Vince Lanci: The Global Macro Funds Are Buying Gold | Arcadia Economics
Summary
Transcript
Macro discretionary global funds. The guys who buy when it makes a new high. The guys who came in buying December 3, that night, that crazy night, December 4, they’re buying these calls. This time, however, they’re buying futures. 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.
Okay, good morning. I’m Vince Lancey and in today’s morning meeting we’re going to talk about the return of macro funds to the gold market. We’re going to talk about miners and where they are in the big picture of all this. And I have some MSA technical levels well, courtesy of Michael Oliver. So we’ll also run through the stories affecting markets today. But first, let’s take a look at where things are trading.
The dollar is down 18. Bonds are yielding four point unchanged. The SP is up twelve handles of 50 118. The VIX 14 spot 43. Gold is 2154-2154 up $7 almost. Silver is 24 spot 13 down two cent. Bitcoin is up 818 at 66,910. That’s actually an orderly rally. Ethereum is down a little bit. Copper is up one and a half percent. Platinum, palladium are mixed. Platinum is up 1%.
Palladium is down 63 basis points after a rip higher yesterday. Oil is down 27 at 78 97 and natural gas is 190 spot four up a penny. Grains, you can’t see them on your screen, but why don’t I help you out with that? Soy is 1152. Corn is 425 and wheat is 55 38. All right, checking one thing here before we get started. All right, let’s get to it, shall we? There’s the gold fix.
There’s yesterday’s stories. I will remind you, all friendly, that that is exclusive. No one’s talking about it yet. Maybe they will never talk about it. But Citibank raised their price targets yesterday and they probably raised them before they let the public know about that. There’s a nice article on bitcoin there, I think whether you’re a bitcoin hater or lover, if you’re a premium subscriber, you should probably look at that.
It talks about it in terms of industry, not in terms of monetary stuff. And the founders, we got some four indispensable charts there. Let’s go and get going. All right. Food for thought today. Breton woods three is a process, not an event. That’s just something that popped into my head when I woke up right after my first sip of coffee. And it relates to oil, gold, and a phrase that I heard someone say the other day, yesterday, it might have been Eric lowering the price of oil in gold terms.
And I think he was paraphrasing something Luke Groman had said. Anyway. All right, so today we’re going to talk about the macro funds. They are back. The miners are on deck. And in premium, we have MSA, more MSA on miners, and Apollo on tomorrow’s jobs report. Let’s get right to the good stuff. Right. We’ll do the news after we do the good stuff today. Market commentary. Macro is back.
Miners are on deck. Okay, what does that mean? Macro funds purchased the last three days. I’ll give you evidence of that. I’ll give you also evidence that the market is tolerating more and higher percentage moves. And then we’re going to look at some miners charts, GDX, basically courtesy of MSA. And then I want to look at gold from a relative overbought, oversold position. So let’s start. All right.
That is call volume in gold. Take a look at how big that is. The average call volume for GLD and GDX and SLV combined were at the highs that we had going back to 23 in March when there was a banking crisis. Maybe we have a banking crisis again. That’s why they’re buying calls. I don’t know the reasons, but I know this macro, discretionary global funds, the guys who buy when it makes a new high, the guys who came in buying December 3, that crazy night, December 4, they’re buying these calls.
This time, however, they’re buying futures. That charts from Ron Blava. Thank you. So last time in March, open interest was low and on the way down. This time, open interest is on the way up. So that means you have bigger commitments by macro funds. This time it’s a two sided sword. The last time, gold did not get crushed when they got out of their positions because most of their positions were in options.
This time, their positions is going to be options and futures. So the plus is, and it’s a good plus. The plus is the market’s going to go up more because they’re buying. The minus is, if they sell, it won’t just be calls this time. Keep that in mind. There we go. All right, next chart. This is an idea that I’ve been looking at for years, and one of the founders put it in a chart for me.
And the idea is, quite simply that gold rarely, almost never, goes up more than 2%. And when it does go up more than 2% or 2%, it usually drops over the next four weeks, anywhere from 4% to 6%. And you’re looking at a time frame from, it looks like September of 22 through last week. The red lines denote 1% higher and 1% lower in terms of the move and the two and minus two, they’re at the extremes there.
So the red lines function as a reference point on the way to 2%. Now, you can look at this behavior and you could say, well, I see a lot more over 2% moves than in the past. Yeah, that’s now. But before this time frame, you never saw this. You saw a lot more of the down 2% moves. You saw consistent down 1% moves. And if you look at this chart, show you how I look at this chart.
