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Gold Investor Research Profile picture
Gold Investor Research
@CRutherglen
Unique and in-depth analysis of the gold and precious metals markets based on data-driven research.
John Cleary Profile picture Rick Norrris Profile picture Roger Serrabassa Profile picture Sonny Profile picture 6 subscribed
Aug 7, 2023 • 7 tweets • 3 min read
The 10yr US T-Note yield is potentially in the process of forming a double-top around 4.2% similar to what it did a couple interest rate cycles ago in Jun 2007.

What is the implication for the gold price?🧵 Image Long term real yields are the main driver of the gold price which means the following are positive for it:
1⃣ A falling 10yr yield

2⃣A rising inflation expectation Image
Apr 2, 2023 • 9 tweets • 4 min read
Thank you @RonStoeferle for the endorsement!

How are we looking at the gold market that may be different from the others including research produced by large brokerage houses?


🧵(1/9)
$gold #Gold First, mapping the level of M2 money supply onto the gold price offers increased utility relative to monitoring its rate-of-change alone.

The level shows gold reached a major support in Nov 2022.
(2/9)
Jul 18, 2022 • 5 tweets • 2 min read
▪️Inflation metric comparison & gold thread▪️

Historically, how has CPI based inflation (which is 1yr backwards looking metric) compare with the 10yr inflation expectation (which is the expected inflation rate implied over the subsequent 10yr period)? Intuitively, the 10yr inflation expectation should be a more moderated than YoY CPI due to the longer period it is averaging over.

Although technically incorrect, one can at least form a moderated CPI by looking at its 5yr EMA which currently is around ~4.5%.
Jul 15, 2022 • 5 tweets • 2 min read
▪️Gold COT chart thread▪️

As previously reported, open-interest (OI) for gold futures had seen a large increase this week.

Today's COT report shows that nearly all of the new OI went into spread positions with 'Managed money' trader category accounting for the bulk of it. Image This helps explain why this new buying interest is not directly translating into a high price. Image
Jun 30, 2022 • 6 tweets • 2 min read
I am more convinced, not less on $3k.

Setup is very comparable to the 7.5yr cycle that ended in late-2008.
▪️2yr yield peaks in Jun'07
▪️GDX/Gold ratio reaches low two months later in Aug'07
▪️Gold in consolidation then advances to $1k over the next ~6 months; a ~50% run. What do we have now?
▪️2yr yield peaked in Jun'22
▪️GDX/Gold ratio making new lows
▪️Gold in consolidation pattern.

A ~50% advance gets price to ~$3k.
Jun 21, 2022 • 9 tweets • 4 min read
The question has been asked, what is holding the gold price up so well despite the 10yr real-yield putting in one of its widest divergences seen on the chart? Image One could make the case that it is the record negative short-term real-yield (3mo T-Bill yield less CPI YoY % chg) that is in-part holding it up.

Here is the same chart as above but with the USD index (DXY) and the short-term real-yield included. Image
Jun 14, 2022 • 4 tweets • 2 min read
If they were to hike 75bp tomorrow that would put the fed funds rate around the downward sloping line which is a potential target. It's a possibility that they pause from there. Lets see. My long-term targets for gold are based on the M2 scaling offset by new mine supply and that data has not changed much.
Jun 12, 2022 • 10 tweets • 4 min read
Coinciding with the large CPI print, on Friday, the 10yr Treasury Note yield spiked up 11bp to a new local high of 3.15%.

Breaking the 10yr into two sequential 5yr periods, we can express the 10yr yield as its real & inflation components for each period. Despite the high inflation headline number, only a minority the day's rise (~15%) can be attributed to the change in inflation expectations with both components well off their highs.

To top it off, the 5yr forward inflation expectation actually decreased on the day.
Jun 4, 2022 • 7 tweets • 2 min read
Why a test of the Mar'21/Aug'21 lows (~$1675) is not likely right now.

Common metrics of the lows:
▪️ futures OI~480k contracts
▪️ managed money long (inc sprd) to ~26.5% of OI from prior local high of ~35%
▪️ option delta-IV max swing was ~$250m on left branch of IV parabola Comparing the above to current conditions:
▪️ futures open-interest already down to ~500k contracts
▪️ managed money long: ~29.5% of OI (based on 5/24 COT data. Probably lower now)
▪️ max-pain price too high. ~$250m on left branch of the current IV parabola only gets to $1735
May 24, 2022 • 6 tweets • 3 min read
1⃣Since the money supply is a primary long-term driver of the $gold price (see link) it is useful to follow it in detail.
2⃣So far this year to Apr, the M2 money supply is up ~$280b. Although reserve & commercial bank credit creation have been strong (+$880b), it has been partially offset by MONEY REMOVED via increases at the Treasury General Account (TGA) and the FED's Reverse Repo (RRP) Facility.
May 14, 2022 • 7 tweets • 2 min read
1⃣How is money supply created?

