Gold/Silver/Wheat: The next short squeeze
Whatis the next market to see a short squeeze? That is the question I have beenasked most by clients this week. Shortages have been popping up everywherewithin supply chains, especially where inventory remains low and bottlenecks indistribution occur. Multiple commodities such as Oats, Cotton, Crude Oil, andGasoline have rallied double-digit percentage gains this month. I know you arethinking, when is it my time in Gold and Silver?
Gold attempted another breakout on Friday and traded back below the $1815 pivotby the end of the session. The volatility results from the push and pull ofrising real yields (acting as a headwind), while the Dollar's correction actsas a tailwind. If the rise in yields can pause while the Dollar drifts lowerand growth slows, you can have a set up for a sustainable rally. Until then,the funds will remain active sellers on rallies just as they have been activebuyers on corrections in US Equities.Tofurther help you understand the quantitative analyses of the precious metalsmarkets, we created a free "Gold Trends Macro Book," updated withsilver slides. You can request yours here: Free Gold Trends Macro Book.
Daily Gold Chart
Silver has a much better chance of a breakout than Gold based on two keyobservations. The simplest would be the Gold/Silver ratio breakdown since September29th at 80:1 down to 73.5 today. That shows momentum is building under Silverover Gold, and second is the latest CFTC non-commercial net long positioning.Currently, Silver has a net long position of 16,190 contracts with a one-yearaverage of 40,866 contracts net long. The three-year max position is 80,646,leaving plenty of participants to join in on any possible breakout, therefore,creating a "Squeeze."
Daily Silver Chart
However back to the short-squeeze question addressed initially, I firmlybelieve that an active one remains in the Wheat market. World Wheat stockpilescontinue to decline while global demand accelerates.The latest CFTCnon-commercial positioning shows a net short of -11,349 contracts meaningtraders could frantically purchase contracts on any supply disruption. Twoquick charts to look at are the Spring Wheat and Winter Wheat.
Daily Spring Wheat
Daily Winter Wheat
While we monitor developments in Gold and Silver, we will be constructingstrategies in Wheat for the next potential leg higher. Remember our goal is toput beliefs and narratives aside and position where we see the bestopportunities. If you have never tradedfutures or commodities, I just completed a new educational guide that answersall your questions on how to transfer your current investing skills intotrading "real assets," such as the 10oz Gold futures contract. You can request yours here: Trade Metals, Transition your Experience Book.
By Phillip StreibleContributing tokitco.com
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phil@bluelinefutures.comwww.bluelinefutures.com