Vince Lanci: Central Banks Keep Buying More Gold | Arcadia Economics
Summary
Transcript
Ctas, which are a fun cohort to watch, were not particularly bullish. They were buying it, but they weren’t crazy. You know, in silver, they’re not even long. They just got long. By the way, in silver. Anyway, so that said, there’s only one conclusion from that. That’s central bank buying. Welcome to the morning markets and metals with Vince Lancey, where each morning Vince brings you the financial and precious metals news to get you ready for your day.
And now, here is Vince. Good morning, I’m Vince Lancey and this is the Goldfix morning meeting. Let’s get started. Today’s market rundown. We’re going to be talking about a new report by credit Agricol on gold and what it means for the precious metals markets in general. Then we’ll look at some market driving news. But first, let’s look at the markets themselves. I’ll leave a chart up for you while we’re doing that.
The dollar is down six at 100 and 267. The ten year bond is unchanged at four spot eight. SP 500 is down 15, handles at 50, 112. The VIX is trading 1559, a little bit elevated after last week. Gold is down ten cents at twenty one seventy eight and sixty seven cents. Silver is up two cent, 24 32. So the market is the gold silver play is they’ve taken their foot off the throat of silver for a minute.
Copper is up almost two cent at 380. Bitcoin is ramping again at 4. 7%. Quick comment on that on Friday nights. I’m sorry. On Sunday nights, when there’s a new product like bitcoin is in the US markets, you will frequently see the market hover below an important level. In this case, that was 70,000. And that’s the banks trying to assess. While the banks try to assess what their flows will be for Monday morning.
And as they figure that out, the market will discount that. So we’re probably going to have a lot of buying on the open for bitcoin coming out of us investors doesn’t mean it goes up after the open, it just means that there’s buying coming in. How it acts after the open will be key for the rest of the day. Okay? So just keep that in mind. Ethereum keeping pace at 40 51.
Palladium and platinum are both up 1. 65, 1. 86% at 1035 and 925 respectively. Energy oil is down thirty cents at seventy seven sixty four. That market has been sleepy, but firm. I think smart talk is looking at power generation with the increasing footprint of bitcoin in the US. And so I think energy stocks are probably something to look at, especially with AI and the chips that are being used, et cetera, et cetera, yada, yada, yada.
Dollar 77, natural gas last down a penny, almost a percentage point. See how that works? Soybean, corn and wheat are all down. Corn down 86 basis points, wheat down 38 and soybean down 58 basis points. Well, soybeans under the teens for a while. Again, that’s a bummer for those of us who like that. This chart here, if you’re wondering what that is, one of the founders had suggested a 50.
He looks at the 50 day moving average and we brought it down to the 1 hour and it gives a nice trend for what’s going on right now. So I drew a trendline underneath that. And the trade for us tactically is you want to watch how gold behaves on the hourly chart as it touches that trendline. And if the trend line holds, you will see the RSI not get below this level.
And if that happens, you’re a buyer. On the other hand, if it breaks below this line, you want to be careful. If it breaks this line, there could be a sell off coming. Anyway, that’s a day trading concept. All right, let’s get to the main event. Right. All right. There is the front page. We put out three stories this weekend. First one about central bank buying again, which was a broad statement.
This one we’re going to be looking at this one here, the credit agriculture report. And then the BTFP facility is scheduled to end today. I’m not sure exactly what ending means, but it’s something to watch for in the markets. So let’s get to the credit agriculture report over the last. I’ve talked about this several times, but as a lead in, since December 3, there have been patterns that I’ve recognized in the gold market, and those patterns are a market that’s been accumulated by the smartest kind of money.
That money is the type of people, that are the type of people that buy dips. They don’t buy strength, and they let the market come to them. They can afford to do that. They don’t chase, they’re not momentum buyers. And the personality of the market during that time frame seemed a little bit sleepy after December 3. I mean, elevated for sure, but a little sleepy. Anyway, during that time frame, we had mentioned several times there was no speculative fund interest etfs were being sold.
Everyone knows about that. We’ve been talking about that for years. Not etfs themselves, but the disinvestment of the west and CTAs, which are a fun cohort to watch, were not particularly bullish. They were buying it, but they weren’t crazy, you know, in silver, they’re not even long. They just got long. By the way, in silver. Anyway, so that said, there’s only one conclusion from that. That’s central bank buying.
