Transcript of Gold is Crashing Hard: Here's what Happens Next.
TraderNick
0:00Gold is absolutely cratering lower0:03today, down 3.4% at the time of0:06recording this video, and I'm sitting on0:08a pretty goodsized gain all of a sudden.0:12Now, this comes after having been0:14bullish 2 weeks ago or so, then moving0:16to a neutral stance. And on Friday, I0:18made posts about how I had flipped0:20bearish and actually shorted gold. And0:23oh my gosh, I got fleeced in the comment0:26section like this person who said that0:28it will rise because you closed your0:30long position. And I talked about0:32closing my longs like last week, I think0:34Thursday or Wednesday, and then I ended0:36up getting short on Friday. And then0:38this person said that next video I'll be0:40talking about gold will rise or how it0:43will rise. And I have found that this0:44happens a lot of the times. Like when I0:46have an idea or thesis and I'm wrong a0:48couple times, people start to really0:50question if my system or strategy even0:52works at all. Somebody pointed out that0:54whenever Nick mentions catching flack, I0:56remember him saying most people watching0:58won't even be trading a year from now.0:59And I forgot that I had said this at one1:01point, but it's so true. Most people in1:03trading don't last more than 90 days.1:05There's the old expression of the 909901:07rule in trading, which is 90% of traders1:10lose 90% of their capital in 90 days or1:13less. So, how did I know that gold was1:15going to plummet lower and that all of1:18these comments doubting my thesis would1:20be wrong and they would look silly on1:22Monday morning? Well, the answer is I1:24didn't know that. And I never know with1:26certainty where markets are going to go.1:28It would be ignorant or naive of me to1:32sit here and say, "Haha, I told you so.1:34I knew gold was going to move lower1:35because I didn't. I follow a system. I1:38have a trend following methodology that1:40follows both technical price action1:42trends as well as macro fundamental1:44trends. I talk about in all my videos,1:46but I never claim to know with certainty1:48where I think markets are going to go1:49next. Gold could have ripped here on1:52Monday and I could have looked silly for1:54closing out of my gold long positions.1:56But I stick to a system and ultimately1:59short-term price noise and and what2:02happens daytoday is not reflective of2:04whether or not someone is a good trader.2:06If I had said it would actually be just2:08as naive to look at my thesis and say,2:11you know, Nick shorted gold and he has2:12this perfect runner. He must be an2:14amazing trader. That is just as naive as2:16saying Nick shorted gold and then let's2:18say it had ripped. He's a bad trader.2:21because you're basing your entire thesis2:22on someone's trading skill based on the2:24outcome of one particular trade when2:27ultimately you should really be weighing2:28someone's trading results over the long2:31term, not someone's one day calls, right2:34or wrong. So, gold continues to move2:36lower. And in today's video, we're going2:37to take a technical view of what's going2:39on here, whether this can continue, how2:41far it can continue, and what the short2:43and long-term outlook for me when it2:45comes to gold currently sits at. As we2:47get started, let me remind you that this2:49is not financial advice. trading is high2:50risk. Please be careful.2:54So, from a daily chart perspective, gold2:56has sort of fallen off of a cliff here.2:58And I have actually trailed my stop loss3:00that I took that short position on3:01Friday. So, I've already moved my stop3:02loss into profit once we lost these3:05lows. It was a fairly tight stop-loss. I3:07risked just8% in terms of a distance on3:10gold price. Uh, you know, this this move3:13here was about8%3:15uh in terms of distance. You can see3:16I've moved my stop loss since then into3:19profit. So, I cannot lose money on this3:20gold short, and it's been off to the3:22races. It's working really well for now.3:25And I talked about this on my stream3:27today, but when I first got into3:28trading, my natural reaction would be, I3:30got to close this out. I got to take3:32profits because, oh my gosh, I'm going3:34to lose my gains here. What I found,3:36like I said, is uh I I don't I follow a3:39system, and that system is a trend3:41following one. Price moving in my3:44direction is not a reason for me to3:46close out of a trade. What would get me3:48to close out of a trade is if price3:50started to fail to hold key levels of3:53past resistance. This level here is my3:55major level of past support turned3:57resistance. So I shorted gold on Friday4:00here after we had retested intraday. You4:02know, we caught a bounce to the 38.2 to4:0450% retracement on this move. Decided to4:07short, put a stop loss over the 61.8 and4:09we flooded lower here. And let's talk a4:12little bit about the macro in just a4:14second, but from a technical view, how4:16far can gold actually go? Well, to be4:19fair to the bulls right now, we are4:21testing a pretty