Short squeeze is short term driver, what's next

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swissaustrian

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During the last 2 1/2 days gold and silver bounced up from their long-term supports at 1526 / 26.6. They basicly retested their December 2011 lows with the precision of an assassin (thanks to algorithmic trading) on wednesday. Then the FED released their FOMC minutes and the QE rumor trading began. PMs were oversold anyway. A short squeeze started and took us to intraday highs of 1598 / 29.06 today. The miners experienced an even bigger short squeeze. Since about 2 hours, pm markets have recoupled with other asset classes and some are taking profits on their pm positions. The short squeeze could already be over. The question now is: what's next?
The dollar had a massive rally and might sell off for a few days. After that the dollar strength might continue for a while, putting pressure on pms in dollar terms. The other side of the coin is that speculators might return to pm markets, driving pms up on the renewed QE rumors. Phyical demand is also very strong, as demonstrated by the return of backwardation. This is the big joker and and the impact of that on spot prices is very difficult to quantify. My guess is that pms will stay relatively flat, maybe appreciate a bit (with significant volatility) in USD terms until mid-june (FOMC meeting), but will thereby outperform stocks and other commodities as the USD continues to appreciate against other fiats.
If the FOMC does enact some QE in june (or gives a clear hint), pms will rally and the USD will weaken somewhat, if not we might get another selloff.
Technically, it would be important to reach and hold 1600 / 30 in the medium term (2 weeks), ideally even reach 1630 / 31.5.
 
Illustrating the short squeeze in European stocks:

Top 5 winners / losers Eurostoxx 50. Winners are all financials:

SOCIETE GENERALE SA
+4,31 %
ASSICURAZIONI GENERALI SPA
+3,88 %
BANCO BILBAO VIZCAYA ARGENTARIA SA
+3,85 %
IBERDROLA SA
+3,30 %
BNP PARIBAS SA
+2,42 %

Losers

SAP AG
-2,25 %
BMW AG
-2,46 %
LVMH MOET HENNESSY LOUIS VUITTON SA
-2,73 %
ANHEUSER-BUSCH INBEV NV
-2,93 %
TELEFONICA SA
-6,29 %
 
By the way: there's still a short squeeze in Brent crude waiting to happen. Watch out for that.
 
I suspect that once the magic pixie dust is off the FB offering, things will return to "situation normal, all F'd up" again. In fact, doesn't look like it will take all day.

Good analysis SA. My posture is "short or out" just now myself, mostly just plain "out" except some paper gold I'm still very red on. I can wait, it's gold (or almost) and I doubt the revelation that some etfs are not even really gold will happen before I can close it green instead. It's phys, after all.

Yeah, that runup was so quick it had to be a short squeeze. I'd have been dancing if I'd bought just before that, instead of much higher.
 
The spike in EUR/USD from a few minutes ago sent gold higher again and gold actually kept it's gains from the spike so far. All other asset classes are falling again, even with EUR/USD staying flat. That's a good sign.

 
France's Hollande: EU Mechanisms Should Help Out In Spanish Bank Recapitalization [DJ]
 
dereksatkinson said:
France's Hollande: EU Mechanisms Should Help Out In Spanish Bank Recapitalization [DJ]
Click to expand...
"mechanisms" = money printing by the ECB
"mechanisms" /= German taxpayer money

Hollande actually campaigned on the idea that governments should be abel to borrow directly from the ECB
 
swissaustrian said:
The Dow is gonna close at session lows again, despite the spike in EUR/USD
Click to expand...

We want SPY down 1%. That will trigger a buy signal for the next up day on the SPY.

We want GDX to get a close of at least 41.58 (Renco buy signal)

Also...

DJ CFTC: Net Euro Short Position $27.7 Billion, Increases 18%, largest net short since Jan

Are we going to see another Euro short squeeze? Don't rule it out after so many up days in a row.
 
Big miners have given away nearly all their daily gains. Most of them closed at session lows. That's not a good sign.
 
