Traders are buying Gold & Silver at the fastest pace in over a decade, and the last time large speculators were as aggressively buying Silver as they did last week was back in September 1997. The net long non-commercial positioning in Silver futures, according to the CFTC rose almost 22,000 contracts last week to a 3-month high (which is closing in on the ‘longest’ since 2005).
Gold, not to be out-precious’d also saw major buying, along with its little brother Silver. Net speculative longs in Gold added over 45,000 contracts – the most since July 2005 – lifting net long positions also to their highest in 3 months. Perhaps, just perhaps, as Alhambra’s Jeffrey Snider notes, this is due to Yellen putting the ‘U.S Dollar’ back on suicide watch as precious metals like Gold & Silver grow in popularity!
Contrarian or not, perhaps Alhambra’s Jeffrey Snider’s view that Janet Yellen’s contortions have put the U.S Dollar back on suicide watch, are now creeping into the market. And for all the noise, the ups and downs along the way, treasury yields haven’t much changed. That observation applies as far back as May 6, which means that for all the mess there isn’t any more clarity.
I think that notion is given further credibility by UST trading Wednesday in response to the FOMC statement; there really wasn’t any response. The same goes for eurodollars which seemed unperturbed by the almost dispirited desperation that the FOMC was trying to forward as a reasoned basis for whatever they might do. That, then, places far more emphasis on what might have occurred on May 6 to make such a unified impact in global money and credit markets.
Obviously, it hasn’t been taken as fixed income gospel yet, thus the sideways action lasting now a little over two weeks. This week’s FOMC statement did nothing at all to clear up any perceivable favor one way or the other. The utter mess of rationalizations could actually be taken as supporting both versions, hawkish and dovish; the continued allusion and even “official” recognition of some stark economic weakness and very little of organic trends to offset it , but also that the Fed may be excusing all that as still consistent in their view with the ending of ZIRP.
It isn’t completely clear either from other “Dollar” proxies as to where Bank balance sheets globally might be progressing. Again, there isn’t any sustained trend here to offer a more compelling interpretation, but enough of a muddle in which to accommodate the possibility of resumption toward tightening. Gold & Silver, for example, have both been trading mostly sideways dating all the way back to late March. The Brazilian real devalued starting on April 28, and the Swiss franc at least stopped its ascendant run on May 6.
So these “Dollar” and credit markets may not yet know what to do regarding Yellen’s version of “conundrum”, but it seems as if her introduction of complications has led to at least contemplation about it, tipping the scales, ever so slightly, back toward financial suicide.
Author: Tyler Durden