major area of support.4:24But we've also simultaneously lost maybe4:27the largest one that I had been watching4:28for the last few weeks, which is this4:3061.8% retracement zone, which gave out4:34on Monday's or Sunday night, Monday4:36morning's open. We flooded the lows,4:39broke through that support, and to me4:40the most likely scenario is you could4:42get some kind of a bounce here. I would4:44not be surprised if you did get a4:45bounce. But I would look at this most4:48likely as a scenario in which if you do4:50get the bounce, I think that sellers4:52continue to take it lower because4:54technicals look bearish on the 4hour4:56chart. Right? If I pull up my 4hour4:58chart, we're putting in lower highs,4:59lower lows on this one. Whoops. Let me5:01just get out of here. Lower lows, lower5:04highs. We're breaking through structure.5:06This is a chart that looks like it wants5:07to keep moving lower in my personal5:09view. But then again, daily chart, where5:12could we head? Well, if we lose this5:13support level, the one that we're5:15currently sitting, if you get some sort5:16of consolidation and then let's say we5:18break through those lows, the next major5:20spot that I see is not until we get down5:22to the 3950 to 4,000 level. Now, from a5:26short-term perspective, I think that we5:28can get there. If I'm just following the5:30trend here, which is again pointed lower5:32here, we put our moving averages longer5:34term as well. We've lost all of our5:36moving averages. The bears have taken5:37complete control of all the 200, 100,5:4050, and 20 period moving average on the5:42simple day moving average. Like the5:44sellers are in control once again. We've5:47also lost a lot of the gold, you know,5:49channels. If you watch a lot of other5:50ones, this was a huge level that5:52everybody was watching this trend line5:54holding and then it broke, right? So5:56sellers have really taken this thing uh5:59back in control. Now, it doesn't mean6:01sellers are permanently here for the6:03long term. And long term is a different6:05story for me. I actually think if gold6:07continues to move lower, I'll be6:09building my long exposure. I do have6:11other accounts that I don't talk so much6:12about publicly uh where I just have6:14passive gold longs that just sit in my6:17portfolio uh from a digital perspective6:19and then physical stuff is also an6:21option that some people like to go as6:22well. Anyways, um I do think that we6:25could come back and retest the lows.6:26Now, if you're a long-term precious6:28metals fan, you should be excited by the6:31thesis that gold may be short-term6:34bearish. Now, if you're a true believer,6:36if you really like precious metals to6:38the long side, maybe you're a physical6:39stacker or you just like the idea of6:41building your portfolio of precious6:43metals, short-term bearishness is ideal.6:47It means you can get more for your fiat6:48currency at lower gold prices on a6:51dollar basis. To me that is attractive6:54longer term and so I would love to see6:56that happen from a trading perspective.6:58Again technicals look bearish but let's7:00also talk macro for a second. What is7:03ultimately leading the gold market to7:05look so bearish right now? Well let's7:07take a look at yields which continue.7:09I'm sure you have seen this. The bond7:10market is absolutely crashing. Take a7:12look at TLT. This thing keeps tanking7:14lower and lower. This is a basket of7:16bond uh it's an ETF that tracks a bunch7:18of long duration bonds. So, when we pull7:21up the benchmark for long duration7:23bonds, the 10-year government bond, this7:25uh yield continues to skyrocket. We're7:27back above 5.2%.7:30And a lot of the gold crowd is thinking,7:32"Oh, this is because people don't trust7:34the government." And I think that that7:36is a piece of it, but there's a couple7:38other things that I think are worth7:40mentioning as to why this chart is7:42actually insanely bearish for gold in7:44the short term. Long-term, it might7:46actually be bullish for gold to see7:47yields moving. Let me break this down7:49and keep it simple. By the way, gold7:51being a bearish reading here is7:53partially because of a couple different7:55key factors. Let's break down the7:56overall reading a little bit better by7:58going to the asset scorecard. And we've8:00got gold getting a bearish read. Couple8:02things to note. EdgeFinder score here8:04just takes into consideration economic8:06growth metrics, institutional activity,8:08technical analysis, crowd sentiment8:10readings, inflation data, jobs market8:12data, etc. Now, what we see here is the8:15real kind of pain point is higher8:18inflation. The 2-year yield is ripping8:20higher, suggesting a more hawkish8:22Federal Reserve rate hike still on the8:24way. And simultaneously, we have the8:26producer price index number, which was8:28higher than expected. We have a little8:30bit of a mixed sentiment in terms of uh8:32our economic growth metrics. But not8:34shown here is the flash services and8:36manufacturing PMIs last week which came8:39in