Gold GOLD PRO WEEKLY, May 19 - 26, 2023

Sive Morten

Special Consultant to the FPA
Messages
18,551
Fundamentals

Yesterday we've discussed big bulk of problems around US Treasury liquidity, and Fed rate decisions that could follow in June and July. The last question that is hot in media now, and that we've not discussed yet is Debt Ceil. As longer I monitor this issue as more confidence I get that this is controlled and managed process. Debt Ceil relates to many other things, such as Banking sector consolidation. At first glance it seems like a nonsense but if you try to dig slightly deeper, the precedent of debt ceil long term confrontation, you will see that this is logical. Now this case is taking more political background rather than economical, despite that economical consequences anyway will be terrible.

WHAT MARKET THINKS ON US DEFAULT

The risk of a US debt default is greater than it’s ever been, threatening to tip global markets into a brand-new world of pain. For investors, there are few places to hide other than the oldest hedge in the book: gold. The precious metal is by far the top pick for those seeking protection in case Washington’s game of chicken over the debt ceiling ends in a crash, according to Bloomberg’s latest Markets Live Pulse survey. More than half of finance professionals said gold is what they would buy if the US government fails to honor its obligations.

1684666207055.png

Even more striking is the shortage of alternative hedges. The second most popular asset to buy in event of a default, according to the global survey of 637 respondents, was US Treasuries. There’s something of an irony to that given that’s the very thing America would probably be defaulting on. But it’s worth bearing in mind that even pessimistic analysts see bill holders getting paid— just late — and that in the case of the most fraught debt crisis in previous years, Treasuries rallied even as the US had its top credit rating removed by Standard & Poor’s.

Traditional haven currencies like the Japanese yen and the Swiss franc had some fans, but each were less popular than the US dollar or, perhaps more strikingly Bitcoin, regarded by some investors as a kind of digital gold. While political and financial bigshots have been lining up to deliver warnings about what might happen if the debt-ceiling impasse isn’t resolved, stocks gained in early Monday trading on hopes for a breakthrough.

U.S. President Joe Biden said on Sunday he plans to speak with top congressional Republican Kevin McCarthy on Sunday as part of increasingly last-minute talks over raising the federal $31.4 trillion debt ceiling.

"We're going to get a chance to talk later today," Biden told reporters on Sunday. When asked what message he would share with McCarthy, he declined to comment before talking with McCarthy first.

About 60% of MLIV Pulse respondents said the risks are bigger this time around than in 2011, the worst debt-limit crisis of the past. The cost of insuring against non-payment through one-year credit default swaps has surged well past levels seen in previous episodes, although they still suggest that the actual chance of a default is relatively slim.

“The risk is higher than before, given the polarization of the electorate and the Congress,” said Jason Bloom, head of fixed income, alternatives, and ETF strategies at Invesco. “The way both sides are so dug in, means there is the risk they don’t get their act together in time.”

The gold hedge doesn’t come cheap, as the metal has enjoyed a very good run so far this year. Buoyed first by the growing demand from Chinese luxury buyers, then by a crisis in the banking sector and the threat of US default, it’s currently loitering just shy of its all-time high of $2,075.47 an ounce.

A comfortable majority of investors in the MLIV survey think 10-year Treasuries will rally if the debt ceiling fight goes down to the wire but the US doesn’t default. However, professionals are split over what might happen if the US government actually tumbles over the precipice. About 60% of retail investors expect Treasury 10-year debt to weaken in the case of a default. If the department can make it past mid-June, then it’s likely to get a bit of breathing room from expected tax payments and other measures, before facing fresh challenges from late July, where market pricing also indicates a degree of strain and concern.

In the 2011 standoff — which led to a credit rating downgrade by S&P but not an actual default — a surge in Treasury buying took the 10-year yield to a then-record low, while gold rallied and trillions were wiped off global equity values. Investment professionals are less pessimistic on the outlook for the S&P 500 Index this time than retail traders.

1684667542502.png

Some investors believe that the debt ceiling drama has already caused some harm to the dollar, and 41% say its standing as the primary global reserve currency is at risk if the US defaults.

