Vince Lanci: Gold Silver Selloff After Nasdaq Sinks 3.6
Summary
➡ The market is currently in a state of uncertainty due to factors such as the weakening yen, expectations of a hawkish Bank of Japan, and concerns about a global recession. This has led to a decrease in the value of tech stocks and precious metals, despite a softer dollar. The market is also affected by the potential of higher tariffs and the impact of AI. The future of the market depends on how it reacts to recessionary information and the actions of the Federal Reserve.
Transcript
The carry trade unwind its violent effect on markets in context and we have an institutional bank analysis take for premium subscribers today that describes what they think is going on. There you see the headline tentatively yen carry unwind bludgeon stocks and bullion. The commentary will be about the yen and the markets itself and the premium aspect will be the Goldman trader comments on yesterday’s activity. And we’re going to talk about levels in gold and where the silver lining is for silver and gold once this is over. All right so let’s look at the markets and while we’re doing that you can take a look at the gold four-hour chart.
The dollar is down 9 at 104.23. The 10-year yield is down 6. The S&P 500 is down 16 at 54.24. The VIX is 18.64 up 61. Gold is 23.69 down 27. Silver is 27.58 down a buck 30 and change. Copper is 408 unchanged. That’s a silver copper gold trade unwind. These are carry trades. These are all yen related. WTI is down a buck 15 at 77.40. Matt gas is unchanged at 211. Crypto is also decimated. Bitcoin is down 2% at 64,000 and change. And Ethereum is 3100 down 5%. So much for the ETH ETF.
Palladium and platinum after surviving yesterday’s deluge are down today. So palladium is down 21 at 908 and platinum is down 10 at 935. The gold-silver ratio is butting up against that chart level. That should make people nervous. Soybeans, corn, and wheat up three unchanged down four in that order. 11, 12, 399, and 551. All right. There’s a lot of information to get out there and I know people are probably looking at the information and saying how can I organize it or how can I think about it. So why don’t we start with the charts.
Okay. This is the gold four-hour chart. I had mentioned just in context of the last three or four sessions that we’ve had. I mentioned that this was, whoever the selling was, we know that short-playing funds started to sell this while producers were also selling and macro funds and mostly CTAs were buying. Then after the sell-off, we commented that over a period of time, this buying was algo-like. It was a short covering we were not bank funds. We were wondering if it would be like this buying here, which is very central bank oriented and we’re hoping that there’s more buying underneath.
We were short in here, full disclosure today. We were short in here. We covered in here and we’re flat and our yesterday’s comment was we’re waiting for the market to tell us which way it wants to go. Then we’ll make a decision what we want to do from there. So we’ve done nothing yet, but here’s the market. This line, which I thought was potentially important. Well, it is if we’re below it, but there was no buying there at all. So this is we’re in fraud zone now. Now, zooming out a little bit to the daily, the chart that you’re all familiar with.
Here’s the buying. Here is what I thought could have been buying. It’s not, it’s a technical level. That line is gone and here’s the trend line that we just broke. That line is gone and there’s the market. I’m tough love. Sorry, I got to say, I’m not a buyer until we get to here. Definitely. Meaning I’m definitely a buyer in this area. I’m thinking about buying in here, but I’m in no rush. When I give you the information about why, you’ll see why. Okay. Silver. Well, as I’ve said the last, I don’t know, three sessions, they’re going to sell silver to get gold to back off.
They now I say they, I mean, the conspiratorial they, the legitimate they is this silver is an economic metal. And in combination with copper, it’s going to sell off because a the global economy is going into recession. Now be China feels it more than most and is likely to sell. They are selling copper. They are. There is a fear that they will sell silver. I’m not saying that they will. I’m just saying that if you’re a long silver and you see China selling copper, you’re like, Oh shit. Maybe I should lighten up on my own position.
This is speculative money getting out. This is not investment money, true investment money. So with that said, on a technical basis, you would want to look at this move and you want to Fibonacci it. And you want to say that this selling here is consistent with that selling there. This was the trend. We’ve broken that trend. And now this structure here between here and here, it needs to be bought. That’s a big range to give you. But that’s where I am. Okay. We’re probably not going to go down here, but this is what’s going on now.
You know, we just, we’re in a recession. It’s the reaction to the recession that gets these markets higher. We need shorts in the silver market right now, and we’re getting them. Okay. Why is silver down and copper up today? Because the market is made up of more than one day. All right. Coppers already had it sell off. Okay. And people have been selling copper and buying silver because of its precious aspect. And now they’re saying, well, maybe silver is like copper. All right. That’s the chart aspect. Let’s go to the events that generated these chart aspects.
