Transcript of Gold Warning: CPI will change Everything
TraderNick
0:00Gold is selling off sharply, or at least0:02it was, and is showing some signs of0:04recovery. Meanwhile, take a look at the0:0610-year government bond yield. This0:08thing is flying higher here today with0:11no signs of stopping. And this is very0:14challenging to global markets. The0:17NASDAQ is sharply lower today. Same with0:19the S&P 500. And to make things even0:21more challenging, oil prices are blowing0:23out again.0:26And the catalyst, at least this morning,0:27that got things really moving was the0:29producer price index year-on-year0:31number, which came in higher than0:33expected at 5.4%0:35versus 5.3% expected. Now, the big one0:38is still coming tomorrow, the CPI0:41report. But let's not understate that a0:43perk up in inflation in PPI is not0:47necessarily good news. It is definitely0:49a bit of a challenger here to what has0:52gone on in the recent probabilities for0:55whether or not the Fed will hike rates0:56or not. And again, to be very clear with0:58the 2-year yield looking like this, the1:00market is thinking rate hikes are1:02coming. Bitcoin is also sharply lower1:04today. Bonds TLT are hitting fresh lows.1:08I think multi-deade lows at this point.1:10Maybe actually the all-time low. TLT is1:13absolutely cratering lower. Bond yields1:16skyhigh. And yet gold is showing at1:19least some kind of resiliency here.1:22Let's talk a little bit about why that1:23could potentially be a simultaneous1:26rally in US Treasury yields and precious1:28metals is a significant macroeconomic1:31divergence. Under normal conditions,1:33these assets are inversely correlated.1:35Because precious metals yield no1:37interest, rising treasury yields1:39increase the opportunity cost of holding1:41them. But we've been talking about this1:43concept right here quite a bit, the1:45debasement trade. and fiscal deficits.1:48This is a scenario where both are rising1:51and this is unique. It doesn't happen1:53very often. Uh but it is sort of the1:57insurance policy that is gold for a lot1:59of people who stack this stuff and hold2:00it for the long term. When the2:02government runs massive fiscal deficits,2:04it must issue a flood of treasuries,2:07right? They need to borrow more money2:08rapidly. This sheer supply of new bonds2:11coupled with a potential lack of willing2:13buyers forces yields higher to attract2:16capital. And we've been talking about2:18this on the channel. Bond prices have to2:20fall in order to get yields to move2:22higher to attract buyers. And2:23simultaneously, metals can also2:26potentially rally. Fearing that2:29persistent deficits will ultimately2:30dilute the purchasing power of the US2:32dollars, investors seek refuge in hard2:35assets with fixed supplies like gold and2:36silver. So, let's be very clear. Gold is2:39still very much down today. But I think2:40it's kind of important to note that we2:42have seen since the number was released2:45a bit of a rebound in precious metals.2:48It is possible, though not necessarily2:51super likely, that gold can rally2:54alongside Treasury yields. And if it2:56does, it's for one of the scariest2:58reasons, massive loss in fiat purchasing3:01power. That said, I do think that3:03tomorrow's consumer price index is still3:05front and center in terms of importance3:07to this market and where we are headed3:09next for gold. From a technical3:11perspective, we are holding support very3:13nicely here. If we break it lower on CPI3:16tomorrow, and this is where I use those3:18expressions that I always talk about, if3:20and then uh for those who are newer to3:23my channel, my background is in software3:24engineering, so I use these expressions3:26all the time as a programmer. If and3:29then in trading is a very powerful3:31sequence. If I am right in thinking that3:34inflation may not be super hot and that3:36a lot of other factors could continue to3:38be supportive of gold, then I will hold3:41on to this trade and try and let this3:43winter become a big one. If I am wrong3:45in thinking that if inflation rises3:48sharply tomorrow on a year-over-year3:50basis more so than what markets are3:52expecting, then I will stop out uh at3:56this level here, this 4216 level of3:58support uh or this level of support. If4:01this fails to hold, then I will cut the4:03trade. And I often encourage traders to4:04be thinking more in these words because4:06a lot of traders don't really think4:07about what's going to happen if they are4:09wrong. But as I've been doing this for4:1110 years, experience has told me, no4:13matter how strongly you feel or think or4:16logic your way into which direction you4:18think a market's going to go, we can4:19always be wrong. And so having a backup4:21plan, a plan B, a riskmanagement model4:24is imperative to long-term trading4:26success. So I'm very curious to see4:27tomorrow, we had the PPI come in hot. Is4:30CPI going to do the same? And here is a4:33little bit of a projection. So tomorrow,4:363.4% is the forecasted number. So