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Gold & Silver Shorts Lose Money: You "Hate" to See It

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SECTIONS
  1. Market Summary: weekly recap
  2. Precious: analysis
  3. Reports: research
  4. Technicals: active trading levels
  5. Tools: educational videos and research
  6. Charts: related markets
  7. Calendar: next week
REMEMBER BARRON’S?: The weekend report is intended to be more like a Sunday paper with different sections. Barron’s of old comes to mind. Best digested in sections between life’s responsibilities if you can. - VBL
1. Market Summary
Tapering turned out to be bullish. Or as we frequently see in efficient markets; Sell the rumor, buy the news. The Fed revealed its Taper this week and that turned into a reason to buy everything- including Gold. The stagflation trade has come full circle. Call it reflation now. Similar to the Covid recovery feeling.
Shorts were carried out on stretchers in several assets. Gold may have been one of them. Stock and bond squeezes occurred. Even the dollar ended higher on the week, but barely.
Three weeks ago markets were discounting inflation and recession. Bonds had signaled a recession from the tightening. Stocks were grinding lower.
Two weeks ago brought mixed signals, with Bonds continuing to discount recession, but stocks turning upward again assuming things would be fine.
This past week, we got full blown reflation behavior. Bonds rallied. Stocks rallied. Commodities rallied. Rallies even rallied. Oil gyrated to the tune of OPEC until The Fed. Then the reflation trade took over..so it too rallied.
The only thing that did not rally was Crypto. Bitcoin was down in its first week after the ETF parade. Here’s a run-down of the broader markets.
Sector Performance
Small Caps outperformed dramatically this week; best week since March. Nasdaq also surged with its biggest week since Feb up 5 straight weeks. The S&P and Dow also made gains on the week with record highs.
via finviz.com
via finviz.com
  • Tech and Consumer Discretionary outperformed this week- see 1 and 2
  • Healthcare and Financials ended the week lower - see 3 and 4
  • Semis soared this week (its best week in a year), up 7 days in a row- see 1
  • Pfizer’s COVID pill announcement slammed MRNA and MRK- see 3
  • TSLA is now larger than the entire S&P Energy
  • PTON collapsed on disappointing earnings and lowered guidance
Bonds
Bonds were strong all week in what is called a “bull steepening”. All interest rates declined, but short term rates declined more than long term ones. This partly undid the “bear flattening” we saw the last 2 weeks. Here is that graphic again for reference. This time the rate moves are in green.
GoldFix Friday WatchList
Complete WatchlistHere
Crypto Saturday Session
2. Precious- Shorts Were Doomed
Note: This week charts were just better aids for describing what happened. We don’t fancy ourselves as technicians. Hopefully it’s not as wonky as it may appear.
TOO MANY CHARTS!!!
TOO MANY CHARTS!!!
Apologies to our editor pictured above. In any event, we are available for questions on anything here. Cheers
The metals markets were shorted most of the week by small funds, CTAs, and prop desks front-running the GLD rotation trade. Frankly, the behavior was pretty obvious. Things unfolded in a way that made a lot of sense. The best trade was to stand pat with longs.
Before we get euphoric: This market could be a lot lower given what is happening in the world. Yes it should be a lot higher based on math and inflation and insanity at play. But according to the internet, Gold is dead.
Bitcoin is digital Gold! We don’t need Gold! Deleveraging of markets means speculators are leaving! End of the year liquidations are coming. Tapering will kill the markets!- The Internet
And so, Gold had 2 double digit gains this past week. While it is very hazardous to predict future gains from past ones in metals, it is instructive to know that this opinion is based on observable info. Specifically the CTA sheep selling Gold which we had discussed several times in this space:
The CTA allocators are the new retail. They can be a large force that affects prices for months at a time. After that, they are almost always a casualty of their own success. Expect them to continue to look to get short, and alternately be forced to cover those shorts on data events.
Once again CTAs got their heads handed to them on a Silver platter.
And this is what a short covering rally looks like
White rectangles above are the last 3 rallies in Gold on the week. The purple line sloping downward represents contracts exited during that time frame. That is CTAs and short speculators getting decimated. You “hate” to see it, folks
In last week’s rallies, the open interest dropped. That is very rare in Gold. It means shorts initiated rallies by closing their positions. Shorts basically panicked. Bears knew they were wrong and headed for the exits quickly.
Meanwhile, Crypto’s inability to rally all week even with the US based ETF flows and its refusal to move post the FOMC tell us there are some relative value hunters out there. Simply put: Crypto was likely overbought from all the ETF hype, and Gold is oversold for partly the same reason.
via zerohedge.com
via zerohedge.com
Real yields had rallied the last few weeks along with Bonds as inflationary fears subsided. That reversed hard again post FOMC. Real yields went back down more negative. Always a positive for Metals. Though never as much as we’d like it to be.
GoldFix Drivers On Display
This past week was extremely constructive for Gold and Silver. Of the 4 drivers which we outlined to dominate the rest of the year, 3 were on visible display. One was implicitly on display.