I wouldn't give to much about today's selloff in gold. The DXY appreciated heavily, so the DXY weighted performance of pms was ok.
Options expiry is approaching on 5-24 and it seems that the target price is $1550.
Silver stayed remarkably strong today, outperforming gold on the downside, which is a very good sign.
 
SA,
Are you seeing a lot of capital flight in to Switzerland? I have been wondering where all those Spanish, Italian, Irish, Greek and Portugese Euros are going. The MSM would have me believe it is going in to sovereign bonds, but I am not convinced. Sovereign debt is the absolute last thing I would ever buy. In fact, I would never buy sovereign debt, I would stuff my cash in a mattress first.
 
Kinda yes.
The peg of the CHF to the EUR is a consequence of capital flights.
Swiss government bond yields are probably the lowest in the world, maybe second to Japan. But our government is actually acting fiscally responsible (running budget surpluses, debt/GDP is ~ 55%), so we're way better off than Japan.

If Target2 balances are any indicator, most of the periphere deposits denominated in Euros are still going to Germany: http://www.pmbug.com/forum/f4/[charts]-stealth-bank-runs-transfers-worst-eurozone-countries-less-bad-827/
 
Gold is gonna close Crimex trading on 1:30 pm ET at ~ 1550, silver at ~ 27.5 which - of course - has nothing to do with the fact that opex is tomorrow :rotflmbo:

The sudden surge of gold from the lows in anticipation of the Crimex closing bell - suddenly outperforming any other asset - is totally normal, nothing to see here :doodoo:
 
10 minutes till the CRIMEX closig bell, gold at 1549 and silver 27.55. have I been right or right
 
Yah, you hammered it SA. Now, the big question - would you be a buyer at these levels? I've got a crapload of PHYS I'm down 11% on (3% more than my normal limit allows), and was planning on doubling (or more) down on at some point so I can get green quicker when we get a real rise...but I've been waiting and waiting so as not to get faked out on a sucker bounce (like the one we just had).

I'm otherwise out of markets. I've had a bunch of personal time-taking stuff going on, so I took risk off awhile back other than the gold, since I'm not here to watch cowboy trades enough to manage risk in realtime.
 

I am a week away from my June purchase. If price are still in this range, I am thinking about tripling my normal purchase. Take advantage of the dips!
 
Miners are massively outperforming today, very positive sign

Looks like a short squeeze in the shares
 
Wow, nice move away from 1550. Some options trader is shitting his pants right now. His choice is: Either let gold go to 1575 by tomorrow or dump a lot of shorts in and bring it back to 1550.
 
HUI targets 500... Probably will hit there by mid june.. i'd get short there for a trade.

Long term, we are probably doubling from here inside a year
 
Looking at today's action in gold and silver, one might think that it's another short squeeze. However, it seems like somebody is actually willing to put a floor under gold at 1530 no matter where and how the dxy ( read: euro) trades. I doubt that this is a paper trader. It seems that the central bank story is true: there's massive physical buying going on below 1550.
Maybe pms are finally decoupling from the dxy and equities? At least they have some breathing space above their long term support (1526 / 26.2) thanks to the intraday rally today. We must not breach these levels, otherwise we're going down quickly.
 
Let's hope you are right SA. I kind of worry about the deleveraging I know will take place when levered bets blow up all over the place as Spain disintegrates.
 
well.. the action is consistent with a bottom but that doesn't mean it's done. The 1st step is getting a close over 1580 and then 1600. Those are some obvious pivots we will need to take out.

Realistically.. the decline wont be officially over without a lot more upside.
 
Gold is remarkably strong here. Lots of buying going on.
The plunge earlier really was just pm fixing related
 
Nice bounce, straight across the board. It looks like Mr. Market my just get his wish as Ben may have little choice but to ctrl+p.
 
Almost back to the 1780 au / 35 ag levels of a few weeks ago.
 
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