the4:40way to read this is that if that number4:41is higher than expected 3.5%4:44clearly the market doesn't like hot4:46inflation, yields move higher, dollar4:48moves higher, stocks move lower, gold4:50moves lower. And if we get a cooler than4:52expected, let's say we get a 3.3 or4:553.2%, something of that nature would be4:58a relief and probably cause precious4:59metals and stocks to rally. And5:01something very interesting is happening5:03right now in crowd sentiment tools that5:05we have here tracking gold specifically.5:08Check this out. The put call ratio5:09measures the waiting of calls versus5:12puts in the market. If this chart is5:14rising or reaching extreme levels to the5:17upside, that tells you that crowd5:19sentiment has moved very bearish. And if5:23this chart is moving sharply lower, it's5:25telling you that crowd sentiment is5:26favoring call buying effectively over5:29put buying, telling you that the crowd5:31sentiment is more bullish. So right now,5:34as you can see, we are reaching some5:36pretty fresh extremes in terms of5:39bearish sentiment for the gold market.5:42So we see crowd sentiment moving heavily5:44in favor of betting against gold. I5:47personally use this as more of a5:48contrarian indicator. Let's build out5:50some more evidence here and see what5:52else we have on crowd sentiment stuff.5:54Okay, so check this out. This is our net5:55options volume taking a look at daily5:57call volume minus daily put volume. Now6:00this is different because instead of a6:02proportion, this helps us to see on an6:04absolute basis just how heavy the6:07relative options volume is in relation.6:10So when you do the proportion, it takes6:12out kind of the volume waiting. This6:13shows you pretty clearly how heavy the6:16selling is actually going on in gold.6:18And I think it's fair to say it is6:20pretty heavy right now. Take a look at6:22this. Basically call volume is getting6:24dwarfed by put volume. There's a lot of6:27bearish betting going on in the precious6:28metals here. And again, that tells me6:31there could be room for a bit of a short6:33squeeze higher, especially, let's throw6:35it in there, if CPI comes in lower than6:39expected, you are a there's a very6:42primed setup here for gold to rip hard6:45on crowd sentiment that is already6:47positioned very bearish. Now, that being6:49said, what this kind of tells me, a way6:51to think about this is that crowd6:52sentiment, the market is already betting6:54sort of a down move in gold. So if you6:57get CPI higher than expected, yes, the7:00market will likely move lower on gold,7:02but perhaps there is limited downside in7:04that scenario. And in the scenario that7:05CPI comes in lower than expected, we7:09have a potential powder keg to the7:11upside move as crowd sentiment would be7:13caught uh off sides with their pants7:16down, whatever you want to call it. The7:18idea is everyone's on one side of the7:19boat and then if that CPI comes in and7:22is a very cooler than expected number,7:25be ready for some fireworks if that7:27happens. Now, I'm not saying that will7:28happen because I don't know what the CPI7:30report is going to be. But as a trader,7:32I'm trying to spot asymmetric riskreward7:35opportunities. And so, if the CPI print7:38reports in a way tomorrow that is better7:41than expected, you could possibly see7:44some very, very large moves in gold. By7:46the way, the tools that I'm using are7:48currently on superale. We're offering a7:50massive 45% off discount currently if7:54you message in on our website using the7:56first link in the description down7:57below. Let them know you're watching the7:59video today and that you're interested8:00in this 45% off discount on our tools.8:02It's a onetime price to pay. No8:04subscriptions, nothing like that. And I8:06I do that because or we offer that8:08because I'm not a big fan of8:10subscriptions into eternity. I think a8:12lot of us are very used to that sort of8:13thing, but not with EdgeFinder. With8:15EdgeFinder, you pay once, you get8:17access, and all future updates are8:19completely free. If you see yourself8:20trading long-term, this is a no-brainer,8:23super cheap option to get access to some8:26very powerful tools that could help8:28level up your trading. If you're someone8:29who's interested in macro fundamentals8:31and also tracking crowd sentiment with8:33tools built by experienced traders, this8:36might be worth looking into. Like I8:38said, all the information to explore the8:39product is down below in the description8:41and message us using the first link down8:43there to speak directly to a member of8:45our support team. Alternatively, you can8:47just scan the QR code that you see on8:48the screen right now to connect to a8:50member of our team. Okay, so I have to8:52come clean a little bit with my gold8:54positioning. I am still long, but I have8:56to say there are some things that are8:58now kind of contradicting my bullish9:00viewpoint. Now, I wouldn't say I'm9:02bearish on gold, but I have definitely9:04moved from