You and I are nobodies. Just simple little peons trying to get by and plan for the future. However, there is Big Money in this world and one of the ways Big Money got big and stays big is by having the wisdom and experience to spot...and then exploit...market inefficiencies.
Think of that lizard creature Soros and his career-making trade in the British Pound. Perhaps for a more current example, think of the guys that were profiled in The Big Short. What do these people have in common? They spotted market inefficiencies and exploited them for profit.
And it's not just these two examples. Major hedge funds, institutions and trading desks are on the lookout 24 hours a day for market inefficiencies that they can exploit. Spot what has been overlooked. Take action and position yourself ahead of the crowd. Wait for everyone else to catch on and catch up.
OK, are you with me so far?
In 2021, all the Big Money in the world has been focused upon Tesla and FAANGS and Bitcoin and bonds and everything else that has been moving with volatility and it has completely forgotten about gold. Comex gold has been in a downtrend since August and Big Money has moved elsewhere.
Through their neglect, they've failed to spot this a glaringly obvious market inefficiency. Are you ready for it?
August 2020: US 10-year note real rate was -1.05% with nominal rate of 0.55% and CPI at 1.6%. Comex Digital Gold price? $2080.
April 2021: US 10-year note real rate is -1.02% with nominal rate of 1.58% and CPI at 2.6%. Comex Digital Gold price? $1750
THAT is a market inefficiency. The good news? You and I have spotted this first and are positioned correctly. In this case, we are Soros or Burry.
And on this fine Thursday morning, do you sense that the rest of the Big Money might be starting to catch on?
In last evening's podcast, I urged you to consider yesterday (and Monday, too) as just "days"...and that's all they were. The Much Larger Issue is this market inefficiency and with the 10-year note rate falling even farther today, the world is waking up to the relative undervaluation of Comex gold versus real rates. And how quickly might CDG (and CDS) correct higher if the yield on the 10-year note continues to fall toward 1.50% or even 1.40%? I'll answer that for you...VERY quickly!
The action today has also accomplished this...Do you realize that the price of Jun21 CDG has been BELOW its 50-day moving average since FEBRUARY 2?!? Until today that is.
So now look closely at the chart above. After breaking down and through the 50-day on January 8, price spent about four weeks trying to get back above and then two full months trending well below and lower.
You with me?
Now look at the chart below of the Apr20 CDG contract and look at the two similar occurrences of this exact same pattern within this ongoing bull market.
- Mar-May 2019: Price below 50-day. Price moves above on May 31 and then rallies from $1320 to $1572 in the next 100 days. That's a move of 19.1%.
- Oct-Dec 2019: Price below 50-day. Price moves above on December 24 and then rallies from $1505 to $1705 in the next 70 days. That's a move of 13.3%.
So let's see...
- Real rates are back to the levels last seen when CDG was at ATHs near $2100
- Big Money has yet to notice
- CoT and BPR "washed out"
- Price breaking higher above key short-term trend indicator
If we just assume a 15% rally from here...as an average of those two moves in 2019...then we are looking at a goal by early July of at least $2000. Why? Price at breakout today was $1755. Add 15% and you get $2018. Now that would still put price up just $118 YTD and we'd still have to wait for the next wave to take us to our $2300 target for 2021 but we'd certainly be on our way.
And where do you suppose your mining shares would be trading in July at $2000 CDG?
And how about CDS? If CDG moves 15% then CDS should move...what?...25%?? That would take price well above $30 to maybe $33 or so. What would physical demand look like at that point? More fun, what would your silver juniors and the SILJ look like?
So let's see where we go from here. Today is just one step and it's CRITICAL that price remains above and pulls away from the 50-day. Next up will be a test and breakout of the "bull flag" that has been brutally enforced since September. Getting above there will not be easy but, once that breakout is accomplished and easily recognizable, we'll have another spark for our rally and momentum.
OK, that's it. As I close, I see that we are very near our highs of the day and looking to move even higher as the bond market continues to rally so put a smile on your face, go out and have a great day.