1684667410140.png


That is what people think right now and what performance they expect from the markets. In general this confirms our view either - gold should rise, while riskier assets, such as stocks, crypto should fall. But, as we've said yesterday - US Treasury has to borrow 1.5 times more than in 2011, and do it faster. It means that moment shock might be stronger.

...but, maybe we should try to look beneath the surface?
Based on the experience of previous decades, the debt limit will be raised and there should be no problems. But there are serious reasons to believe that in this case this problem will be used to solve much more complex problems and for this reason a simple and quick result will not work. In any case, the Speaker of the House of Representatives McCarthy said both that the problem will be solved, and that without reducing the expenditure part of the budget, there will be problems with this. So understand him as you know!

Previously we already talked that it could be controlled and managed crisis. And there are reasons exist to launch an event that would be similar to 9/11 by its effect to restore the strategic management system in the United States. And default can just become such an event. Since many people in the United States already understand that it is impossible to tolerate the lack of strategic management, it is very likely that a development in which a default will be created on purpose. Of course, the political management of the situation has already been thought out, but here are the economic consequences... Our task is to warn our readers about this development. The more information we get - the more confidence appears. Everything started with banking crisis and controlled takeover of SNB and FRP by JP Morgan. Then, we come further - take a look what J. Powell said on Friday.

  • JP Morgan may become the only bank in America as a result (!!!);
  • the relationship between the weakening of the labor market and inflation is no different from what it was before the pandemic;
  • inflation in non—housing services is particularly sensitive to labor performance;
  • inflation may be more sensitive to changes in the labor market;
  • price stability is the foundation stable economy
  • The Fed is obliged to return the inflation rate to 2%;
  • inflation is now much higher than the Fed's target;
  • Fed chairmen still have hawkish rhetoric.
  • They clearly understand the pain of households (consumers);
  • the US banking system is strong enough to withstand current and future challenges;
  • due to the tightening of banking conditions, the rate may not be raised as much as we planned earlier;
  • continued aggression in raising rates may cause stress in the market.
  • We can decide not to raise the rate any more;
  • the "weakness of the labor market" or its absence is an extremely important factor for future inflation;
  • it will take more time to reduce inflation;
  • we can afford to continue to carefully evaluate incoming macro data;
  • there is no decision on the Fed rate ceiling yet. But until recently, we believed that it was necessary to further tighten financial conditions.
The general conclusions are unambiguous: both Powell and Bernanke understand that inflation is much higher than acceptable (and, of course, not 5%, but significantly higher), but they also understand that further tightening of monetary policy will lead to political consequences. And therefore, they (well, more precisely, Powell, and Bernanke simply supports him) leave for themselves the maximum corridor of opportunities and will demand a political decision from the White House. And here we come back to the logic of the need to restore the strategic management system in the United States.

Together with J. Powell/B. Bernanke speech, J. Yellen had own press conference. CNN reported that U.S. Treasury Secretary Janet Yellen told bank chief executives that more mergers may be necessary following a series of bank failures. How to combine this with strength of the US banking system, mentioned by J. Powell above, and Yellen also reaffirmed the strength and soundness of the country's banking system at the meeting with bank CEOs on Thursday.

And what J. Powell means with "JP Morgan may become the only bank in the US"? And Why? So it should be something like this:
1684670112221.png


It sounds absolutely curious, if you do not understand the background and miss the loss of strategic management. If you take a look at the debt ceil issue and banking crisis from this point of view - everything stands in right place. To illustrate what "loss of strategic management means", I give you just one example. Last year, US Defence ministry was intended significantly (5 times) in two years increase ammunition production, as for the US, as for Ukraine and EU needs. First talks about this appeared last year, 1.5 years already have passed but this target is not achieved. Business Insider writes, that
"Disorganization and bureaucracy could hamper the US military's production of ammunition, according to a new report from a government watchdog. The Army faces challenges in managing the procurement and production of conventional ammunition," the Government Accountability Office warned in a study published in October(!!!).

