Macro Storm Coming to Gold

Flow Show Comment: Obvious Gold Bears are Obvious

Authored by GoldFix ZH Edit

Everything about Hartnett’s report this week is bearish for gold. He doesn't talk about gold negatively at all, but everything he's talking about in there is bearish for gold. It is bearish for stocks more, but it is somewhat bearish for Gold as well. Unless the Fed eases.

What matters now, assuming that everything is actually bearish for gold, assuming that he's right economically: is how *low* can they get Gold before things turn around economically?

Secular Bull vs Macro Bear

The pricing of gold is now entering a battle between secular forces like BRICS, US debt, entrenched anti-Goldilocks inflation, Mercantilism, etc on the one hand. And on the other hand, bearish macroeconomic/financial forces are about to assert themselves.

Economically, financially, policy-wise, things are changing in this market negatively to counter positive secular forces driving gold  higher.

What we need to keep in mind is the secular forces that drive gold and silver higher have not changed. But the macroeconomic forces are going to assert themselves now. 

When the economics of a marketplace turn bearish, especially in gold, that encourages the short players to get confident.

Gold Bears Are Predictable

Bears will then lean on it because they see things corroborating their projected opinions. That's going to happen. It is happening. It will affect the bear behavior.

Analogously; They are watching a football game down 21-0 with 5 minutes left on the clock. But their team has the ball. So the bears get pumped up a little.

We therefore *know* what the bears will try to do now that macro data is turning.

What we (and the bears) don't know— and this is the mystery— is how strong are the longs this time?

Bulls May Not Get Spooked This Time

How confident are they in their secular opinions? Will they be scared out because of the macroeconomic info? Historically, they're easily scared out.

Many of the secular reasons to own gold in the past, were mostly the same reasons as to own it now. But in the past, they were not really strong in their confidence, so they were easily scared out. And in the past, they were never this profitable either.That's why the banks had their way constantly with them.

The question now is, Do the longs have the confidence to stay in? If gold cracks lower $300, then you know that the macro discretionary buyers and the CTA commitment wasn't very strong,

If that happens,  we're going to be looking to the central banks to see if they're going to be buying again. Central Banks are the secular buyers. Unless the BRICs kiss and make-up with the G7 overnight that cohort will be buying. The question is at what price. The key to the BRICs in a bear move is China. If their economy is in trouble, they will back off. If not, then they will happily buy dips. As China goes, so go the BRICS and increasingly the G7.

Which brings us back to the macro situation

The Unlikely Macro Bull Case Exists

If the macroeconomic discretionary buyers do not puke (as somewhat expected up top) on the bad economic information  likely coming out for gold, well, then they’ve really got the banks on the run.

Because when the macro cycle eventually turns bullish for gold again... then Bullion banks are possibly not going to have bought back as much as they want to buy. And that would be is a beautiful thing. They will *not* have covered their shorts to book profits and to facilitate their market-making operations in the next cycle. They will not have enough bullets reloaded to sell. Their bear profit cycle will have been short-circuited.

That's what we're looking out for moving forward. But right now, just know that this report is nothing about gold. But everything he's talking about here is bearish for gold. So the question is, how bearish will it be? If sideways is all they can do during this time, then we have a much bigger leg higher coming when the macro turns. But not until then

The Super-Stag Case

Everything bearish observed above is bearish for stocks, not gold per se. But Gold gets sold as well during these cycles. It is these cycles that cause the banks to flex and make gold look as bad as stocks to dissuade ownership.

BUT….. if these are Anti-Goldilocks times ,then no real soft landings will occur; only Stagflation. If we get full-blown stagflation instead of soft-landing slowdown, then you see secular forces trickle down to macro data. Then we get the 1970s behavior. Gold up with stocks down. Then we dance a little.

P.S using Hartnett's rationale.- It feels like stagflation, Buy Gold short stocks/bonds avoid Bitcoin. If you believe the Fed will ease on a soft landing, buy Bitcoin and Bonds/ Stocks, avoid Gold. Crash landing: Bonds, then buy Gold and Stocks and Bitcoin, and everything else to benefit from the next easing.