Government Policy: was very bearish, now neutral
That was on display as clear as day. Fears of Tapering weighed on Gold all October. As every commodity on earth made new all time highs, Gold and Silver were conspicuously absent the rally. So, Tapering should be bearish Gold right? Not so fast. Last week showed, Sell the rumor buy the news axioms matter. If last week was not an aberration , then Gold and Silver should be clear if they can survive into US Thanksgiving.
Seasonality: bearish, but not strong
We saw another week lacking fresh money being placed into the assets. That means little to no origin buy-side interest. Simultaneous unwinding by long speculators and lack of new investment flows is bearish. Yet the market did not drop. This lack of buying will continue until late November. At which point it will become “Buy Season”. Then we get a preview of how big or small the 2022 interest is.
CTA Selling/ GLD Exodus; very bearish, but no damage this week
CTAs: These types piled in again this week right before the FOMC announcement. Their positions were the fuel that burned hottest in the rally that followed.
These are the “new retail” in that they are individual investors with money in semi-managed accounts. They behave like a herd of wildebeest and can really move a market for a prolonged period of time. Many make money. But the last ones to the trough get slaughtered in typical national geographic fashion. These guys have been shorting Gold since tapering became apparent last month. They have also been doing mini short covering rallies as they do not have deep pockets. There will be a bigger buy back soon. If it is in a rallying market, they will make it sloppy.
GLD Frontrunning: It is a fact that “normal” US investors in GLD for inflationary purposes are being inundated with requests to sell their Gold and buy Bitcoin ETFs. This is a big deal and will be a prolonged factor for years possibly.
Savvy professionals have been selling gold in front of this anticipated further selling. Savvy does not necessarily mean correct, however. While we see GLD interest decline as BITO and other ETFs sponge liquidity from it, we did not yet see Gold sell off. Nor is Bitcoin rallying from the increased interest yet. This may change, but it is quite possible the idea is a little too crowded right now
Several subscribers have asked us privately about this concept. Here is our take. Maybe one should have a little exposure in Bitcoin, but not at the expense of Gold. At least not yet. The upside potential in Bitcoin is astronomical. Maybe invest in it like a small stock, not a store of value. At least it isn’t a store of value yet. How many years until it becomes stable like Gold? That assumes it won’t be subsumed by some unknown like Digital Dollars.
LBMA Unwind: can’t tell, likely very supportive
We can’t say with high confidence this is a factor yet. Typically it shows itself well after it has manifested. But; 1) the BASEL 3 rule changes are there 2) the rules have been tweaked to protect the LBMA clearing and 3) there seem to be no more reasons to delay it. Explosive rally? No idea. Anyone who tells you otherwise is selling you something other than acumen. Orderly rally and solid support? Likely.
What we can say, and have been saying since July is this: The ceiling may not be raised for Gold and Silver. It rarely if ever goes up more than 2% in a day But the floor certainly has been raised. There will still be dips to buy. But those dips will be shorter in duration. And so far that is the case.
3. Reports/ Tools
<We have 3 good ones worth reading and will post them Monday for premium subscribers.>
Other Indicators on Our Radar
4. Technical Analysis
Report Excerpts Courtesy MoorAnalytics.com
GoldFix Note: Michael Moor’s work is used by oil refiners, hedge funds, and large investors. Do not attempt to use price levels without symbol explanations or out of context.
Gold
TECHNICALLY BASED MARKET ANALYSIS AND ACTIONABLE TRADING SUGGESTIONSMoor Analytics produces technically based market analysis and actionable trading suggestions. These are sent to clients twice daily, pre-open and post close, and range from intra-day to multi-week trading suggestions. www.mooranalytics.com
Bitcoin
Energy
5. Podcasts
GoldFix
Bitcoin Brief
Nothing but Good news in Crypto land, yet no pop yet- Run Time 4:50
6. Charts
All Charts by TradingView.com
Gold
Silver
All Charts by TradingView.com
Bonds
Inflation Bonds
Bitcoin
7. Calendar
Some of the upcoming week’s key data releases and market events
MONDAY, NOV. 8
  • None scheduled
TUESDAY, NOV. 9
  • 6 am NFIB small-business index Oct. – 99.1
  • 8:30 am Producer price index final demand Oct. – 0.5%
WEDNESDAY, NOV. 10
  • 8:30 am Initial jobless claims (regular state program) Nov. 6 – N/A
  • 8:30 am Continuing jobless claims (regular state program)
  • 8:30 am Consumer price index Oct. – 0.4%
  • 8:30 am Core CPI Oct. – 0.2%
  • 10 am Wholesale inventories (revision) Sept. – 1.1%
  • 2 pm Federal budget Oct. – -$284 billion
THURSDAY, NOV. 11
  • Veterans Day holiday: None scheduled
FRIDAY, NOV. 12
  • 10 am Job openings Sept. – 10.4 million
  • 10 am UMich consumer sentiment index (preliminary) Nov. – 71.7
  • 10 am Five-year inflation expectations (preliminary) Nov. – 2.9%
Main Source: MarketWatch
Zen Moment:
Invisible wall
RELATED CONTENT
8. Disclaimer
Disclaimer: Nobody is telling you to do anything here. Anybody who tells you to do something without first intimately knowing your personal situation is irresponsible at best and manipulative at worst. Worse, anyone who acts on other people’s opinions without first doing an inventory of their own situation shouldn’t be surprised if they lose money.
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