US military ammunition production — including of bullets, howitzer and mortar shells, and small rockets — is overseen by the Army. However, production has been complicated by multiple factors. For example, each plant has a different contract with different requirements. The contracts require the operating contractors to pay for maintenance while the government funds any plant modernization. Not surprisingly, Army officials told GAO that "challenges in delineating what is considered maintenance and what is considered modernization can cause confusion about which party is responsible for the costs."

Other words speaking - when you try to produce something complicated and in small amount, everything works great, such as war planes. Here is where the big profit margin is forming and everything happy - the client (i.e. Pentagon) and producer (say Lockheed). But when you have to produce something vitally necessary but chip and with big volume - problems are started. Country vitally needs ammunition, bullets and shells but since this generates no profit margin or even loss and demands government subsidies - production process stumbled. This is how US economy now works - this is in all spheres. Behind this model stand very powerful people and corporations who are in habit with "Implement the budget" but only if it brings profit to them. And this is across the country. And now even government authorities could do nothing with this superstructure, despite that it is vital for national interests and US survival. They lost the strategical management over the country.

So, what, and how all this stuff relates to banking crisis?

Directly. To restore strategic management system, US government needs to get direct control over cash flows distribution and eliminate bargain hunting where it brings problem to national interests (as in example with shells above). To do it, banking system has to be more centralized and better controlled then now. In perfect scenario this should be some chain of state-owned banks, where each one responsible for it own sphere (agriculture, social programmes, defence etc) and all of them under strict control by Central Bank to eliminate "dirt cash backs" in wrong pockets.

If we believe that there will be a re-industrialization of the American economy over the next 10-15 years, then everything becomes more or less clear. We need a tool to finance this re-industrialization in a way of AUKUS+ strategy. For a healthy (non zombie) company with good financial statement and collateral, you can easily get cheap financing without corruption. That is, state-owned banks have become a kind of tool for economic development. the Central Bank stands over them with a cudgel, which controls the risks of the entire sector. And he does it right, as practice has shown.

So, isn't everything that is happening with American banks now an attempt to create such a tool for centralized financing of the re-industrialization of the American economy? We'll wait and see. But the interesting thing is that if, after all, a default on treasuries happens, then this process can accelerate very quickly.

In practice - there is also no problems at all to let JP Morgan swallow all the others. Take a look - еhe TOP 5 banks have 53.6% of the assets of the banking sector. We have seen that unrealized losses in the banking sector are equal to capital. We have also seen that the FDIC compensates JP Morgan for approximately 5% of First Republic's capital as damages. Let's omit the "shadow banks", that is, everything else that fills the financial system.

Let's say the average third of the banking sector collapses. This is approximately 7.5 trillion dollars. assets. In principle, the same 5% may be needed from the state. A paltry $375 billion. Let's even assume that JP Morgan will buy them all. As a result, you will get a bank with assets of $ 11.2 trillion, that is, 50% of the entire banking sector. Bing! J.Powell was knowing what he was talking.

Now debt ceil drama comes to public sphere. Everything has to be as in Hollywood movie - first direct clash of opponents, second direct clash of opponents and culmination. Now the market is sitting and thinking (as we've shown above) - "they will no longer raise the rate, they will sort out the national debt. Nothing, we'll survive. And we experienced something else."

Here the ensemble "The Board of Governors of the Fed" comes on stage and begins to sing the song "Inflation has not decreased enough, further rate increases are not excluded." Applause, curtain. The next meeting is June 13-14, so a month of nerves is provided.

Moreover, this factor should not be underestimated, even though the increase may be only 0.25%. It's not even about the rate, but about uncertainty, which affects literally everything - both commercial mortgages, which at some point should start to fall, and banks, which are still sitting with unrealized losses, and everything else.

Well, imagine that you are a counterparty of the bank. He tearfully asks you to continue working with him, to give him some loans, repos, not to withdraw your deposit or something else. You agree because you understand that it shouldn't get any worse, at least in the near future, so you can work for some more time. And then you realize that it could be even worse.

It is this uncertainty that can lead to new breakthroughs when the next bank falls on its side, and the state will again have to pour money into the problem, bringing the default closer.