That’s a report that I’m working on, a piece that I’m working on about mercantilism. It’s time to revisit that. There we go. Okay. Front page. See this report here. If you’re a premium subscriber and you read this report, you’ll know that this is not one of the bullish Goldman reports, despite Goldman saying they’re bullish. And we explain why we’ll give you a taste of that a little bit later on. It’s not to say it’s not a buy on their report. It’s to say it was a hold on their report, not a buy. And we’ll explain why in a second.
Gold’s next six month trading. Well, you know what, I’m going to pull that up here to remind everyone, including ourselves, negatives on the radar, who the three buyers are, and the open interest got a little bit too high. Okay. Where buyers at 2300. You can’t worry if gold to 2300. And that’s where the new support is. Anyway, moving on. But Goldman trader weighs in on Japanese yen moves and tech sell off. Okay. So we have, this is a report we normally share only with founders, but because it’s so relevant and is probably going to be ongoing, we’re going to share with you.
The founders want to get a special comment on this report as well with regards to the bond market. All right. So let’s read this. Asia risk is dominated by Japanese yanks yen strength unwinds. The Nikai is down 3% as the bank of Japan is likely to debate whether to raise interest rates when it meets next week and unveil a plane plan to roughly have bond purchases in coming years. Sources said signaling its resolve to steadily unwind its massive monetary stimulus. They’re going to let the bond market drop. They’re going to let bond yields rally.
They’re going to actually make them rally to squash inflation. So a steepening of their yield curve, which will strengthen the end because people will say, Hey, if I can get 5%, I’m making a number up, uh, in Japanese bonds, then I’ll put my money back in yen. In addition to this affected everything. In addition to the end, the big sell off across global markets yesterday with really the tech AI complex under significant pressure. Think this is, you know, this is very staccato writing. Think underestimated the scrutiny around Google and the question about the lack of returns around their AI investment.
This could be a theme for hyperscalers. Translation of that is there’s a lot of money being spent on AI and there’s really no returns on it. Okay. Uh, if you put an AI sticker, uh, on your company, it makes the stock go up. Uh, that’s one thing, right? Like you did with Bitcoin, but to spend money on AI at chip places and not make any money on is entirely different. And this is the beginning of a bubble unwind, I believe. Okay. We have that whole report and, uh, uh, well, it’s a trader’s take.
So this is what the institutional clients say. This is not like, this is like three levels beyond mainstream media. All right. A little bit more about the yen carry unwind the yen carry unwind Japanese yen has extended its upside versus the U S to a fourth consecutive session with the end benefiting from risk aversion efforts by officials to guide the currency lower and an unwind of carry trades and mounting expectations of a hawkish bank of Japan at next week’s meeting, which we just said the chart. There is the NASDAQ tied to the yen.
So as the yen weekend meeting went up on this chart against the dollar, people decided to short, um, the yen and take that money and buy stocks. That’s what’s called a carry trade. You’re borrowing from the thing that you know is going to keep getting worse and you’re putting it in something that you think has a good chance of getting better. This market is now unwinding. So as the yen goes down in this sense, strengthens versus the dollar, uh, the tech stocks and the economic factors weigh on it. Precious metals are lower across the board despite the softer dollar and risk aversion amid a broader downturn in metals and what is seemingly an unwind of winning trades.
Spot gold slipped from a 24 0 1 high through the psychological figure and to a current U S dollar level of 23 65 and change. So it’s $5 above that. Now base metals also trade on the back foot amid the broader risk aversion and ongoing pessimism regarding Chinese demand risk aversion, risk off because of recession means everything drops. You have to put this all in context. When the world, when the markets are looking at recession risk and they focus on what the fed will do to counter the recession risk, they buy stocks.
They say, Oh, the fed’s going to rescue us. They buy economic assets. When the recession news starts to come and that comes in three areas, right? It comes from, it comes from China’s economic slowdown is being felt more. One, two, Japan is going to risk its own slowdown to fight inflation, which is what they’re talking about now. And three, uh, a realization that AI is really a naked emperor. Uh, and four, if you will, the risk or potential of higher tariffs, uh, if Trump were to win or if anyone else were to win is going to be recessionary globally.
