New From Paul Mylchreest

43
Thu, Dec 4, 2014 - 10:15am

Longtime Turdites will recall that Paul Mylchreest is an excellent metals analyst. His latest report explores in great detail the ongoing link between the price of gold and the value of the Japanese yen which, as you know, is a theme we've already been following here for months.

This is a lengthy and detailed summary and it is chock full of terrific information about the gold--yen link, the global gold "market" and GOFO/backwardation. Please take the time to scroll through it and thank you to Paul for sharing it!

TF

Nikkei Gold Danger

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  43 Comments

lnardozi
Dec 4, 2014 - 10:22am

First again?

What's up with that?

CPE
Dec 4, 2014 - 10:27am

Mylchreest

writes great stuff, thanks!

Kismet
Dec 4, 2014 - 10:31am

Turd?

The third turd?

jaw777
Dec 4, 2014 - 10:36am

Trade

Anyone know a good way for a guy to short the Nikkei and go long gold in an old fashioned stock/options trading account?

Ignoring of course they can keep this going for a long time.

ReachWest
Dec 4, 2014 - 10:38am

Excellent Report!

Thanks for posting this Turd. I'm about half way through and actually following most of it. Mylchreest does a great job laying this out in a very readable and easy to understand fashion.

CPE
Dec 4, 2014 - 10:43am

@jaw777

Google works really well:

Short NKY and use the funds to go long PHYS

If you mistyped about short Japanese stocks vs Japanese currency then you would short FXY instead of NKY...

wildstylechef
Dec 4, 2014 - 11:01am

Again as I said before yen carry trade vs gold

Its the yen carry trade and the derivatives that are so much more lucrative that is the detriment to gold as the cash from the yen carry trade is exponentially better but when it reverses it will be explosive to the reverse.

StevenBHorse
Dec 4, 2014 - 11:06am

If this is all true

Which I don't doubt in the slightest, then the snap elections in December will carry huge implications for the markets. Should Abe lose, then you could see an epic unwind of this pair trade.

I'm just trying to wrap my brain around the components of this. Long NKY, short gold.

XAU/USD short

NKY/USD long

But there is a step in the middle where you convert Dollar to Yen.

XAU/USD short

USD/JPY Long

NKY/JPY Long

I have just confused myself, but I think that is right.

batting500
Dec 4, 2014 - 11:27am

Great Read!

I would suggest everyone make the time to take it in.

Good Luck All...

batting500

Dec 4, 2014 - 11:39am

Question for the brain trust

Am attempting to wrap my head around this and around SBHorse's comment... but I don't get something in the text.

Paul says "We question whether entites which have put on this long/short trade have acknowledged that a rapid exit from a large short position in gold could be problematic. If so, we wonder whether a short position in gold is being partially hedged by accumulating long positions in (high beta) silver".

If this is true and has been happening, then why has the gold/silver ratio grown so exceptionally high over this time? If these entities, as Paul says, were hedging gold shorts by going long silver, shouldn't the G/S ratio have moved markedly in the other direction? It just seems to me that actual price movement undermines this thesis... am I missing something?

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