bullish to more neutral on9:06gold going into the CPI report. And I9:09know it's kind of a copout, kind of a9:10lame thing to say, but I'm just9:13following my system. I know it's not as9:14exciting, doesn't get as many clicks9:16when I go into more of a neutral,9:17open-minded stance when it comes to9:19gold, but ultimately I'm here to try and9:21make money in the markets. And if I'm9:22doing that, I need to stick to my9:24system. Let me show you what I'm seeing9:26that has sort of challenged my view9:28here. If I flip over to gold, I've got a9:30very flat plus zero score on edgeinders9:34reading. What does this mean? If you're9:36newer to my channel, all this thing is9:37doing is it's looking at a bunch of9:38economic growth metrics, inflation9:40metrics, jobs market data. This is stuff9:42that the Federal Reserve cares about and9:44hence why I care about it, too, to try9:46and guide direction on things that I9:48care about. Okay. So, if I'm looking at9:50economic growth, we have some strength9:52here for gold. Basically, weaker numbers9:54have been good for gold because it's9:56weak for the dollar. But here's the9:58challenge. Today's producer price index10:00moves inflation into the bearish10:02category because inflation was hotter10:04than expected and the 2-year yield is10:07sharply higher today. That is suggesting10:09hawkishness from the Federal Reserve.10:10And I have to keep an open mind. If CPI10:13tomorrow comes in in a way that is much10:14more supportive, uh, meaning lower than10:17expected, then I could get more on the10:19bull camp again. But right now, I've10:21moved decisively from bullish to more10:23bear or not uh bearish, but more10:25neutral. So again, I want to clarify.10:27I'm not betting that gold's moving10:28lower. I'm not selling out of my10:30position. I'm not closing anything. I'm10:32just moving into a neutral stance.10:34Meaning, I'm not going to add longs10:35right now. I'm going to wait and see10:37what happens with CPI. And depending on10:39how things come out uh with that report,10:42I will adjust my positioning10:43accordingly. And if I make any changes10:45to my ongoing positions, I will notify10:47members inside of our Discord. that is10:49also linked in the description if you10:51want to check out that service. I have a10:52signal service where you can see every10:54trade that I'm taking in-depth entries,10:56exits, and breakdowns. Most traders10:58don't realize that having a brokerage11:00with good trading costs can make or11:02break your long-term trading results. In11:05fact, things like slippage or spreads11:07can seriously cost you more than you may11:09be realizing when trading with11:11brokerages that widen their spreads11:13dramatically. And I want to make sure I11:15reiterate that you can literally go from11:17a profitable trader to an unprofitable11:19one just by high trading costs with the11:22brokerage you may be using now. And so I11:24wanted to tell you about today's video11:25sponsor which is Black Bull Markets.11:27Black Bull Markets is a New Zealand FA11:30regulated brokerage offering forex11:32metals and crypto trading with over11:3426,000 tradable instruments. They offer11:37CFDs on so many different products and11:39they keep their spreads rock solid even11:42during volatile market periods. In fact,11:44recent verified third-party data from11:47datal list shows exactly how reliable11:49their feeds are. Let's start with gold11:51and silver for example, specifically XAU11:53and XAGUSD.11:55During sharp volatility windows,11:57Blackbull held spreads near their tight12:00normal averages while major competitors12:03widened significantly. 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You get a great brokerage and12:56free tools. the brokerage gets access to12:58a new client. And on our side of things,13:00you support our channel with this sign13:02up. And a bit of a disclaimer, please do13:04your due diligence and make sure that13:06[music] this brokerage is good for you13:08before proceeding with the offer down13:09below. The full terms and conditions as13:11well as disclaimer can be found on the13:13page linked below. Thanks to Black Bull13:15Markets for sponsoring today's video.13:17Now, back to the content. So, the more13:19positive sign is that the jobs market, I13:21should say the positive sign for gold is13:23that the jobs market has still shown a13:25little bit of rockiness here recently13:27outside of the non-farm payroll. The13:28non-farm payroll was very strong.13:30Jobless claims, ADP, and Jolt's job13:33openings, however, were a little13:34lackluster versus expectations. So, I'm13:37waiting and I'm watching close when it13:38comes to the CPI report tomorrow. I will13:40be live streaming it. If you want to13:41tune in, make sure to subscribe to the13:43channel, turn on post notifications,13:45etc. And uh maybe I'll see you there.13:46Let's go take a look at another one that13:48is a little bit more interesting to me13:50and that is the S&P 500. So, check this13:53out. If I flip over