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JUL 02, 2019

Firecrackers and bottle rockets arent the only things exploding this summer. Gold and corn and have already put on a show. The yellow metal rose 13.5% a month and the yellow grain soared 38.5% in a little over a month, hitting our initial upside targets in the process. As we expected, both of these markets rose a little too far, a little too fast and are now in the midst of inevitable retracements.

RMB Group trading customers that followed our suggestion to exit their December $1,400 / $1,450 bull spreads in gold and half of their December $4.20 calls in corn have seen their patience pay off. Now that both markets are retracing, is it time to re-establish full on bullish positons? Lets take a look, starting with gold.

Data source: Reuters

Gold hit our first upside target of $1,435 per ounce and rallied as high as $1,442 per ounce before reversing dramatically, declining 4% to a low of $1,385 in a just five days. That low has held up so far. Gold is up $20 today which is good news for the June 2020 $1,450 / $1,500 bull spreads we suggested purchasing for $750 or less inearly June.Continue to hold these spreads as our original upside target of $1,500 per ounce and new upside target of $1,625 per ounce are now in play.

Gold volatility has risen and with it, the price of COMEX gold calls. This is bad news for anyone trying to add to or establish a new bullish position now. We will monitoring this market to more reasonable entry opportunities down the road. For now our focus is on silver.

Could Silver Be a Back Door Play on Gold?

Gold may be soaring but silver is sleeping. Compared to its richer cousin, the poor mans gold is getting poorer and poorer by the day. Like platinum, silver is now viewed by traders as an industrial rather than a precious metal despite thousands of years of history indicating otherwise.It now takes 92 ounces of silver to buy one ounce of gold. This is hard to imagine considering that gold is only 15 times rarer than its pauper cousin.

Data Source: FutureSource

The last time silver was this cheap vis--vis gold was in the early 1990s.How much poorer can silver get? Lets assume that the gold / silver ratio simply reverts back to old resistance at 82.50 ounces of silver versus one ounce of gold. Lets also assume that gold

Data source: Reuters

remains trading right where it is today at $1,408 per ounce. Divide $1,408 by $82.50 and you get a silver price of $17.07 per ounce. Thats $1.83 more than the $1.524 per ounce silver settled for today. And thats with the ratio merely retracing back to what were 30 year highs.

Those looking for low cost entry on the bull side of gold may want to consider taking a flyer on its destitute cousin instead. Silver options are reasonable right now and, if silvers thousand year relationship with gold holds up, it could be a better bet all around.Silver has spent the last 5 years coiled in narrow trading range. Gold has already broken out of its trading range. Silver volatility is also near recent lows. Golds volatility is on the rise.

How much more does gold need to rise to awaken the sleeping giant which is the silver market? Is it $50 more per ounce? Is it $100 more? We dont know.What we do know is the gold / silver ratio is about as far out of whack as weve seen in our 30 years of trading commodities.There are three ways this spread can get back into line: 1) silver rallies more than gold; 2) gold falls more than silver; 3) silver rallies and gold falls.

Focusing more on silver right makes sense because it has the bigger upside potential for a lower cost (and risk) potentially making it a better performer should either of the three scenarios listed above play out.Should gold continue to rally, our conservative upside target for its pauper cousin is $17.00 to $17.50 per ounce.Our longer term targets higher.

December COMEX $16.00 / $17.00 bull spreads in silver settled today at $965. December $16.50 / $17.50 bull spreads settled at $675. With 146 days left until expiration, either would offer a good, low cost peek at the upside. Both have the potential to be worth as much as $5,000 should silver breach the upper end of its recent trading range prior to option expiration on November 25, 2019.

Its All-About Weather in Corn

Data Source: Reuters

Like gold, corn broke out of a multiyear trading range and then retraced. Unlike gold, whose fortunes are dictated by fears of global conflict and interest rates, the ultimate direction of corn will be determined almost entirely by Mother Nature.Most analysts will agree that this years crop got planted too late to produce the bumper crops of the last few years. What the market is sorting out now is just how bad the damage will be.

Corn hit our first upside objective putting our second target of $5.50 per bushel in play. Its still too early in the growing season to consider adding to our half position but a pull pack to the 50% retracement level of $4.00 per bushel in the front month futures contract will cause us to sit up and take notice.

Please be advised that you need a futures account to trade the markets in this post. TheRMB Grouphas been helping its clientele trade futures and options since 1991 and are very familiar with all kinds of option strategies. Call us toll-free at800-345-7026or312-373-4970(direct) for more information and/or to open a trading account. Or visit our website

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The RMB Group

222 South Riverside Plaza, Suite 1200, Chicago, IL 60606

This material has been prepared by a sales or trading employee or agent of R.J. OBrien & Associates (RJO)/RMB Group and is, or is in the nature of, a solicitation. This material is not a research report prepared by a Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.


The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO/RMB believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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The RMB Group is a full service commodity brokerage firm specializing in providing clients with access to futures and commodities through managed futures, individual futures trading services, and providing “one-on-one” advice and customer service. From alternative investment solutions to individual futures trading, we pride ourselves on building relationships and designing investment opportunities that fit your personal risk tolerance and interests. With an average tenure of 20 years of financial markets experience, our brokers are seasoned veterans who excel in customizing strategies for experienced investors and mentoring beginning traders.

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