Gold chart courtesy of StockCharts.com annotations by Mish.
This post is inspired by a pair of Tweets by Fred Hickey on the COT position and a response to it.
While Kuroda's (BOJ) "Operation Ostrich" continues (h/t to Bloomberg's Jonathan Ferro), driving the yen 2% lower today (helping the US dollar rally and pressuring gold), at the end of the day there was really good news from the COT report for gold (data as of Tuesday, June 14)
— fred hickey (@htsfhickey) June 17, 2022
Today's COT showed Managed Money (hedge fund & CFTs) dropping their net long gold futures contracts by 20.6K to just 36.9K, down 36% from last week and to the lowest level of the year. 70% of that weekly drop was due to an increase in short positions (+14.5K to 72.2K contracts.
— fred hickey (@htsfhickey) June 17, 2022
The Managed Money position tends to be late in entry on the way up, and overstay shorts and longs when reversals are at hand.
Note that the Commission of Traders (COT) reports come out on Friday but reflect the position on the previous Tuesday.
Gold Last Five Days
Gold chart courtesy of StockCharts.com annotations by Mish.
Sometimes the trend followers get it correct and sometimes they don't.
Their timing has been mostly good this year but they missed out on some big moves in the past few years.
On a different note, I am glad Hickey seems to have abandoned his practice of calling the commercials "smart money".
One set of commercials are the miners selling production, another set of commercials are the Jewelry producers and industrial users, and the third set are the hedged market makers who take the other side of trades.
There is nothing either smart or dumb in commercial positioning.
Let's go back a bit further.
Futures traders(hedge funds, CFTs, computer algos) slammed gold $20 lower this A.M. BEFORE the CPI release. U.S.$ was stronger at the time, but just because 1 central bank (Fed) is slightly less pathetic than BOJ & ECB is not a justifiable cause to sell gold. All 3 are debasers
— fred hickey (@htsfhickey) June 10, 2022
Gold closed today near $1840.
US Dollar Fluctuations Have No Meaningful Impact On the Price of Gold
Dollar and Gold charts courtesy of StockCharts.Com annotations by Mish
Flashback May 11, 2022: US Dollar Fluctuations Have No Meaningful Impact On the Price of Gold
In terms of gold, hardly anything has changed for a month although the miners have been hit hard, impacted by rising energy costs and liquidity issues.
Gold itself brushed off a huge push up in the dollar since the beginning of 2021.
General rules about gold and the dollar don't work over significant period of time.
Gold vs Faith in Central Banks
Gold chart from St. Louis Fed, annotations by Mish.
I have posted that chart before and have not updated it for a while. Also, I am running out of room for notes.
Is Everything Under Control?
No one can tell you where gold, stocks, or Bitcoin is headed, and I won't either because I don't know.
But I can suggest what a key driver of gold has been historically speaking. On that score, I like my chances.
Recent gold weakness reflects a bit of renewed belief in Powell. How much is warranted? And even if it is warranted, what are the odds of a currency crisis somewhere?
End of the 40-Year Bull in Debt and a “Global Depression” Threat
For discussion of the currency crisis idea, please see End of the 40-Year Bull in Debt and a “Global Depression” Threat
The discussion includes a video interview of Danielle DiMartino Booth who commented, "If you want a front row seat with popcorn, follow the EM [emerging market] space."
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