The Analytical Framework: The Four Pillars
I make decisions based on a confluence of evidence from four key pillars. I never rely on just one.
Macro-Fundamental Analysis (The "Why")
This is our strategic overlay. It tells us the long-term direction of the tide.
Key Metric: Real Interest Rates - US 10-Year Treasury Yield minus CPI or TIPS breakeven rates.
Rule: If real yields are trending down and below 1%, long-term bullish bias. If trending up and significantly positive, bearish/neutral bias.
Other Factors: US Dollar Index (DXY), Fed policy, central bank gold purchases, global debt levels.
Intermarket Analysis (The "Context")
No market moves in a vacuum. Analyze how metals behave relative to other assets.
Gold/Silver Ratio (GSR): Primary relative value tool. High ratio (>85) = silver cheap. Low ratio (<50) = silver expensive.
Gold vs. Equities: Moving together = dollar-driven. Diverging = safe-haven trade.
Gold vs. Bonds: Shows if gold is acting as inflation hedge or deflationary safe haven.
Technical Analysis (The "When")
For timing entries and exits. Fundamentals tell me what to buy; technicals tell me when.
Key Tools: Moving averages (50/200 DMA), support/resistance levels, RSI momentum, volume confirmation.
Golden Cross: 50 DMA crossing above 200 DMA = strong bullish signal.
Volume: Breakout on high volume = confirmation. Rally on declining volume = warning.
Sentiment & Positioning (The "Who")
What other traders are doing. Be with smart money, fade dumb money extremes.
COT Report: Watch Commercials (smart money) vs. Managed Money (speculators). Contrarian signals at extremes.
ETF Flows: Monitor GLD/SLV flows. Large inflows confirm conviction. Extreme inflows after run-ups can signal tops.
III. The Trading Strategies (The "How")
Based on the four pillars, I deploy capital using three distinct strategies:
The Core Position
(Long-Term Investor)
Goal: Build long-term strategic allocation as inflation and portfolio insurance hedge.
Signal: Convergence of bullish fundamentals: dovish Fed, negative falling real yields, DXY structural downtrend.
Execution: Buy deep pullbacks to major support (200-week MA). Don't trade actively.
Instruments: Physical bullion, GLD, PSLV.
Gold/Silver Ratio Trade
(Relative Value)
Goal: Profit from ratio mean-reversion without directional view.
Signal: Ratio at historical extremes.
Long Silver/Short Gold: When ratio >85-90 (silver undervalued).
Long Gold/Short Silver: When ratio <45-50 (gold undervalued).
Instruments: Futures (/SI, /GC) or ETFs (SLV/GLD).
Tactical Swing Trade
(Weeks to Months)
Goal: Capture major price swings based on prevailing narrative.
Signal: Clear catalyst + technical setup.
Example: Dovish Fed → real yields drop → gold breaks consolidation on high volume + commercials not heavily short = A+ long setup.
Instruments: Futures, options on futures, leveraged ETFs (extreme caution).
IV. Risk Management: The Shield
Most Important Section
You can have the best strategy in the world and still go broke without proper risk management.
The Five Pillars of Risk Management
- The 1% Rule: Never risk more than 1% of trading capital on a single trade. Period.
- Position Sizing: Size = (1% of Capital) ÷ (Entry Price - Stop-Loss Price). Stop-loss determines size, not the other way around.
- Always Use Stop-Loss: A trade is a hypothesis. Stop-loss is where hypothesis is proven wrong. Honor it without emotion.
- Know Your Correlations: Long gold, silver, and miners = much higher than 3% risk due to correlation.
- Discipline Above All: Rules without discipline are worthless. Discipline without rules is chaos.
V. Best Sources of Data: Your Arsenal
Real-Time Data & Charting
TradingView: Best all-in-one platform for charting, technical analysis, and social collaboration. Can overlay DXY and US10Y on XAUUSD.
Bloomberg Terminal / Refinitiv Eikon: Professional standard. Expensive but unparalleled in data depth and speed.
Fundamental & Economic Data
St. Louis FRED Database: Best free source for US economic data. Chart everything from treasury yields (DGS10) to inflation expectations (T10YIE).
ForexFactory / DailyFX: Economic calendar for key releases and central bank meetings.
World Gold Council & Silver Institute: Quarterly supply/demand reports essential for fundamental analysis.
Sentiment & Positioning Data
CFTC Commitment of Traders (COT): Official source. Barchart presents data in user-friendly, chartable format.
News & Commentary
Bloomberg & Reuters: Real-time, unbiased financial news.
Kitco News: Industry standard for precious metals-specific news.
Financial Times / Wall Street Journal: High-level macroeconomic analysis.
Final Words
Discipline is your shield, risk management is your armor, and this strategy is your sword. Go to the market prepared.