The two main factors are via
▪️ Commercial bank credit creation &
▪️ FED assets purchases (QE)

Note, during the prior QT period, commercial banks expanded credit to offset the QT thus keeping the money supply YoY chg relatively stable. Image 2⃣During the coming QT2 period (presuming they can get to it before reversing course) one can likely expect positive M2 growth to continue but at a much lower YoY rate compared to the QE4 rate of +$2.8t/yr.
May 12, 2022 • 7 tweets • 3 min read
1⃣In a recent podcast today, it was claimed by the analyst being interviewed that the $HUI / $gold ratio suggests the PM mining stocks should be 3x higher to get them back to the 2004-2008 levels.

Why is this not a good valuation metric to use?
stockcharts.com/h-sc/ui?s=%24H… 2⃣Mainly because it does not include in the denominator the mining company's gold-equivalent production per share.

In the case of Newmont $NEM (a large component of $HUI index), production has been declining over the past 20yrs while shares-outstanding have been increasing.
May 11, 2022 • 4 tweets • 2 min read
1⃣One of the telling signs of an intermediate cycle low (ICL) for the $gold price is:
▪️a local low in gold futures open interest
AND
▪️a spike in trading volume.

Both conditions are currently occurring for gold. 2⃣Preliminary data for May 10 shows gold futures open interest was up +21.9k contracts on the day despite the price trading down. It looks like a low has formed or is in the process of forming.
Apr 8, 2022 • 4 tweets • 2 min read
1⃣Gold futures open interest looks to be in the process of bottoming out after having peaked on Mar 9 along with the $gold price. If confirmed, the recent price consolidation may also be coming to an end soon. 2⃣So far the gold price has held up very well despite the strongly rising 10yr real yield.
Feb 10, 2022 • 6 tweets • 3 min read
1⃣With the $gold price having moved up to a high of $1837 today, its intrinsic value (IV) premium to the IV minimum was nearly at the level we saw at the $1854 local high on Jan 25. 2⃣Here is how options traders have collectively adjusted their Mar'22 contract positions since gold's local low on Jan 28. No sign that traders are significantly betting on a breakout before opex.
Feb 8, 2022 • 4 tweets • 2 min read
The gold price is back to mid-channel and a price-volume divergence has developed again. Based on the gold options intrinsic value curves, I am still looking for a low before opex (Feb 23) as being most likely; i.e. between Feb 14 to Feb 22.
Image Watch the USD.
Jan 26, 2022 • 4 tweets • 2 min read
1⃣The Feb'22 gold options contract has now expired and here is how its intrinsic value chart concluded. Image 2⃣Looking ahead to the Mar'22 gold options contract intrinsic value curves, as mentioned previously, there is not as much downside protection embedded in the IV curve for this contract compared to Feb'22 contract. Thus, the risk is to the downside as we get closer to expiration. Image
Jan 12, 2022 • 5 tweets • 2 min read
1⃣Clearly we have a peak forming in #gold futures open interest. Preliminary data for Jan 11 shows an increase of 23k contracts. 2⃣Why this cycle-high is important is because the next cycle-low will likely be the intermediate-cycle-low for gold with a possible target of ~$1720 (+/- a few %).

If it happens you are going to want to buy that low because the next move up will be big!
Jan 7, 2022 • 8 tweets • 3 min read
1⃣10yr real yields have fallen rather quickly over the past few days. Since there is an inverse correlation between gold price and 10yr real yields, it is worth noting. As of now, the divergence that had developed mid-2021 between the two has now largely closed. 2⃣Back in Mar 2021, long-term Treas yields maxed out (coincidently??) at the 1940s controlled yield curve level. Now we are seeing rising rates mainly in the center of the curve (1yr-10yr). Will the 1940s controlled yield curve also mark the high during this advancing in yields?
Dec 10, 2021 • 17 tweets • 9 min read
1⃣Roadmap for Gold Investors:

#Gold is likely to make a new ATH to $3k first before dropping into its 8yr cycle low.

The alternative of drifting down into an 8yr cycle low in 2022 w/o having made a new ATH seems less likely.

This thread will explore the supporting analysis. 2⃣First, consider the constraints on timing. Using historical cycle duration as a guide, the 8yr cycle low in gold can be expected to occur between mid-2022 to mid-2024. Some time before this low it will put in a 8yr cycle high. Image
May 21, 2021 • 6 tweets • 2 min read
1⃣One of the drivers for the next strong move up in gold will be the USD index (DXY) breaking below the Feb '18 low of 88.15 and descending into its 3yr cycle low.

It is currently on calendar day 84 of the current intermediate cycle. They usual run 160-280 calendar days. 2⃣In which case, the 3yr cycle low can be expected to occur between Aug and Dec'21. However, it is probably too late in the current daily cycle to expect the break lower to occur now. It is more likely to begin later this summer.
stockcharts.com/h-sc/ui?s=%24U…