Look at the down 1% moves versus the up 1% moves. Right. It seems like it’s heavily skewed to the down 1%, but not as much as I profess. And if you look at the 2% up moves, well, when they happen, you usually get a retracement afterwards. But the thing about this chart today I want to draw your attention to is you rarely get big moves bunched up. On the positive side, you get them bunched up, but not so close and so high.
And look at the trend, the emerging trend. Now we have three updates in a row where you have the market averaging 1% move and we’re up 40 basis points. Again. That’s a sign that this market is being permitted to rally and will probably continue to do so. Next up, GDX weekly. Now, this is an MSA chart and I’m going to read to you what his excerpt on this is.
MSA. We’re updating the chart from the weekend report. The action is moving towards this very long term structure after having broken out to positive last week via weekly momentum. We’ll show that chart in a minute. The 200 week average is comparable to a four year average. So 200 week moving average is a four year average. And this structure is hyper clear on momentum. No false signals from it.
Closing this week at 30. 4 would credibly break out over the downtrend structure. We’ve also run GDX’s 36 month momentum, or three year average oscillator, and it will render a massive flat ceiling breakout if this month closes over 31, basically in sync. So he has two different measures and they’re corroborating each other, that we’re on the cusp. It hasn’t happened yet. We’re on the cusp of a significant breakout for miners using GDX as his example.
Now there’s a larger excerpt of this in premium, and I’ll show you another chart on that in a second. Here’s the other chart. This is his proprietary momentum indicator and you could see what he has there. He has a momentum chart that works in percentages on the left and it looks like on the right he’s looking at as a technician. He’s a technician and he’s saying, well, you have a breakout on this chart.
You have a 200 week moving average. The point is we’re on the cusp, but I’ll look at some more charts on that in a second. Gold shift to gold. On the overbought concept, gold is trading above 80% RSI. Does that mean it’s overbought? Yes. Does that mean it has to go down? No. Markets remain overbought as long as people buy them. It’s just a warning that if the market makes a new high and the RSI does not make a new high, that you could be tiring at at least in the short term.
This is also a reflection on american and global macro discretionary futures funds coming in as represented by the open interest change as well. Here’s bitcoin for comparison. Bitcoin is lower than gold on the RSI. So this is what you want to see gold. Do you want to see gold’s RSI come off 80% but maintain an elevated level and then it will work back up to 80% or higher? Given a robust market.
You don’t want to see the open interest drop and the RSI drop and the market drop at the same time. You don’t want to see those things, silver for comparison. Well, silver is not overbought. And in the context of things historically, when this happens, when gold leads like this, you will see a day where silver explode. This is the bearish comment, okay? You will see a day where silver explodes 5% and that will be the market catching up.
That will be like a move that nobody’s looking at. Like it’ll make bitcoin look like a rookie. And it will do that because someone will say, gold is way overvalued relative to silver. I’m going to buy silver. And usually it’s your smaller macro discretionary funds that say, I’m already long gold, buy some silver and you’ll get that momentum coupled with CTA shorts and the market will really scream, that’s the bullish side.
The bearish comment on that is sometimes that’s a sign of a top okay. At least short term. Just be careful of that. With regards to the RSI in general, well, we’re below all time highs. I would expect silver’s RSI to hit 80% too, when it’s really in play. The question is, will silver hit up before the miners themselves? And I’m not sure about that. I don’t know how that works.
There’s some more charts in here, aren’t there some comparison for you? Nvidia is at an 81% RSI. Now, are you bearish on Nvidia? Well, then maybe you should be bearish on gold. The point is, I wouldn’t fade either one of these markets until there’s a reason to really fade them. Fade them, meaning become bearish on them. Okay. Comments on the markets yesterday and today, gold. New all time highs yesterday, new all time highs today.
Silver plays catch up yesterday, and it’s the canary in the overbought coal mine for gold right now. Miners. Quick comment about miners. Now, I’m not an expert on miners, but I started fundamentally as an analyst, and I will say this, I still believe, I strongly believe, and I think it’s an opportunity. It’s coming up as an opportunity. Now, I think one of the reasons miners had been hated so much, there are multiple reasons, some of them legitimate, some of them mechanical.
And I’m going to describe one of the legitimate mechanical ones. Miners. When this bricks thing started, miners have international exposure. They have regulatory risk, they have nationalization risk. At the very least, if you’re a miner with operations in a foreign country, you’re going to have labor strikes, you’re going to have cost of goods produced are going to go up. What happened? Ghana said, we’re buying gold from Newmont.
Now, Newmont was probably extorted to an know. It’s like either you sell us a percentage of the gold at spot or we’re not going to let you operate. Boom. That’s a negotiation. Latin America. Latin America wants to get their piece of the action by saying, you know what? We want our labor very labor intensive. Right? They’re very to the left of center, right? They’re like, you know what? We want our people to be paid more.
