“As gold rallies and crude falls, we are likely to see some type of capitulatory momentum that might overlap with a move in bonds.” Mind sharing a few more words on why?
So here is the thing, crude is falling cause positioning is repricing after the geopolitical risk and the lower growth means marginally less demand for crude. overall crude is neutral on a longer term basis fluctuating between 60 and 90. gold is in a similar spot with how its connected to real rates and the quantity of money in the system. These two reflect opposite pressures most of the time (with qualifications). So crude is likely to have a capitulalory sell with gold a capitulatory bid. If this takes place at a extreme with rates being to over extended in a specific direction then this can begin to inform if i should take the other side of one of these ratios, outrights or maybe calendars.
Thank you for your illuminating explanation, comrade! The People’s Leader is most intrigued and wishes me to inquire further:"Some comrades used to track copper/gold as a proxy for bond yields and report it maintained a strong correlation until 2021. How do you interpret this capitalist divergence? And under what market conditions might the copper/gold ratio prove a more potent tool for our proletarian analysts than crude/gold and vice versa?”
Think about why the correlation even exists? Copper and crude are going to have more sensitivity to headline inflation which has fallen while core has been the main focus. This is on the economic side.
On the financial market and liquidity side, we have see an increase in the quantity of money, especially in bill issuance. This is what has caused gold to diverge from its real yields correlation being so tight.
there are definately some deeper explainations we could go into in terms of China joining the WHO and then more of a divergence away that contributes as well. But you know more about China than i do
Just to add on. Its large speculators positioning. Recent equity selloff we had where vol/premiums got overblown had large specs turn net short. I interpret it as since they turned net short yet macro data is still strong, inflation down, this might cause slightly further unwind(the process he mentions). Which could inch us closer to ATHs
“As gold rallies and crude falls, we are likely to see some type of capitulatory momentum that might overlap with a move in bonds.” Mind sharing a few more words on why?
ahhh Orfeo. hows Mao?
So here is the thing, crude is falling cause positioning is repricing after the geopolitical risk and the lower growth means marginally less demand for crude. overall crude is neutral on a longer term basis fluctuating between 60 and 90. gold is in a similar spot with how its connected to real rates and the quantity of money in the system. These two reflect opposite pressures most of the time (with qualifications). So crude is likely to have a capitulalory sell with gold a capitulatory bid. If this takes place at a extreme with rates being to over extended in a specific direction then this can begin to inform if i should take the other side of one of these ratios, outrights or maybe calendars.
Thank you for your illuminating explanation, comrade! The People’s Leader is most intrigued and wishes me to inquire further:"Some comrades used to track copper/gold as a proxy for bond yields and report it maintained a strong correlation until 2021. How do you interpret this capitalist divergence? And under what market conditions might the copper/gold ratio prove a more potent tool for our proletarian analysts than crude/gold and vice versa?”
Think about why the correlation even exists? Copper and crude are going to have more sensitivity to headline inflation which has fallen while core has been the main focus. This is on the economic side.
On the financial market and liquidity side, we have see an increase in the quantity of money, especially in bill issuance. This is what has caused gold to diverge from its real yields correlation being so tight.
there are definately some deeper explainations we could go into in terms of China joining the WHO and then more of a divergence away that contributes as well. But you know more about China than i do
> Net position in equities remains short but not as aggressive as 2023:
When you say this how are you measuring net positioning? What do the `CFF6TNCN` and `IMMOENCN` tell you exactly?
I see these being negative (red bars) yet see the corresponding indices rise in price, which is confusing
These are just COT positioning. WHen people are positioned short then they need to unwind the position (buy) if their view is offsides.
Just to add on. Its large speculators positioning. Recent equity selloff we had where vol/premiums got overblown had large specs turn net short. I interpret it as since they turned net short yet macro data is still strong, inflation down, this might cause slightly further unwind(the process he mentions). Which could inch us closer to ATHs
spot on