Formally, the Fed is, of course, an independent institution. But, the feeling that they are, one of two things, really struggling with inflation or trying to give the Ministry of Finance a nasty false ****. Colleagues are right, the play continues, but you and I do not know the ending. However, there is a feeling that the denouement will be a heap and will look colorful. It's as if the problems in all directions slide into one point in time, when the bang is so banging.

There are numerous scenarios, how it could be done technically. Few of them we've considered in previous researches, but, to be honest, it is not as important - how it will be done. It is more important, why the US needs this. The forced and controlled compression of the Empire will allow you to draw in the best while this collapse is happening. The best personnel, the best technologies, etc. In principle, this was already the case – after the First World War and the Second World War. How does the described scenario differ from the consequences of the Third World War only without large-scale hostilities? New relations will be built on the "ruins" of world trade, and the United States, thus, will be able, after re-industrialization, to restore its share in global GDP in the spirit of the late 40s and to lead this process. However, the population is not enough, and this explains necessity of uniting, the AUKUS. Well, it's clear why the whole EU sanctions frenzy and the explosion of the Northern streams. To weaken a future competitor.

So, the first direct clash of counterparties by Hollywood scenario has happened - Kevin McCarthy said "We are involved in a competition with China - like in a swimming competition. But our debt is a burden that slows down our movement, and this gives the Communist Party of China — one of the largest owners of our debt — a competitive advantage. So let's stop swimming with so much extra weight. Let's win!

On a role of a 2nd clash of opponents we could use this one:
1684674203123.png


It seems that only culmination stands ahead. We clearly shows that this time debt ceil discussion and default is quite different thing, compares to all previous cases. There are a lot of blank spots still, on how it could be done, but overall tendency of this process brings more and more facts that indeed, it could be planned, controlled and intended initiative. When we get final results - we get the proves of our suggestion. We want you to make thinking wider, and, of course, just warn on this scenario. No needs to say that gold will be among best beneficiaries if collapse will happen.
 
Technicals
Monthly

Gold stands inside the April range by far. It seems that we were right about the pressure due to rising demand for US Dollar. As we've shown above, market still doesn't believe that default could happen. We're not arguing. At the same time, we suggest that probability is significantly higher and market underpricing the real cost of it. As closer we come to X-day and as more signs of default appear - as more demand for gold will be. That's why we do not expect too big drop on gold market. It could last for a week maybe until the default hazard becomes feasible.

Trend stands bullish, market is challenging YPR1 and its breakout is vital for long-term new bullish trend. The objective reasons why market can't break it is monthly oversold level. Bullish power mostly stands intact, as the 2nd month in a row market stands above 1950$ area, showing very small pullback out from the top:
gold_m_22_05_23.png


Weekly

Weekly trend has turned bearish, but we do not see any signs of sharp reversal and downside acceleration. So if this situation stands, we do not exclude appearing of bullish dynamic pressure within few weeks. Market stubbornly coiling around the top and stands above previous "B" top. Pullback is relatively slow and choppy. Next upside target is 2145$

gold_w_22_05_23.png


Daily

So, as we've discussed on Friday, here we have a kind of DiNapoli bullish "Stretch" pattern - combination of Fib support and oversold level. It suggest technical pullback. Bullish engulfing pattern tells the same, that's why we've said that scalp traders could consider intraday long position taking.
gold_d_22_05_23.png


Intraday

Of course, we keep watching for XOP target around 1922$, but this will be the next step. Besides, it could not be achieved - CD leg is slower than AB, as you could see. But first, let's see for upside bounce. This is the one that we will start next trading week with. Supposedly, 1995-2000$ area is the one to watch as potential target for the bounce.

Additionally, we have B&B "Sell" in progress, with thrusting action started from 2022 top. It means that way to 2000$ level could start from deep downside pullback, as it is shown on 1H chart.
gold_4h_22_05_23.png



Minor XOP is done, so, if B&B "Sell" works - we should get drop to 5/8 support, where 2nd leg of upside retracement could start. So let's see how it will go.
gold_1h_22_05_23.png
 
Last edited:
Fundamentals

Yesterday we've discussed big bulk of problems around US Treasury liquidity, and Fed rate decisions that could follow in June and July. The last question that is hot in media now, and that we've not discussed yet is Debt Ceil. As longer I monitor this issue as more confidence I get that this is controlled and managed process. Debt Ceil relates to many other things, such as Banking sector consolidation. At first glance it seems like a nonsense but if you try to dig slightly deeper, the precedent of debt ceil long term confrontation, you will see that this is logical. Now this case is taking more political background rather than economical, despite that economical consequences anyway will be terrible.