If the open interest is going down and the ETF volumes are open, interest is going down. And there’s no data saying investors are buying gold, but the price keeps going up while someone else is buying it. That someone else is not in the US, and that’s an over the counter trade. Anyway. We’ve been saying that for a while. No bank has said that. They won’t say that. We’re not going to get into why they won’t say that.
But it’s interesting when banks, which their job is to know everything, say things like we don’t know, isn’t this interesting? I wonder why that’s happening. Okay, well, one bank finally broke the silence, and that’s credit agriculture. They’re not a player in metals, but they know the FX markets very well. And here’s that story. We’re going to just run through a little bit of it. The main title is looking for Trump hedges.
You will be surprised. And it’s an excellent run through of pros and cons of Trump Biden winning. Anyway, I think it’s very good, but buried inside of it was a very nice, very concise insight into gold, and we’re going to read some of that to you. Xau. Just for the record, the gold price hit a new all time high in recent days, fueling some questions about the drivers of the move.
Indeed, a look at the XAU’s traditional drivers, like the level of global real rates and yields, as well as the path of the US dollar, would suggest that neither can explain the latest rally of the precious metal continuing below the graph. Moreover, with global sentiment still largely robust, there seems to be little evidence that demand for safe havens is behind gold’s recent gains. This seems to be particularly the case given that its rally went hand in hand with the rally in bitcoin and is also seen as a real asset, but that is positively correlated with risk appetite.
A look at market positioning would further suggest there is no evidence that speculative demand for gold is driving the latest price action. This leaves us with one explanation, that the latest XaU rally reflects growing demand from central banks or sovereign wealth funds. We would add. According to latest data courtesy of the IMF, gold and central bank reserves has grown by more than 1% on average between January 24 and January 23.
The latest price action in gold could suggest that the demand has intensified in recent weeks. Yeah, it’s more than 1% on pace. So this chart here, I’ll blow it out a little bit for you. Here’s the whole concept for you. The chart on the left is gold price in the red line with the green histogram showing the marketing position. Now, the market has continually rallied since September of 18, and there’s been a choppy but decidedly noticeable trend of open interest dropping on the speculative investment side.
So as the histogram is dropping, the market is going up. Now, that’s not how the gold market works. Historically, when the pricing is driven by american buyers, that’s a sign that the buying is not american because it’s not american based. Okay, now, on the right hand side, you have the gold price versus the change in gold holdings by central banks. So this is actually a nice little chart here.
The gold price is the green line. And what you want to call that Magenta histogram, I’m wearing colored glasses, is a show in the gold holdings. Right? So you can see that the price of gold generally correlates to the buying of central banks. And you can see that on the right hand side in that little section over here, the price of gold has continued to correlate with central banks demand.
But if you go back to the left side, the price of gold is no longer correlating to us domestic investor demand. That’s because the buying is coming from here, not here. What does that mean? Well, it means two things. First is that as credit agricol suggests, they’re being professional, that the demand is not domestic. Now, that means the demand is physical. It’s not financial. Us investors demand financial tracking the BRICs and countries that are going to be using gold as a store of value and a monetary asset in this BrIcs.
I’m sorry. Breton, woods three currency multipolarity reset are going to use gold as a store of value. They need the gold. They want the gold. So the corollary is this is about people wanting the gold. It’s moving from here to there. And so they want the physical gold and that’s why the price is going up. The second corollary is, well, not corollary. Related is you’ll also see that the Comex vaults are draining.
We have that in here somewhere. It’s gold’s turn to drain. Now, the second corollary is that pricing power for the asset. Gold and silver is moving east. Something else we’ve been talking about since, I don’t know, since way back we learned about it. And the point is, when pricing power moves somewhere else, then the control of price or the management of price moves somewhere else. So the demand is over in China, let’s say, and the supply is over in the US, let’s say.
And so when the price goes up in China, the demand either pulls the gold or the price in the US goes up. And that’s what’s happening. The arbitrage is evidence of further drainage of us gold to the east. Okay, so there you go. That is in the premium report. You can see we’ve actually attached a pdf there. And keep that in mind. Let’s do the market news now, and then we’ll do some very quick levels.
BTFP is slated to end today, but so far there seems to be no panic. Aside from the ramp up in gold last week, which is a hedge for banking problems. We put that in there because that’s a sign that gold could be very weak this week because BTFP is ending. And the rally last week was a run up on fear of that. But that won’t happen until after CPI.