They’re going to strike. Right? So you negotiate with strikers right now, you go to another country that we don’t even know about yet. This is the one that you haven’t seen. This is the bad one. A country says we’re nationalizing the mines. What happens if that happens? Now, I’m not telling you that’s going to happen, but I’m saying that I’m speaking as an analyst now. If you are an american domestic fund manager who has money in stocks, you have to be responsible to your clients and you don’t ever want to say to them, our stock went to zero because someone nationalized something.
You don’t want to have that type of risk. Geopolitical uncertainty at the equity side makes them take positions off. Now, there are other reasons for miners to be weak. Now why is that bullish? It’s bullish because the equity guys are going to be very late to the game in miners. They’re not going to come in institutionally and say, let’s buy the miners. They’re still going to be focused on the risk of nationalization, which is still a real risk.
But now you have to go back to the technicals. If the technicals are right, then they’re no longer being prudent with their risk management. They’re being late to the game. Let’s hope it’s late to the game. Okay. That’s why I wrote delayed gratification. Oil was strong yesterday and weak today. Bitcoin orderly re rally actually interesting. It’s like bitcoin is sinking with gold right now. With volatile moves to the downside, stocks took a breather.
Bonds were strong again and the dollar was mixed. The market news yesterday was basically Powell speaking, so we’ll just read a couple of those headlines. Federal Reserve Chairman Jerome Powell on Wednesday reiterated that he expects interest rates to start coming down this year, but he is not ready yet to say when. Powell said policymakers remain attentive to the risks that inflation poses and don’t want to ease up too quickly, if at all.
Wall street banks are on the cusp of a sweeping regulatory victory after Federal Reserve chair Jerome Powell signaled officials would scale back plans to make them hold more capital. That’s kind of inflationary. He’s basically saying we’re going to rain in banks, and the banks rebelled and the banks said you can’t do that because we’re so important. And Powell has to give in a little bit so banks will operate with more leverage than the marketplace was thinking.
A chinese man who worked as a software engineer at Google in California has been charged by the US Justice Department with stealing artificial intelligence trade secrets from the technology giant while covertly working for rival China based companies. Comment hopefully it’s Google. It is Google. If it’s Google, then we’re kind of introducing the woke mind virus over there, too. Anyway, just a little joke. New York community Bancorp is raising more than $1 billion from a group of investors, including former treasury secretary Steve Mnuchin, in a bid to sharp confidence in a troubled regional lender.
I don’t know the details of that, but the market reacted very favorably to it. Please know that New York community Bancorp, they were given some of the crap that collapsed from SVB, who was given some of the crap of another previous company. So that’s how it works. They’re just consolidating. That’s all they do. Foot Locker reported a holiday quarter loss on Wednesday and its shares plunged nearly, nearly 30%.
A sign of consumerism is dying, right? Go on vacation. Don’t buy new sneakers. The SEC approved new requirements that public companies disclose their greenhouse gas emissions, but dropped a key provision that was fiercely opposed by business groups. That is not something to worry about. That’s the sign of a dying ideology. Right. So we passed the rule, but we took the teeth out of it. It’s like saving face geopolitically.
You can see those headlines. There’s one from each. Israel is acknowledging that the US wants to cut a deal that’s good for Biden if they did. Us military said it conducted self defense strikes. They’re doing their job. Chinese foreign minister Wang said they resolutely oppose all acts of power. And, you know, we’re going to reabsorb Taiwan and be careful in the Philippines. Right on deck today, we’ve got beg chair Powell testifying again to Congress.
I’m not so sure that there’ll be anything new there, but the markets certainly continue to read things as bullish for inflation and bullish for the market as well. The big data point this week is the non farm payroll. And it’s big, but it’s even bigger, I think because, well, it’s even bigger, I think because you’re now starting to see some banks and some analysts say, well, I’m seeing a huge divergence.
I’m seeing your traditional banks are saying your normal banks. Right. The consensus is the jobs market is going to weaken. And now I’m seeing Apollo, which is they like to stand out. They also manage a lot of retirement bond money. They’re saying the jobs market is going to be really strong and surprise. And if that happens, you’re going to see the markets start to discount, or at least consider discounting fed rate hikes.
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. The silver maple Leafs are one of the most popular silver products and also come from one of the major sovereign mints. To get yours, call Miles Franklin at 833-26-4653 where you’ll have your own dedicated broker who will be happy to answer any questions you have for any of your precious metals buying or selling needs.
So call Miles Franklin at 833-26-4653 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. .
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