WHAT MARKET THINKS ON US DEFAULT

The risk of a US debt default is greater than it’s ever been, threatening to tip global markets into a brand-new world of pain. For investors, there are few places to hide other than the oldest hedge in the book: gold. The precious metal is by far the top pick for those seeking protection in case Washington’s game of chicken over the debt ceiling ends in a crash, according to Bloomberg’s latest Markets Live Pulse survey. More than half of finance professionals said gold is what they would buy if the US government fails to honor its obligations.

View attachment 83929
Even more striking is the shortage of alternative hedges. The second most popular asset to buy in event of a default, according to the global survey of 637 respondents, was US Treasuries. There’s something of an irony to that given that’s the very thing America would probably be defaulting on. But it’s worth bearing in mind that even pessimistic analysts see bill holders getting paid— just late — and that in the case of the most fraught debt crisis in previous years, Treasuries rallied even as the US had its top credit rating removed by Standard & Poor’s.

Traditional haven currencies like the Japanese yen and the Swiss franc had some fans, but each were less popular than the US dollar or, perhaps more strikingly Bitcoin, regarded by some investors as a kind of digital gold. While political and financial bigshots have been lining up to deliver warnings about what might happen if the debt-ceiling impasse isn’t resolved, stocks gained in early Monday trading on hopes for a breakthrough.

U.S. President Joe Biden said on Sunday he plans to speak with top congressional Republican Kevin McCarthy on Sunday as part of increasingly last-minute talks over raising the federal $31.4 trillion debt ceiling.



About 60% of MLIV Pulse respondents said the risks are bigger this time around than in 2011, the worst debt-limit crisis of the past. The cost of insuring against non-payment through one-year credit default swaps has surged well past levels seen in previous episodes, although they still suggest that the actual chance of a default is relatively slim.



The gold hedge doesn’t come cheap, as the metal has enjoyed a very good run so far this year. Buoyed first by the growing demand from Chinese luxury buyers, then by a crisis in the banking sector and the threat of US default, it’s currently loitering just shy of its all-time high of $2,075.47 an ounce.

A comfortable majority of investors in the MLIV survey think 10-year Treasuries will rally if the debt ceiling fight goes down to the wire but the US doesn’t default. However, professionals are split over what might happen if the US government actually tumbles over the precipice. About 60% of retail investors expect Treasury 10-year debt to weaken in the case of a default. If the department can make it past mid-June, then it’s likely to get a bit of breathing room from expected tax payments and other measures, before facing fresh challenges from late July, where market pricing also indicates a degree of strain and concern.

In the 2011 standoff — which led to a credit rating downgrade by S&P but not an actual default — a surge in Treasury buying took the 10-year yield to a then-record low, while gold rallied and trillions were wiped off global equity values. Investment professionals are less pessimistic on the outlook for the S&P 500 Index this time than retail traders.

View attachment 83931
Some investors believe that the debt ceiling drama has already caused some harm to the dollar, and 41% say its standing as the primary global reserve currency is at risk if the US defaults.

View attachment 83930

That is what people think right now and what performance they expect from the markets. In general this confirms our view either - gold should rise, while riskier assets, such as stocks, crypto should fall. But, as we've said yesterday - US Treasury has to borrow 1.5 times more than in 2011, and do it faster. It means that moment shock might be stronger.

...but, maybe we should try to look beneath the surface?
Based on the experience of previous decades, the debt limit will be raised and there should be no problems. But there are serious reasons to believe that in this case this problem will be used to solve much more complex problems and for this reason a simple and quick result will not work. In any case, the Speaker of the House of Representatives McCarthy said both that the problem will be solved, and that without reducing the expenditure part of the budget, there will be problems with this. So understand him as you know!