our chart here to13:55the S&P, right? If I flip over to S&P,13:58this is getting a very solid bearish14:01reading. And let's break down just a14:03little bit as to why that economic14:05growth being soft is not super14:08supportive of potential earnings growth14:10going forward. If we get continued14:12softness in economic growth metrics, you14:15could start to see that negatively14:16impacting corporate earnings, which is14:18obviously one of the most important14:19things to equities, stocks, etc. Okay,14:22so what about inflation? Inflation going14:24higher causes yields to move higher,14:27which is borrowing costs going up for14:29businesses, which is eroding to profit14:32margins. Ultimately, rising inflation14:34and rising yields is problematic for14:37stocks. So, I understand here very well14:39that EdgeFinder has a pretty strong14:42reading that I mostly agree with with14:45stocks. I wouldn't be surprised at all14:46if we see a little bit more of a14:48correction to the downside here in the14:50short term for the stock market. The14:52jobs market data, like I said, non-farm14:54payroll was good, but several other14:56metrics, little bit of softness on job14:58openings, ADP and weekly jobless claims.15:01But then here is the problem. The15:02problem is the chart is not necessarily15:04broken in my view here. So, if I take a15:06look at our longerterm moving averages,15:09we are losing today, or at least15:10threatening to lose, I should say, the15:1250-day moving average. The 20-day has15:15already been lost, but the 100 and 20015:17are down below. One thought process that15:19I have with the S&P 500 is, could we15:21potentially be headed to finally get a15:24little bit of a retest of that 200 day15:26moving average? Is there potentially a15:29trade to be taken here to the downside,15:32moving back in the direction of a 20015:33day moving average? I think it's15:35possible. And I think you have enough15:36macroeconomic factors here, at least in15:38my opinion, to support a potential short15:41trade setup. Let's drop down to the 415:44hour time frame and take a look at this15:45chart. So, what you can see here is that15:47a lot of our critical levels of support15:49are simply just not holding. And while15:52we see this kind of level of support15:54being broken, this is what I'd be15:55looking at for a possible short trade on15:58the S&P 500. So, we've had this big push16:01lower, this very decisive close below16:03this move, this uh this level of16:05support. And so, if we rally back up16:07into this area, this could potentially16:09be a trade that I take to the downside.16:12Right? So, we have this 4hour chart16:14downward structure here on this this16:16overall. And if we were to sort of get a16:18retracement back up into this area of16:20support, could potentially sellers take16:22it from there? Now, there's a big risk16:24here. There has to be there has to be16:26said that CPI just like we talked about16:29how it could be a powder keg for gold.16:31It could also be a powder keg for the16:33S&P. So that is one thing where I would16:35probably wait actually for the CPI print16:38to to print. See what that brings me16:41before initiating a new position because16:42I think you know just naturally you16:44could have a very sharp sharp sharp16:46sharp move one way or the other on CPI.16:49So, and with it being so close, I might16:51just wait to see how that prints. Uh, or16:53if we get the technical setup here on16:55CPI day, perhaps there's an opportunity16:57for me to stay bearish predominantly on17:00the S&P 500. Uh, just because I have a17:02list of factors and reasons as to why I17:05might do that. Now, I don't generally17:07love to short stocks. They generally17:09move higher over the longer term. And17:11so, if I do short them, I try not to17:13stay overstay my welcome. Meaning, if I17:15get short, if there is a setup here17:17where I take a position on the S&P 500,17:20I need to stop out very quickly if that17:22trade idea does not work. This is a17:24relatively tame stop-loss here, and I17:26would put on mod modest size if I were17:29to take this trade. Now, again, if I17:31take this position, I'll notify members17:32inside of our Discord, but this is a17:34possible setup for me. The other one17:36that is kind of interesting is actually17:38the Russell 2000 index, which is also17:41sharply lower. These are small cap17:43businesses and they are very sensitive17:44to what happens with interest rates and17:46inflation. If this thing breaks through17:48these lows, I think you have some17:50potential for another flood lower on17:52this chart as well. And I'm really17:54pulling out all the bearish setups here17:56today cuz Bitcoin is also on the bearish17:58list. Let's take a look at this one. So,18:00Bitcoin is basically sitting at a level18:02of support here. However, and I'll mark18:04that up really quick. So if I draw in my18:06support zone, right, you can see this is18:08a daily chart support zone that we've18:10kind of been bull flagging