Loading ...Posted by a guy who goes by the “handle” VBL……..
The simplified idea is: A Fund wants safe haven exposure, but not economic exposure. They will then sell Silver and buy Gold. It is a version of the old “Recession means sell copper, buy gold” trade.This occurs usually in two types of events. War (which we are seeing now, and also saw this in February/March when Gold rallied first after Ukraine started) is the first. Fed tightening starting April 2022 also instigated this.
The practical reason is, Firms give some cross-margining on Gold versus Silver and treat it like a spread. Therefore it ties up less money for CTAs.These guys will trade Gold/Silver like an energy crack spread. CTAs frequently will buy heating oil and sell crude going into winter for the same idea. Going back to trading floor days we saw this. Same idea…
Prognosis: Silver will lead next leg up ( if there is one) unless there is news. We are seeing that to an extent today as Silver catches up a little.But do not expect things to get frothy until November when new money comes in. That is our tactical wish anyway.