Saturday, March 14, 2015
Your gold talk for this weekend
Here's gold's chart:
OMG iz horbl!
Well, not really. While gold did break down in USD terms, it was only because the USD did this:
which is an even more aggressive advance than what we saw in December and January. Seriously, that's 3% in 2 weeks: that's faster than the average stock index move.
In fact, when you look at both charts, the week before March 9th could have seen gold hammered as a bunch of dumb yanks set up long-USD-short-gold positions.
It's happened before. Here's a gold chart with the correlations that Mickey Fulp pointed out to us in November:
And you'll see gold was <-.9 correlated with USD in early November, then it broke upward: first slowly, through December, and then aggressively in January as Whitey's position fell apart and you and I made some good profits.
Look at both the USD:gold correlation and the EURUSD:gold correlation. Pretty damn near mirror images. That means every white-ass honky cracker in the world is playing that trade right now. Which means the boat is full.
So I guess, yet again, we'll continue to see gold get sold down in the long-USD-short-gold trade, until it suddenly breaks upward again.
As for Wall Street Whitey, his reasoning for this trade is wrong, and here's why:
1. Gold moves for other reasons than just USD moves; a >|.9| correlation is always bullshit. The moves caused by going short contracts get cancelled out when the contracts are cancelled, while the moves caused by physical demand don't get cancelled out (barring a magical increase in physical gold supply, which won't come from the miners but might temporarily come from more ETF selling, though how many weak hands are left in GLD after the past few years is a good question).
2. Meanwhile, this is the gold chart that the rest of the world sees:
And it shows that gold has spent the past month doing a good job of acting as a hedge against currency devaluation. In fact, even though gold in US dollars broke below the SMA(50) on Feb 17th, gold ex-US only dropped to its own SMA(50), which it has hugged very safely ever since.
3. And the whole Yen/Euro currency devaluation idea is bullshit anyway because the Yen and Euro shouldn't be collapsing just because of QE, because they're fighting liquidity traps and the same "money-printing" actions in the US didn't cause the USD to collapse versus the Euro when the Euro was in tightening and the US was in QE. But there's a lot of people in the US market who learned all they know about economics from clown blogs like "The Mises Institute", so "money printing" will always be a live idea for short-term trades.
4. And anyways, none of those white-ass honkies matter, because the fundamentals for gold depend on Indian and Chinese demand; early predictions for the Indian monsoon are positive, the rupee has been holding up well because people still think Modi will repair their medieval economy, and if he does that's good for gold because Indians buy gold, but if the rupee tanks that's also good for gold because it means gold is appreciating in rupees, and rumblings are now afoot that China might want to loosen the yuan peg because the yuan appreciation is killing their trade data.
I still don't want to trade the GLD:USD chart right now, because it's simply hugging the SMA(50), which might mean it wants to go down in ex-USD terms and is just waiting for a suitably shocking moment to die. If gold ex-USD breaks below the SMA(50) and/or below 5.10, then yes it could collapse to $1000 US. And that'll be when the patient poops a lung.
But it's not doing that yet, and given that heavy selling made it no more than hug the SMA(50), it makes me think that gold ex-USD will pop upward again. Um, someday.
And that would mean gold will be appreciating against ex-US currencies, which will mean foreigners will buy it again, and the white-ass honky crackers will have to cancel out their shorts against foreign physical buying.
So certainly gold has to turn around by June or July when Indian jewellers start buying. I mean shit, Whitey doesn't want to given Indians a discount on gold buying, does he?
It could turn around viciously before that, if China moves to loosen the yuan peg, because then gold suddenly will be a hedge against yuan depreciation. I don't know if that's a live option for them at the moment, but if it happens a lot of pasty white asses gonna get owned yo.
In either case, the white-ass honky short position on gold that got built over the last 2 weeks will reverse at some point. And then we make money.
Hey shit, maybe it all turns March 19th when the Fed tells everyone they're still being "patient".
So there's your gold talk for this weekend.
There is no interesting trade here at the moment, unless you would be happy to sit for months on end in a pool of other people's vomit.
But when the GLD:UDN chart pops and the correlations snap loose, shit will get real bitches.