around. The18:12problem is we are also at some overhead18:15major resistance and so far rejecting it18:17at this time. So if I'm looking at this18:20from a bearish perspective, what would I18:22be looking for? You probably see it18:23coming. I'd be looking for something18:25like this. A break at this support18:27level, a retracement back up into that18:29area, and then I could set up a defined18:31risk trade to the downside. uh that18:34might actually produce a decent18:36riskreward uh opportunity. Here's a look18:38at Ethereum. Same general prospect here.18:40You have major support around 2360. If18:43this level were to break, perhaps there18:44is some downside move uh in in the18:47Ethereum world as well. Let's also flip18:49through a couple charts to take a look18:51at where institutions are currently18:52positioned. I find this to be really18:54interesting. When we look at gold, you18:55can see they are very very bullish18:57overall. This yellow line represents18:59long percentage. And what we can see is19:01over time institutions continue to be19:03very bullish on gold. Bitcoin, however,19:06seems to be showing a little bit of19:07selling pressure coming into it. And I19:09find this next part really interesting.19:11Notice how with the NASDAQ, there's a19:13recent surge in bullishness on NASDAQ.19:15While if we flip over to S&P 500, we're19:19right here, S&P, you can see it's19:21actually been showing some selling. So,19:23institutions seem to be selling S&P and19:25buying into tech stocks in the NASDAQ.19:28And because we mentioned the Russell, we19:29can't ignore this one. Look at this. A19:31lot of selling pressure coming in on the19:33Russell 2000. And maybe the most19:35interesting, the Dow Jones has been one19:37of the most clear bullish preferences19:40from institutions. From a technical19:41perspective, the Dow Jones has lost some19:43pretty critical support zones here,19:45though. So, let's keep an eye on that.19:46And we'll take a look at the good old19:48DXY. The dollar index, despite hot19:50inflation, popped initially and is19:52getting faded here, at least at the time19:54of recording this. And this is something19:56to watch because again, I think19:57tomorrow's CPI report is critical. If20:00CPI comes in higher than expected, then20:02perhaps the dollar bases out and we20:04actually make a move back up to the top20:06end of this recent range. That said, if20:08inflation comes in cooler, I think20:09that's the more interesting scenario. I20:11think the downtrend persists and we see20:13dollar actually make a move back down to20:15levels like 98. So, I can't understate20:17how important tomorrow's CPI report is20:19going to be. Having the right tools to20:21monitor this stuff and joining a group20:22like ours, I think personally I'm a20:24little bit biased, is highly worth every20:27single dollar invested. If you are20:28looking to take your trading to the next20:30level, get access to our tools, join our20:32VIP group. All the information is in the20:34description down below. Be careful20:35trading CPI, please. A lot of people20:37lose a lot of money on these sorts of20:39events because they bet with so much20:41conviction. And I'm telling you, after20:43years and years of doing this, um, that20:45I don't know with certainty what's going20:46to happen with CPI. And so I need to20:48position size and prepare accordingly in20:52the case that I am right or in the case20:53that I am wrong. Trade safe and we'll20:55see you tomorrow. Trading fundamentals20:57can be a lot of hard work, [music] but21:00we actually made a pretty cool free21:02Telegram channel where we are publishing21:04constantly updates on what is going on21:07from a macro fundamentals [music]21:08perspective. And no, it's not AI. It's21:10not written by a robot. It's written by21:12a real person on our team. His name is21:14Allan. He puts together a report each21:16day on what is going on on things like21:17gold, currency pairs, commodities,21:20indices, etc. on a global financial21:22fundamental analysis basis. It's a21:25really cool newsletter where you can21:26basically stay on top of things by21:28reading for like a minute per day. If21:30that would be interesting to you to join21:32the free Telegram channel, there is a21:34link in the description down below on21:36this video that you can join and get21:38into the action there. We also offer21:40special discount perks for our products21:42[music] as well as for funded accounts21:45and for brokerages etc. And we also do21:48some giveaways as well. So definitely21:50take a second to join the Telegram21:51channel in the description down below.21:53[music] I also want to take a second to21:54just genuinely thank you for supporting21:56my content here. Make sure to subscribe21:58and hit the thumbs up button if you have21:59not already. And I do hope that more22:01videos in [music] the future will22:03continue to help you on your trading22:04journey. Good luck. Thanks for watching.
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