absolutely redhot, scorching hot in8:42terms of economic growth projections8:44looking really strong. Again, we don't8:45have it in edgeinder. We have ISM PMIs.8:48But let me just show you how that flash8:50PMIs data came in. Okay, so here it is.8:52So flash manufacturing PMIs, flash8:54services PMIs last week absolutely blew8:57out to the highest level since 2021.9:00That is an economic stronghold point of9:03view. Now what I mean by that is that9:05this is suggesting that the economy is9:07actually expanding. It's growing and it9:10is becoming stronger. Now that is a9:13negative narrative almost all of the9:15time for gold. Stability in the realm9:17economic security is not something9:19bullish for gold. And so the macro leans9:21just slightly bearish here for gold here9:23in terms of economic data that we track9:25within EdgeFinder. Technical momentum to9:27the downside is pretty clear to see. And9:30sentiment, crowd sentiment we talked9:31about last week a lot. Crowd sentiment,9:33people were super bullish on gold going9:35into the weekend, uh, which I'll show9:37you now. Okay, so what you're looking at9:39is the put call ratio with a 5day moving9:41average applied to it. We've selected9:43gold and what this is showing you is9:45relative put volume versus relative call9:48volume. When this chart goes really9:50elevated, it tells you the crowd is9:52really bearish. And when this thing goes9:53really low, it tells you the crowd is9:55really bullish. And so we actually saw9:58going into the weekend, part of the9:59reason that I took a short on gold, not10:01the only reason, but a contributing10:03factor to our scoring system with an10:04edgefinder was that call volume was kind10:08of going crazy versus put volume. What I10:10mean by that is basically people were10:11betting gold was going to move higher.10:13And again, my comment section kind of10:15reflected that. It was a minefield when10:17I turned bearish. So many people were10:18against me on that thesis. And I don't10:20say that to say like, haha, I was right10:22because like I said at the beginning of10:23this video, I never know with certainty10:25what prices are going to do in the next10:26few days. I'm just following the trend,10:28following the macro. And also keeping an10:30eye on sentiment. This is why crowd10:32sentiment getting overwhelmingly bullish10:34or bearish on something can create some10:37really decent riskreward opportunities10:39as we're seeing today. Again, crowd10:42sentiment super bullish. Suddenly, you10:44get these huge one-day drops that10:46absolutely catch people by surprise who10:48are on the other side of the trade. By10:49the way, if you want to try out the tool10:50that I'm using here to track crowd10:52sentiment and macroeconomic data all in10:54one place, EdgeFinder is my company's10:56main tool that we build and sell here.10:58We have thousands of people around the11:00world using our stuff and a team of 1011:02people total building and maintaining11:04what you see here. So, if you're11:06interested in trying out our tools and11:07seeing what it's all about, uh, I'll11:09leave a link in the description down11:10below to where you can sign up for a11:11trial. And if it's easier, just scan the11:13QR code that you see on the screen right11:14now. My background is in software11:16engineering. I love trading, but I also11:17love building tools for traders. And11:19building this business has been so much11:21fun. So, I encourage you if you are11:23interested in trying out our stuff, if11:24you want to bring macro into your11:26trading, if you want to track crowd11:27sentiment, institutional sentiment, you11:30can do so all with the tools that we've11:31built over the last 5 years here. So,11:33anyways, getting back to this 10-year11:35government bond yield story, let's talk11:37about this. So, why are rates rising?11:41That's the question, right? And and11:42specifically, uh, bond yields slash11:46rates, right? Because both are rising11:48here. And what I mean by that, rising11:49rates are are the Federal Reserve, like11:51the overnight rate, but also bond11:53yields, which is controlled by the11:54market, not controlled by the Fed.11:56Today's video is sponsored by Ola Prime.11:59Whether you're a futures trader, a forex12:01trader, a gold trader, whatever you are,12:04Ola Prime has one of the widest12:06selections of trading account types for12:08their traders. 