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Friday, May 20, 2016

More Pain for the "Smart Money" a Turnaround in Gold


In my March 16 entry I noted that two major "smart money" trades:

short US $ betting on a dollar fall
Short oil betting on lower oil

and that subsequent market moves turned those smart money trades into losers.

I noted the latest "smart money " trade was Gold...here's what we have seen very recently :

Bloomberg:

Gold is heading for the longest run of weekly losses this year because of the Federal Reserve

While the metal was little changed on Friday, it was set for a third weekly drop. Traders have boosted bets that U.S. policy makers will raise interest rates in the next few months, spurred by comments from Fed officials, minutes of the last policy meeting and quickening inflation.
“The hawkish minutes from the Fed meeting and economic data shows an increasing chance of a rate hike in June or July,” Jens Naervig Pedersen, a senior analyst at Danske Bank A/S in Copenhagen, said by phone. “That wasn’t priced in a few months ago and implies further upside for the dollar and quite a beating for gold.”
Gold rallied to a 15-month high earlier this month on expectations that the Fed would keep rates lower for longer amid risks to the global economy, adding to the appeal of owning non-interest-bearing assets. As the likelihood of a rate move increased, the dollar strengthened, cutting demand for gold as an alternative asset.


The chart below shows more bad news for the smart money trade betting on a weaker US dollar as well as recent pain for smart money holders of long gold positions

The chart  is entitled "different paths" but in fact the path is the same..a reversal of positions held by a large number of smart money" traders and a reversal as the Federal Reserve indicates a higher likelihood of interest rate changes.



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