Previously we already talked that it could be controlled and managed crisis. And there are reasons exist to launch an event that would be similar to 9/11 by its effect to restore the strategic management system in the United States. And default can just become such an event. Since many people in the United States already understand that it is impossible to tolerate the lack of strategic management, it is very likely that a development in which a default will be created on purpose. Of course, the political management of the situation has already been thought out, but here are the economic consequences... Our task is to warn our readers about this development. The more information we get - the more confidence appears. Everything started with banking crisis and controlled takeover of SNB and FRP by JP Morgan. Then, we come further - take a look what J. Powell said on Friday.

  • JP Morgan may become the only bank in America as a result (!!!);
  • the relationship between the weakening of the labor market and inflation is no different from what it was before the pandemic;
  • inflation in non—housing services is particularly sensitive to labor performance;
  • inflation may be more sensitive to changes in the labor market;
  • price stability is the foundation stable economy
  • The Fed is obliged to return the inflation rate to 2%;
  • inflation is now much higher than the Fed's target;
  • Fed chairmen still have hawkish rhetoric.
  • They clearly understand the pain of households (consumers);
  • the US banking system is strong enough to withstand current and future challenges;
  • due to the tightening of banking conditions, the rate may not be raised as much as we planned earlier;
  • continued aggression in raising rates may cause stress in the market.
  • We can decide not to raise the rate any more;
  • the "weakness of the labor market" or its absence is an extremely important factor for future inflation;
  • it will take more time to reduce inflation;
  • we can afford to continue to carefully evaluate incoming macro data;
  • there is no decision on the Fed rate ceiling yet. But until recently, we believed that it was necessary to further tighten financial conditions.
The general conclusions are unambiguous: both Powell and Bernanke understand that inflation is much higher than acceptable (and, of course, not 5%, but significantly higher), but they also understand that further tightening of monetary policy will lead to political consequences. And therefore, they (well, more precisely, Powell, and Bernanke simply supports him) leave for themselves the maximum corridor of opportunities and will demand a political decision from the White House. And here we come back to the logic of the need to restore the strategic management system in the United States.

Together with J. Powell/B. Bernanke speech, J. Yellen had own press conference. CNN reported that U.S. Treasury Secretary Janet Yellen told bank chief executives that more mergers may be necessary following a series of bank failures. How to combine this with strength of the US banking system, mentioned by J. Powell above, and Yellen also reaffirmed the strength and soundness of the country's banking system at the meeting with bank CEOs on Thursday.

And what J. Powell means with "JP Morgan may become the only bank in the US"? And Why? So it should be something like this:
View attachment 83932

It sounds absolutely curious, if you do not understand the background and miss the loss of strategic management. If you take a look at the debt ceil issue and banking crisis from this point of view - everything stands in right place. To illustrate what "loss of strategic management means", I give you just one example. Last year, US Defence ministry was intended significantly (5 times) in two years increase ammunition production, as for the US, as for Ukraine and EU needs. First talks about this appeared last year, 1.5 years already have passed but this target is not achieved. Business Insider writes, that




Other words speaking - when you try to produce something complicated and in small amount, everything works great, such as war planes. Here is where the big profit margin is forming and everything happy - the client (i.e. Pentagon) and producer (say Lockheed). But when you have to produce something vitally necessary but chip and with big volume - problems are started. Country vitally needs ammunition, bullets and shells but since this generates no profit margin or even loss and demands government subsidies - production process stumbled. This is how US economy now works - this is in all spheres. Behind this model stand very powerful people and corporations who are in habit with "Implement the budget" but only if it brings profit to them. And this is across the country. And now even government authorities could do nothing with this superstructure, despite that it is vital for national interests and US survival. They lost the strategical management over the country.

So, what, and how all this stuff relates to banking crisis?

Directly. To restore strategic management system, US government needs to get direct control over cash flows distribution and eliminate bargain hunting where it brings problem to national interests (as in example with shells above). To do it, banking system has to be more centralized and better controlled then now. In perfect scenario this should be some chain of state-owned banks, where each one responsible for it own sphere (agriculture, social programmes, defence etc) and all of them under strict control by Central Bank to eliminate "dirt cash backs" in wrong pockets.

