Gold Here

 
So what do we think of gold right here?

We like it.The meme is a strong dollar hurts gold and it it does. The Fed has sent its obligatory messengers into the wilderness of the marketplace to spread the word interest rates are going up. And most likely they will, though there's a possibility they won't.

But there is more to it here, as is usually the case. We have listed excerpts from two gold articles. You need to read them both in their fullness to get a better picture. We will be buyers but until we get a clearer signal for the entry point we want or should we say hope to get. But we have no intention of being washed out of it.
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To say that gold and gold stock investors have seen their portfolios pull back over the past two months would be a big understatement. However, because the rally that preceded it this year was huge it still appears that the market is just wringing out its excesses. And that means a buying opportunity is near.

Gold bottomed in December 2015 at a price of $1045.40 per troy ounce and then rallied to $1377.50 by July. That was a 32% gain, in round numbers, and was a serious move in anyone’s book. Since then, gold is down just under 9% in price, which is a significant decline.

 

The VanEck Vectors Gold Miners exchange-traded fund (ticker: GDX) had a much wilder ride, as it gained more than 150% from its January low to its August high. And its drop from the peak was a portfolio-busting 27%. Volatility cuts both ways so investors owning gold stocks saw tremendous profits on the way up and commensurate losses on the way down.

The question is, “Why are these markets both down so much and are they back in their long-term bear markets?”

barrons.com/articles/gold-fans-keep-the-faith-this-bloodbath-will-end
  
What Else is Moving

1. There is massive FX volatility  as money piles into the USD
2. Oil is rallying relentlessly
3. Gold is down against every major currency this week
4. There is no observable news to justify moves of this magnitude
5. Precious Metals are having the largest drawdowns of any other market
6. JGBs after getting hammered post the BOJ August policy change  have recouped 1/2 of their losses

Right now we are trying to get a bearing on the possible causes seen and unseen on the deluge of selling.In times like this, we are long on observable facts, and short on opinions until a thesis that ties things together materializes. And when one does not, we just look at what is moving the most and try to reverse engineer the behavior.

Biggest Movers This Week Using the chart below we can easily spot what the biggest movers in  widely held commodities and the FX markets were this week.
Weekly Futures Performance

 
 ODEY's Levered Gold Bet

Even Paulson would be scared

Odey’s  biggest bet is in Gold. Gold represents 100 per cent of his fund’s unleveraged value, meaning a large rally or fall in its value may dictate the fate of his entire portfolio. His reasons are well known, and may be why he has become a target if it is Odey being liquidated. Mr. Odey: “central banks have printed $80tn of money, backed by only $1.27tn of gold”. Which we agree is going to be the death of all paper money. But to be leveraged to the extent that Odey is may be irresponsible.

As the FT states: "Odey’s long gold position interacts with his overarching premise — that a crisis starting in China explodes through global markets. Large amounts of global gold demand come from Asia."

And there is the problem. The crisis has to be inflationary, not deflationary. And Central Bankers are in charge of a market that will take out leveraged portfolios despite easy money.

ODEY's Levered JGB Bet

Mr Odey’s second big trade is that Japanese government bond yields will explode higher as financial markets realize that the “all in” Bank of Japan has run out of ammunition. Some macro hedge funds have over the years attempted to short JGBs based on the idea that the country’s indebtedness and poor growth was incompatible with its low yields. JGB yields have continued to drop, leading to the trade being nicknamed the “widow maker”
Again from the FT:

"the premise that JGB yields will rise during market turmoil is no certainty. The Japanese are the world’s largest single owners of financial assets, which in the event of a crash would presumably be sold and funds repatriated into yen. Over the last two decades a strong yen has tended to coincide with a fall in Japanese government bond yields. Betting against JGBs in anticipation of a crisis may have painfully opposite consequences when a crisis arrives."

 
marketslant.com/articles/common-sense-gold-and-silver-etfs