Okay. So we could be in for a short term. Top nonfront payrolls increased 275,000 for the month, while the jobless rate moved higher to 3. 9%. The US has widened its productivity lead over Europe, sparking fears in the EU that it faces a competitiveness crisis as policymakers call for greater public and private investment. I got to call it what it is. They know that’s happening. They’re encouraging that to happen.
Germany has let its key industry sources leave for the far east. It’s a little late to talk about that now. It’s actually very upsetting. Reddit and its investors are seeking to raise as much as 748,000,000 in what could be one of the biggest initial public offerings so far this year. Yes. Take a look when you start searching things. Now. Google has amplified Reddit searches, so Reddit’s pages are now in the Google database.
I don’t know, specular speaking, that might be a really good IPo. I’m not playing that. Next. Legislation that would ban TikTok in the US or force its sale is hurtling towards a vote in the house following months of behind the scenes efforts on Hill. Well, yeah, we’re not friends with China anymore. Next. Restaurants like San Diego based Cali barbecue are experimenting with a form of dynamic pricing. All right, so real time pricing is basically the world is becoming an exchange.
Right. And so while that may seem more fair, if you get the discount, you’re not going to get the discount. This is going to be a way to customize prices for demand. When you walk in the store, if you bought oreos last time, the price of oreos are going to go up eventually. That’s what we’re working towards. It’s real time price gouging. Geopolitically speaking, U. S. President Biden said it’s always possible that there could be a Gaza ceasefire before Ramadan and he was not giving up.
While he said he believes Israeli PM Netanyahu is hurting Israel more than helping Israel, that statement right there is the policy of the Biden administration. Pre election. We’re pro Israel, but we think they’re not doing what’s best for them. We are worried about the Gaza. So this is the democratic party trying to keep the AOC cohort in line with the pro Israel cohort. Israel APM Netanyahu said he intends to push ahead with an invasion of Rafa.
Not sure how to say that and insisted his priority is to prevent another terror attack like the October 7 amas raid. Data on deck. While none are scheduled today, CPI is tomorrow. BTFP outlook is supposed to come out today. All right, that’s pretty much it. So let’s take a quick look at the charts, right, and we’ll let you go. All right. I already said tactically, what’s going on? Big picture.
That’s got to be something to freak you out, right? Let me get rid of some of these here. Let me get rid of all these. If gold closes this week above 21 95, roughly next week should put us on target for 22 50. This is a big week. I don’t think it would be bad for us to have three to five days of lower as long as we don’t break around 21 40.
However, if we do then below 21 40, we can go easily down to 2040 and still be a valid market. I guess the long story short is simply this. The market by almost every measure is overbought. See that? That’s RSI. That’s the daily chart. Overbought. The weekly chart. Overbought. And flatlining. The monthly chart, not overbought yet. So that’s kind of cool, right? So go back to the hourly.
The hourly is well off the overbought. That’s really constructive. This is constructive. And it leads me to believe that for the next two weeks, sideways should be bullish. Okay, here’s overbought in the four hour. Still overbought but not collapsing. You like to see this dip below 70% with the market not dipping below, say 2080 and you’ll be happy to go silver the silver market just a quick comment about silver.
Let’s pull that up there. The silver market is. I said this before and I’ll say it again. The silver market is going to continually be used as a lever to keep the gold price in line. However it ends when it can no longer do that. And there are signs that it is ending now. Now I’m not saying it’s ending, but there are signs. And those signs are when the silver ctas cover their shorts and consider getting long.
And that’s where we are right now. It also could be a top, but what I’m getting at here is if that were all that were happening, I would say to you that silver is definitely toppy. The reason I don’t think it’s completely toppy yet is because again, gold looks good is because the EFP, the exchange for physical something that I look at and Bob Coleman looks at is signaling that there’s some physical shortage or physical tightness again.
And that usually leads to violent dips and explosive spikes, which is not really helpful if you’re day trading, but that’s the way the market is. Get ready for some volatility in silver. As long as gold is stable, silver dips should be bought. But I wouldn’t buy silver on strength. That’s it. I’m Vince. Have a great day. Thanks for watching this morning’s markets and metals update with Vince Lancey brought to you each day by Miles Franklin Precious metals where this week 1oz silver canadian maple leaves from the Royal canadian mint are only 339 over spot.
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