If we believe that there will be a re-industrialization of the American economy over the next 10-15 years, then everything becomes more or less clear. We need a tool to finance this re-industrialization in a way of AUKUS+ strategy. For a healthy (non zombie) company with good financial statement and collateral, you can easily get cheap financing without corruption. That is, state-owned banks have become a kind of tool for economic development. the Central Bank stands over them with a cudgel, which controls the risks of the entire sector. And he does it right, as practice has shown.

So, isn't everything that is happening with American banks now an attempt to create such a tool for centralized financing of the re-industrialization of the American economy? We'll wait and see. But the interesting thing is that if, after all, a default on treasuries happens, then this process can accelerate very quickly.

In practice - there is also no problems at all to let JP Morgan swallow all the others. Take a look - еhe TOP 5 banks have 53.6% of the assets of the banking sector. We have seen that unrealized losses in the banking sector are equal to capital. We have also seen that the FDIC compensates JP Morgan for approximately 5% of First Republic's capital as damages. Let's omit the "shadow banks", that is, everything else that fills the financial system.

Let's say the average third of the banking sector collapses. This is approximately 7.5 trillion dollars. assets. In principle, the same 5% may be needed from the state. A paltry $375 billion. Let's even assume that JP Morgan will buy them all. As a result, you will get a bank with assets of $ 11.2 trillion, that is, 50% of the entire banking sector. Bing! J.Powell was knowing what he was talking.

Now debt ceil drama comes to public sphere. Everything has to be as in Hollywood movie - first direct clash of opponents, second direct clash of opponents and culmination. Now the market is sitting and thinking (as we've shown above) - "they will no longer raise the rate, they will sort out the national debt. Nothing, we'll survive. And we experienced something else."

Here the ensemble "The Board of Governors of the Fed" comes on stage and begins to sing the song "Inflation has not decreased enough, further rate increases are not excluded." Applause, curtain. The next meeting is June 13-14, so a month of nerves is provided.

Moreover, this factor should not be underestimated, even though the increase may be only 0.25%. It's not even about the rate, but about uncertainty, which affects literally everything - both commercial mortgages, which at some point should start to fall, and banks, which are still sitting with unrealized losses, and everything else.

Well, imagine that you are a counterparty of the bank. He tearfully asks you to continue working with him, to give him some loans, repos, not to withdraw your deposit or something else. You agree because you understand that it shouldn't get any worse, at least in the near future, so you can work for some more time. And then you realize that it could be even worse.

It is this uncertainty that can lead to new breakthroughs when the next bank falls on its side, and the state will again have to pour money into the problem, bringing the default closer.

Formally, the Fed is, of course, an independent institution. But, the feeling that they are, one of two things, really struggling with inflation or trying to give the Ministry of Finance a nasty false ****. Colleagues are right, the play continues, but you and I do not know the ending. However, there is a feeling that the denouement will be a heap and will look colorful. It's as if the problems in all directions slide into one point in time, when the bang is so banging.

There are numerous scenarios, how it could be done technically. Few of them we've considered in previous researches, but, to be honest, it is not as important - how it will be done. It is more important, why the US needs this. The forced and controlled compression of the Empire will allow you to draw in the best while this collapse is happening. The best personnel, the best technologies, etc. In principle, this was already the case – after the First World War and the Second World War. How does the described scenario differ from the consequences of the Third World War only without large-scale hostilities? New relations will be built on the "ruins" of world trade, and the United States, thus, will be able, after re-industrialization, to restore its share in global GDP in the spirit of the late 40s and to lead this process. However, the population is not enough, and this explains necessity of uniting, the AUKUS. Well, it's clear why the whole EU sanctions frenzy and the explosion of the Northern streams. To weaken a future competitor.

So, the first direct clash of counterparties by Hollywood scenario has happened - Kevin McCarthy said "We are involved in a competition with China - like in a swimming competition. But our debt is a burden that slows down our movement, and this gives the Communist Party of China — one of the largest owners of our debt — a competitive advantage. So let's stop swimming with so much extra weight. Let's win!

