Please note: the COTs report was published 10/1/2021 for the period ending 9/28/2021. “Managed Money” and “Hedge Funds” are used interchangeably.
The Commitment of Traders analysis last month showed a potentially bullish setup in both gold and silver. The washout of Managed Money Net Long contracts that occurred in early August appeared to be over and a rebound was underway. Unfortunately, it looks like there was another washout in September. As highlighted recently, it’s possible exhaustion may be near. However, if another washout occurs, it would probably drive Managed Money net positioning negative for the first time since Nov 2018.
Below is a look at the details.
Last summer, Ohio Gov. Mike DeWine signed a bill into law that exempts gold and silver bullion and coins from sales tax. This will not only relieve some of the tax burdens on investors in the state; it will also take a step toward treating gold and silver as money instead of as commodities.
The Federal Reserve not only runs US monetary policy with its interest rate manipulations and its quantitative easing program; it also “regulates” financial institutions. That’s why the fact that several Fed members made multiple multimillion-dollar stock trades in 2020 even as the central bank was putting its big fat thumb on the economic scales is more than a little problematic.
Even as the Fed talked about tightening monetary policy, the money supply grew at the fastest pace since last winter.
In the latest period, M2 increased by $263 billion. This is a major jump compared to the last two months and is the highest month-over-month growth since February. The same period in 2020 saw M2 only grow $62B.
Incentives matter. All of the political grandstanding, media spin and wishful thinking won’t change this basic economic principle.
Both Janet Yellen and Joe Biden insisted “enhanced” unemployment benefits weren’t incentivizing people not to work. But as we recently reported, analysis of continuing unemployment claims after a number of red states cut enhanced benefits undermined this narrative. Now a study by Mercatus Center economists Michael Farren and Christopher M. Kaiser further destroys the ludicrous notion that paying people not to work won’t result in fewer people working.
The Federal Reserve held its September Federal Open Market Committee (FOMC) meeting last week. While there was a lot of talk about the central bank tapering its quantitative easing program, the Fed didn’t announce any concrete plans to slow asset purchases. The lack of concrete action was no surprise to Peter Schiff. After the Fed meeting, Peter appeared on NTD News to talk about it and the Fed’s apparent reluctance to take any concrete steps toward monetary tightening. He said the central bank is in the process of replacing America’s economic foundation with a money printing press.
The Fed has an inflation problem.
The CPI is running well above the mythical 2% target and there isn’t any sign that it will ease soon. To deal with this problem, the central bank should tighten its monetary policy. But that would create a whole new problem, given that it can’t tighten in this economic environment. So, what is a central banker to do?
Well, if the Fed can’t hit the target, how about just moving the target?
One of the major technical indicators for investors is the 50 Day Moving Average (DMA) vs the 200 DMA. This analysis examines these moving averages for both gold and silver along with other technical indicators.