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So,12:46if you're interested in exploring the12:48various account types offered by Ola12:50Prime and interested in getting that12:51extra discount, use that promo code and12:54the link in the description down below12:56to get 20% off any of their account12:58types. As always, I want to issue a word13:00of caution. Please only consider getting13:02funded or trying to get funded if you13:05already have skills in your trading and13:07are simply looking to scale it up to the13:09next level. Prop firms are an excellent13:11way for experienced and skilled traders13:14who lack capital to potentially scale13:16things up. If you're interested in13:18exploring Ola Prime, use the link below13:20and take your time to review all of the13:22different terms and conditions to make13:23sure this is the right prop firm for you13:25and your trading style. Thank you to Ola13:27Prime for sponsoring today's video. Now,13:29back to the content. So what's going on13:31here? Because I have seen a lot of the13:35gold crowd getting into the thesis of13:38well it's because people don't trust the13:39government and national debt is out of13:41control that's why bond yields are13:42rising kind of it is a piece of the13:45story. In fact let's grant that that is13:48a component uh mistrust in national13:52debt. uh this is SLS skepticism right13:57very very valid point and this is where14:00a lot of the gold people will say yeah14:02so that's bullish gold so so why isn't14:04gold going up this is one piece of why I14:07think yields are moving higher I talk14:09about this often but typically when a14:11market is making a really decisive move14:13it's usually not one reason it's usually14:15multiple reasons and when you actually14:17uncover why bond yields are moving14:19higher14:21there's more to this story than just14:23skepticism. We talked about those flash14:26PMI numbers. So by the own words of14:29Kevin Worst, the Federal Reserve, they14:31are all sort of unanimously basically14:33saying the economy is strong. That's why14:37they can also support interest rate14:39hikes. So a strong economic outlook is14:43also why bond yields are rising. Now14:46think about this for a second. mistrust14:48in the national debt that situation14:50makes people say if I'm going to lend14:52you money I want higher yield that makes14:54sense but if you only look at that14:56you're going to miss part of the story14:57here the other part of the story is that14:59strong economic outlook is a portion a15:03portion here as well if strong economic15:06outlook is happening it is inflationary15:09now there's a couple things that are15:10that are actually inflationary so that's15:12our next one rising oil prices plus15:16inflation15:18Okay, this is a big one too. And this is15:20also not great for gold. Let me explain.15:24So, if the economic activity here is15:26blown out, things are looking really15:28strong. Now, I want to also pause and15:30just say this, the economy being strong15:32does not necessarily mean it is strong15:34for everyone. I am totally aware that15:36the main street people of America on15:40average are not doing great. Prices are15:42high, things are expensive, mortgage15:44rates are blown out completely. I'm not15:46saying that people are all doing great15:48and the economy is, you know, ra roses15:50and dandelions. That's not what I'm15:51saying. What I'm saying is instead the15:55output of the economy, the businesses of15:57America are doing crazy good. Is there a16:00widening wealth gap? Absolutely. But16:02from an absolute output of the economy,16:05the economy itself is churning. It is16:07strong. And again, the Fed has said as16:10much. Don't take my word for it. Kevin16:11Worsh also even described the economy or16:14the monetary policy currently as closer16:17to accommodating than restrictive. That16:20massively suggests that interest rates16:22can keep going higher in the eyes of the16:25Fed. So, we'll get back to that in just16:26a second. But rising oil prices and16:28inflation, uh, this gets worse.16:31Inflation goes higher if the economy is16:33steamrolling. if everyone's out there16:35spending and and when I say everyone,16:36I'm really talking about like business16:38spending, you know, building these data16:39centers, a chase for all of the16:41available resources causes inflation to16:44rise. And so you have the situation16:46where it's like dollar strength, right?16:49Dollar strength is a big piece here. Uh16:53strong dollar, right? You have16:56attractiveness in the US relative to16:57other places. People doing the AI16:59buildout want to come here to do so.17:02there's a chase for that strong dollar17:04story. Now, again, this narrative here17:07is not all bullish for gold. In fact,17:09let's take a look at a couple of these17:11things and talk about which ones are17:12bullish for gold. Mistrust and17:14skepticism, that's bullish. But strong17:16economic outlook, not good for gold.17:19Rising oil prices and inflation, not17:21good for gold. Now, again, people get17:23caught up on this. They say, "Wait,17:24Nick, what are you talking about?17:25Inflation is good for gold. Not if it's17:28backed with a strong economy and the17:30Fed's going to rate hike in response to17:32that inflation. Because let's talk about17:35this, right? Opportunity cost.17:39Opportunity cost, right? What are we17:41talking about here? Well, think about17:42this. You can buy a bond in the US17:44government and get 5.2%.17:48Or you can buy gold and you can get 0%.17:51Now, let me just tell you personally,17:53longer term, I'm picking gold, but I'm17:57not I can't speak for everyone. A lot of17:59investors