What Hath Mother Wrought?
Keynes, himself, is credited with line line "the market can stay irrational longer than you can stay solvent". Boy, isn't that the case today as the metals react as if yesterday's Fed rate hike was somehow surprising or unexpected.
We led off yesterday's podcast note by admitting that we had no idea of what to expect today...and we certainly didn't expect this!
Ridiculous! Again, it's as if no one saw this coming! Hasn't the Fed been telegraphing this since October 28? Wasn't the certainty of this rate hike the reason gold was smashed from $1180 to $1050 in the five weeks that followed? Didn't all of the Spec selling and shorting already drive the gold CoT structure to historic levels? And yet, here we are...gold is down $29 as I type at $1048. Well, whatever. Not much I can do about it except try to remain rational...if not solvent.
Here's a chart that I first published two weeks ago when gold last sunk to these levels. Are we finally seeing the washout that drops price to that 1035-1045 level? I guess we are, though we still haven't made a new low below what was seen on Dec 3 at $1045.40.
All I know is that it's a shame there isn't a CoT survey today as I would love to have seen the results if there was. The amount of old Spec long liquidation and new Spec shorting has to be overwhelming. How else could price be down 3%? Are we back to where we were on Dec 2, when we speculated that the CoT actually went Commercial net long? Probably! Perhaps even more so. (Is that the foot long? And then some!)
<...Sorry. Gotta throw those references in there to help me keep my sanity...>
Does it matter that The Specs are likely NET SHORT and The Commercials are NET LONG as I type? I think so. Does it matter that price is near what we anticipated as a bottom and have discussed for weeks? I think so? Does it matter that sentiment is terrible and now virtually everyone thinks that gold is going lower, lower, lower? I think so. And, so, I still expect a gradual rally into year end, an extended rally in January and a positive year in 2016 that breaks the 3-year losing streak.
In the end...since my stack of gold and silver is just as shiny as yesterday...my only frustration today is that I haven't gotten the hoped for opportunity to short the S&P. It hasn't been up so far today and it certainly hasn't approached the 2090 level where I would look to get short. So, I have nothing. And the S&P is down 12 points as I type at 2061. Nuts.
The miners are getting the snot kicked out of them today but, so far, the HUI remains above that critical 105 level.
The long end of the yield curve is rallying with the 10-yr down 3 bps to 2.26% and the 30-yr down 4 to 2.97%. With Mother's 2-yr at straight up 1.00%, this further flattens the 2-10 yield curve to just 1.26% or 126 basis points. And the "economic news"...which obviously doesn't make the slightest bit of difference to anyone...continues to be all bad.
Some analysis of yesterday's "news" from Denver Dave and his pal PCR:
And besides the metals, crude is smashing toward new lows, too. Again, if we see $33-34, I might consider taking a grab at "the knife". I'll let you know.
So, that's all I have for now. I still own my UGL calls which expire in four weeks and I still own my Feb16 gold call which expires at the end of January...though all of them are worth considerably less than yesterday. Let's just see how the "market" reacts once today is over and we head into year end with all of the trade loaded onto the short side of the boat. For now, just try to keep your sanity while staying focused upon why you hold precious metal in the first place.