Macro Dragon: Overnight Gold & Silver Mayhem, Biden picks VP

Macro Dragon: Overnight Gold & Silver Mayhem, Biden picks VP by Michael McKenna
Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.
(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon: Overnight Gold & Silver Mayhem, Biden picks VP 


Top of Mind

  • Biden, VP & POTUS: Yesterday’s Dragon talked about the potential pathways here under Biden’s VP Pick is likely to be POTUS & we finally have a decision. Biden went for the safe & well consensus forecasted California senator Kamala Harris. This should solidify the women vote & minority vote (especially among blacks) in the US for the Dems.

  • Not quite a done deal unlike the hypothetical Michelle Obama that we talked about yesterday, yet still lightyears ahead of saying picking Hilary Clinton. And not a game changer (albeit also with its own set of unsystematic risk) that if he had picked Demings in Florida, who obviously is not as well known as Harris is.

  • So huge day for women & minorities not just in the US, yet in all shapes & sizes globally. As a Biden presidency would be historical on a number of pioneering grounds. Expect team Trump to bring out the skeletons & graveyards on Harris over the next few wks to months.

  • Plus also with the VP pick finally done, full attention goes back to the stimulus package in congress. Again, here is about WHEN not IF. Again, the Reps show how disconnected they are in the discussions of getting this out.

  • Only thing Trump has going for him is social unrest… the more things heat up & escalate, the greater a chance for him to garner the “law & order” support. If you go back to Maslow’s Hierarchy (alert on authority bias), safety needs in number two, coming after physiological needs (food, water, air, shelter). Point here being, before you can worry & be concerned about an equitable & fair society for all genders & ethnicities – you are likely to first prioritize the well being of yourself & family first. This is encoded in our DNA, so the strategy – whilst the paragon of immoral – is brutally brilliant. Imagine what happens to perception of law & order when you get the following hypothetical headlines:

    16 Police Officers in the US Brutally Executed by mob or Police Headquarters Bombed killing 25 people inside, etc…

  • Point here is, whilst is almost certainly a Biden & Harris win if the vote happened today… there is a lot of time decay to get through between now & Nov 3.

  • Silver $25.31 -15%, Gold $1920 -6%, Mayhem?: Ole did an excellent Metals update that can be found here & is also attached for those on the VVVIP mailing list. From the Dragon’s take, this is part of the way. At the end of the day, as of last Fri close silver & gold has flown +51% & +13% in 3wks in pretty much a straight line. They had gone from 18.72 to 28.30 & 1798 to 2035, putting in new high for this cycle in silver to 29.13 & an ATH new high in Gold to 2063. Interestingly enough Silver ATH back in 2011 is just shy of $50.

  • KVP’s prime conviction bullish view remains – however we always have to contend that our timing can be off, to which we simply turn to the charts to give us some metrics to work off of. For gold the big lvls are the previous ATH of c. $1920 (we are currently $1888), its then really $1800 & most crucially importantly that $1750/$1760 lvl. All whilst keeping an eye on the direction of implied real negative rates, which have had a reversal over the last few days alongside nominal yields – view there is yields are capped, question is where?!

  • Almost certainly 1% to 1.20% at most conservative, yet obviously holding onto gold & silver for a test of the 1% to 1.2% lvls on US10yrs is not going to be feasible, unless one has a NAV allocation (i.e. 10% to 25% of AUM & can weather the drawdown), with UST around 0.64%, KVP feels we are getting towards top end of the range. Lets see.

  • For silver, its worth noting that a -15% is not even 2.5 StDev, 1 StDev is currently +- 7.1% on 10day vol. That should give you context on whether a position is too big, too small or just right. The $22 lvl is the key one to watch from a charts perspective for the bulls on silver, post which its $14 (kinda like EURUSD 1.14).

  • Again counter reversals in mega trends is not just rare, it’s the norm – breaking 1800/1760 & 22/14 begs a revisit to the long-term strategic view. Obviously those with shorter tactical trading horizons will have tighter stops & lvls.

To Keep In Mind Today

  • NZ: RBNZ met & was unchanged as expected, here is a link to their statement
  • UK: 2Q Flash GDP -22.3%e -1.7%p YoY, IP, Mfg. Production
  • EZ: IP, Ger 10yr Bond Auction
  • US: Inflation 0.7%e 0.6%p, CORE 1.1%e 1.2%p, Oil Inventories, Kaplan @ 23:00, Federal Budget Balance, 10yr Auction

Start-to-End = Gratitude + Integrity + Vision + Tenacity. Process > Outcome. Sizing > Idea.

This is the way