Hedge funds are the most bearish on commodities prices in at least 13 years as fears of a deeper economic slowdown cast doubts on demand for everything from crude oil to metals and grains, according to a report by Bloomberg
Meanwhile, WTI crude oil traded above $79 price per barrel.
And gold traded over $2500 price per ounce while silver traded around $28 an ounce.
Only grains are beaten down to historical lows.
So, hedge funds got that right… that is, if they are not forced to cover those shorts very soon.
All year our mantra has been “looking for inflation in all the wrong places.”
Not to mention the Federal Reserve will most likely lower rates in September as this week’s CPI and PPI readings might lull them to sleep.
However, I cannot imagine the Federal Reserve is not watching gold and oil as carefully as we are.
The Gold Miners ETF (GDX) tends to spark when gold becomes a high flyer.
Hedge funds don’t understand the power of this gold bull market.
Gold has made higher highs and higher lows.
Plus, one has to wonder what $2,500 gold does for miners.
Here are the notes I sent to media producers to consider as talking points:
- Going out on a limb-believe we are about to see more (maybe a lot) upside in commodities
- Oil-can see 80-90
- NatGas thru 2.20 has a lot of room
- Silver still cheap and in an uptrend
- Gold on its way to 2700
- Ags-DBA
- Bitcoin-very close to the start of a more substantial leg up
- Reason we like commodities now more than most equities
- Geopolitics
- No sign of decreasing debt or govt spending
- Fed about to ease-or at least totally done hinting at raising-and with CPI PPI next week, numbers will support inflation over-ha
- From a risk standpoint, best value on the board
- Risk on and off in equities now
- Risk On
-High Yield bonds still outperforming long bonds and SPY
-Semis still holding a weekly bull phase
-Biotech seeing money flow-good sign
-Retail while underperforming held critical support
b. Risk off
– Transportation sector remains a weak link
-Long Bonds outperforming SPY
-Gold holding over 2400
-Indices all below their 50-DMA or in warning phases
3. See more stagflation than any other economic scenario
Let’s take a look at the gold miners:
The Gold Miners ETF (GDX) returned to a bullish phase in price.
It is outperforming SPY.
Momentum is beginning to grab the 50-day moving average.
It is also above the July 6-month calendar range low.
It still has to clear the July 6-month calendar range highs at 38.58.
Regardless, GDX looks like it has lot of room to go, while the indices remain stuck in warning phases with bearish divergences in momentum.
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