are picking bonds, right? Why18:01would I I'm going to hold on to cash18:03because it's yielding a lot more. I can18:06put it into a savings account, get more18:07out of it instead of buying gold, which18:09yields you absolutely nothing, and tends18:11to trend lower in the macro environment18:13that we are in right now. So again,18:17opportunity cost bearish for gold,18:19strong dollar, bearish for gold. Rising18:21oil prices and inflation not good for18:22gold, especially when mapped out with a18:25strong economic outlook currently.18:27Finally, mistrust in national debt.18:29That's bullish for gold. But you can see18:31here the odds are stacked in the short18:32term, not so favorably to gold. Now,18:36this is the short-term outlook, okay?18:38Because I want to tie this in and talk18:39about how long-term some of these things18:41I think change. Long term, I think that18:44structurally higher borrowing costs will18:46start to ultimately weigh on the strong18:49economic outlook personally. So, hear me18:52out. Short-term, I still think gold has18:54room to move lower. But long-term, I18:57think that there is actually an18:58opportunity to build a position in gold19:00in my own personal accounts. Now, I'm19:02telling you what I am doing. I'm not19:03telling you what to do. Financial advice19:05is not shared here. I'm just sharing my19:07opinions. I reiterate that because19:09long-term I do like the idea of building19:11a long position in gold. If prices19:13continue to get cheaper relative to19:15dollars, I think that the strong dollar19:17narrative works for a while, but19:19eventually if economic data slows, if19:21these rising oil prices take a toll on19:24the consumer even more, and ultimately19:27we see that higher inflation, higher19:29borrowing costs starts to weigh on the19:31business cycle, then I also I ultimately19:34think that there's an opportunity to19:36actually build a position in gold. And19:38at the end of all this, there will still19:41be mistrust and skepticism around the19:44ballooning national debt. So, Nick, did19:47you really just say you're bearish and19:49bullish on gold? Yes. But time frame is19:53important. Short-term, I remain in the19:56bare camp when it comes to gold. Like,19:58going back to gold, I I I already, you20:00know, mapped out our whole thesis here.20:02Technicals look bearish to me. I'm going20:03to trend follow this and see how far it20:05wants to go. And uh ultimately if we20:08keep moving lower then longer term I20:11like the idea of building a long20:13position in precious metals. Hope this20:15wasn't too confusing but time frame20:18matters right? If we're talking about in20:19the next few months I generally lean20:21more bearish for gold. If we're talking20:23about in the next few years gold looks20:26like a good buy in my personal opinion.20:29two different nar two different time20:30frames but also a lot of different20:33factors that are either weighing20:35short-term heavily on gold and may erode20:38longer term which I again I think that20:40the state of the economy I I don't see20:42right now a situation in which the20:44economy is red-hot for you know 10 years20:46from now um I think or or at least like20:49in the the next like two years from now20:51I would be surprised if the economy20:52continues to pick up alongside yields20:55going higher but the point is yields I20:57think can keep drifting ing higher due20:59to strong economy, higher inflation, and21:02that's going to be a bearish pressure on21:04gold for the time being. In my personal21:06opinion, trading fundamentals can be a21:08lot of hard work, but we actually made a21:11pretty cool free Telegram channel where21:13we are publishing constantly updates on21:16what is going on from a macro21:18fundamentals perspective. And no, it's21:20not AI. It's not written by a robot.21:22It's written by a real person on our21:23team. His name is Allen. He puts21:25together a report each day on what is21:27going on on things like gold, currency21:29pairs, commodities, indices, etc. on a21:32global financial fundamental analysis21:34basis. It's a really cool newsletter21:36where you can basically stay on top of21:38things by reading for like a minute per21:40day. If that would be interesting to you21:42to join the free Telegram channel, there21:44is a link in the description down below21:46on this video that you can join and get21:48into the action there. We also offer21:50special discount perks for our products21:53as well as for funded accounts and for21:56brokerages etc. And we also do some21:58giveaways as well. So definitely take a22:00second to join the Telegram channel in22:02the description down below. I also want22:04to take a second to just genuinely thank22:05you for supporting my content here. Make22:08sure to subscribe and hit the thumbs up22:09button if you have not already. And I do22:11hope that more videos in the future will22:13continue to help you on your trading22:14journey. Good luck. Thanks for watching.
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