So recessionary because business slows down and inflationary because commodities go up. Now, commodities are up. They’re just backing off. I mean, goals at 2300. So we’re looking at a marketplace that’s right now deciding between stagflation and recession. So why did stock sell off? Everyone perceives the fed is going to ease stock sold off because these things happened in a very tight timeframe and they don’t think the fed’s going to ease enough now. Okay. And you never know the fed might not ease. So everyone’s just nervous. It’s a crowded trade. Everything’s a crowded trade.
Everything’s unwinding and it will continue lower. Now about the stock versus the S and P 500 versus gold. I want to say this, uh, well, let’s start with the Dow. The Dow gold relationship is something I look at and that should converge. Meaning, uh, gold should hold its own relative as stocks drop, but it won’t happen as fast or as overnight as you want it to. Why? Because the plunge protection team is going to be in there buying dips in stocks because it’s okay for stocks to drop as long as gold is dropping more and that’s how it works.
The only thing holding this country together from a, uh, uh, economic, uh, complacency is 401ks. They can’t have that go down too much. You know, yesterday it was a bigger than 2% move lower in stocks. You don’t see those too much. In fact, we hadn’t seen one for a year. Keep that, keep that in mind in the back of your head. 2% is a number because they rarely let gold get above 2%. 2% is a magic number for them all to act. Anyway, moving on to specifically about gold and silver sell off.
Yesterday we put out a report and in that report in the previous section, we said Goldman is looking at what price China buying will come back. Therefore, while their target may be the same for 2025, they are not bullish right now. Thus, why are they putting this report out for the report to be written at all implies clients were asking Goldman did a similar thing in oil a couple of years back and oil rocketed a week later, but this was not the oil analyst. So the report that they put out yesterday that we show we’re not backtracking on what it said.
We’re just putting a fine point on it. Well, fundamentally they’re right. China will buy this dip all things equal. However, for them to put out the report at that moment meant they had nervous clients that were calling and they were trying to hold their hands and you have the result now. So this is where we are. Data on deck today is Wednesday new home sales. That’ll mean that it’s weaker. The question is how will the market react to weaker no new home sales, meaning recessionary information will come out. And if recessionary information comes out, will the market treat bad news as bad news or bad news is good news.
And that’s probably a key indicator for the next three days. We would say one other thing, one of the gold fix founders, when we were debating yield curve and version, and we’re saying, is that a recession? Is that a recession? It’s baking a recession in. And when the yield curve uninverts, recession starts, which is kind of what’s happening now, or is realized. Recession is realized. And we asked him what really, he’s a housing person, but as to what really on the housing side, what what starts a recession? And he said, because commercial real estate was in a panic.
And he said, as long as houses are still going up, we’re not in a recession. It’s when houses stop going up that we’re in a recession. And of course, I asked why. And he said, well, that means they’re laying off people. And the only thing driving this economy right now is construction workers working and spending money, drywall hangers, buying Starbucks instead of Dunkin Donuts. Because people feel less rich when their home values drop and mortgage rates don’t respond and get homes up again more than the whole thing cascades down. So all recessions lead with weak home values.
Checking back with the markets before we go. All right. So silver is essentially on its lows as is gold. It’s going to be a tough week and potentially tough as we head into September, October. Meaning we headed to sell season, China and India and all the other bricks are still buying gold because they need it for their project. Unless, of course, China has a deflationary crisis, but they are on top of it and they are easing rates and they’re easing those rates to combat what’s going on. So not a lot of good news here, but that’s the reality of it, right? Okay.
So keep your eye on the gold price below 2385. If it gets up to 2385 and breaks above it, you will see 2400 become a magnet again. If not, don’t be surprised if the market drops to 2300. And when everyone’s panicking then, then you take your dry powder out and you say, I’ll deploy a little bit of it. Or keeping Michael Oliver’s comments aside in mind, 4% moves are not a problem. We’re in the acceleration phase and that means the widening volatility phase. Anyway, I’m Vince. Have a good day. Thanks for watching this morning’s markets and metals with Vince Lancy brought to you each day by miles Franklin precious metals who we encourage you to contact for your next gold or silver order and miles Franklin brings us a gold and silver special each week where this week’s special includes constitutional silver half dollars for only $2.50 over spot.
One of the more popular silver items available and on the gold side, we have 10 pounds American gold eagles for only $39 over milk. And to place an order or get your questions answered, call 833-326-4653 or email us at arcady at milesfrankton.com. And as always, thanks for watching. Please note that this video is not intended as legal licensed financial trading advice and is to be used for informational purposes only. Please contact your financial advisor before making any decisions and thanks for watching. [tr:trw].
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