Commitment of Traders
For the moment, silver’s intermediate-term bull market remains in force, albeit with a record level of bearishness on the part of the “smart money”.
“If the weather forecast suggests it might rain, wouldn’t you carry an umbrella?”
"The physical market dog is starting to wag the paper market tail. Anyone trading paper-centric historical patters is driving forward while looking in the rear view mirror."
Someday something will change and the confidence scheme will fail.
"Now that we are entering a negative rate world, I am seeing a lot of very large-sized institutional money looking for a home. Some of this money is flowing into gold, and this is confusing technical traders who are battling what looks like a technically overbought gold market..."
Someone Is Very Wrong On The US Dollar: Hedge Funds Most Bullish In One Year, 'Real Money' Most BearishSubmitted by Tyler Durden on 02/29/2016 11:57 -0400
As JPM explained 10 days ago, before one can form a definitive view on the future direction of the S&P500, aside from BTFD "just because", one first has to decide what the USD will do from here. And that's where we run into a problem, because according to the latest Commitment of Traders data, the outlook of the "smart" money managers has never diverged as much as it does right now.
Monetary Metals has been predicing a rising gold-silver ratio. This ratio moved up very sharply this week, and now it takes 83.2 ounces of silver to buy an ounce of gold.
It's within a hair’s breadth of breaking out past the high set on Oct 17, 2008.
While we still think its early to call the end of the dollar bull market that has been in place since July 2011, it's apparent that the world is currently not in as broad of a dollar bull market as we were in last year.
While the fear and loathing of gold by the "smart money" and central banks has been extensively documented in recent years, another asset class is emerging as the "most hated" within the speculator community: treasurys, or rather, duration.
Man Group, which runs $76.8 billion in assets, said on its website that its $4.4 billion AHL Diversified fund lost 5.1% on Thursday. Among other funds to have been running bets, to a greater or lesser extent, against the euro were Brevan Howard Asset Management, which oversees about $25 billion in assets; Tudor Investment Corp.; Moore Capital Management; and Caxton Associates, said investors. "Pretty much everyone was short the euro. The view was very clear for everyone."
Gold sentiment may finally be getting bearish enough to support a durable bottom.
Sales of American Eagle gold coins at the U.S. Mint surged in November, with gold demand nearly tripling month-over-month. China's gold reserves rose by another 21 tonnes in November, the biggest bout of gold buying since China began disclosing monthly data on it's gold reserves in June
Despite these very high levels of demand, gold prices fell sharply in November - from $1,141/oz to $1,070/oz or 6.6%.
With an all time high of 293 ounces of paper per ounce of registered physical gold, it appears hedge funds continue to ignore systemic risk and surging physical demand, merely following the trend lower in paper gold prices by adding to already record short positions in gold last week. With the speculative world near-record long the USDollar and record short gold, how much longer can the status quo boat can remain upright with so many on the same side. After this week's shake-out of USD longs courtesy of Draghi, one wonders if the gold squeeze is about to begin?
The lack of fear in risky assets is another way of saying that risk premia have been low, or as we also like to put it, that complacency has been high. Not fully appreciative of this inherent risk, it seems many investors have refrained from rebalancing their portfolios, and bought the dips instead. We believe the Fed’s efforts to engineer an exit from its ultra-low monetary policy should get risk premia to rise once again, that if fear should come back to the market, volatility should rise, creating headwinds to ‘risky’ assets, including equities. That said, this isn’t an overnight process, as the ‘buy the dip’ mentality has taken years to be established. Conversely, it may take months, if not years, for investors to shift focus to capital preservation, i.e. to sell into rallies instead.
The only other time the S&P 500 Hedgers’ net long position exceeded 60,000 contracts was... September 25-October 9, 2007. We may or may not have to remind you that October 9, 2007 marked the all-time high in the S&P 500 to that point – and for 6 years to follow. Obviously, this was decidedly NOT a well-timed long extreme.