On a role of a 2nd clash of opponents we could use this one:
View attachment 83933

It seems that only culmination stands ahead. We clearly shows that this time debt ceil discussion and default is quite different thing, compares to all previous cases. There are a lot of blank spots still, on how it could be done, but overall tendency of this process brings more and more facts that indeed, it could be planned, controlled and intended initiative. When we get final results - we get the proves of our suggestion. We want you to make thinking wider, and, of course, just warn on this scenario. No needs to say that gold will be among best beneficiaries if collapse will happen.
Another fantastic weekly report. Thx
 
Hi sive, hi everyone,

Here's an update on my Natgas swing buy. The Weekly DRPO is now valid, and I will now try to find intraday entries to follow that direction.
My long term swing take profits are unchanged, I repost here below my previous call entry and TP.

Posted on 28th March:
I'd like to post here a trading plan on the NatGas with a possible DRPO on the weekly chart.
We are on a big zone on the Monthly timeframe and on the OP (100% extension) target of the previous downward ABCD pattern. I bet on the upside reversal
Capture d’écran 2023-03-28 à 11.51.51.png





Now for those who couldn't get in, those who prefer short term positions or just to work on that weekly setup and accumulate short term points, we will try to find nice setup on intraday basis.
Technical.
3 Months:
Capture d’écran 2023-05-22 à 08.52.39.png

Nice reaction on the zone, it has always reacted those 20 past years that's why we're buying this support.

Weekly:
Capture d’écran 2023-05-22 à 08.29.26.png

DRPO is now valid with a strong weekly candle that breaks previous daily resistance, I expect a continuation now and will try to catch next retracement.

Daily:
Capture d’écran 2023-05-22 à 08.33.38.png

We can see that there has been a nice double bottom formed. We have average price for our long term position around 2.05 now, but we would like to enter again for short term trade. So we could wait for a 38.2 retracement from the last upside swing and that coincide with the previous resistance, the small green zone around 2.30/2.35. That will be my next entry point. Take profit would be a report from the previous W consolidation around 2.70/2.80.
Please note that it is important if we can make it with this trade, that you don't shut all your position on TP but keep a small amount of this position for the long term targets.

Please feel free to ask if you need any information on this trade. Hope this is clear. Thanks sive for your great analysis on Gold.
 
Hi sive, hi everyone,

Here's an update on my Natgas swing buy. The Weekly DRPO is now valid, and I will now try to find intraday entries to follow that direction.
My long term swing take profits are unchanged, I repost here below my previous call entry and TP.
Great description Tchurik, very detailed - thanks !
 
Greetings everybody,

So, markets remain under pressure across the board, and gold is not an exception. The next round of debt negotiations has failed, which makes markets be nervous. From that standpoint, chances on next drop to 1950 first, but potentially to 1925 area seems more probable scenario:

gold_d_23_05_23.png


Besides, we have technical reasons to look down as well. On 4H chart market perfectly completed our B&B "Sell" setup that we've discussed on Friday, but totally destroyed an idea of upside AB-CD reaction. Besides, we have uncompleted XOP target down there:

gold_4h_23_05_23.png


1H chart also shows that Friday's jump totally erased, by downside reversal swing. Theoretically we could suggest Double Bottom, but with no fundamental background and uncompleted XOP target chances look small for it. Besides, don't forget that price has erased daily engulfing pattern as well.
gold_1h_23_05_23.png

That's why, theoretically, bulls could try to watch for W&R of "A" lows. If we get it, it is possible to try take a long position with stops under W&R. And move stops to breakeven as soon as possible. For the bears situation is more tricky because daily 1949 support is too close and there is no simple solution for short entry with small potential loss.
 
Greetings everybody,

So, recent gold performance brings some clarity on the pattern that is forming here now. On daily chart market shows tight consolidation around lows. MACD trend remains bearish. This makes us think that another leg down is still possible:
gold_d_24_05_23.png


On 4H chart it is becoming clear that we're dealing with triangle now. Which is formed after downside action. Triangle, by classic analysis, at least, is continuation pattern. But for now it keeps door open for both direction. Here I plot downside butterfly, but easily you could imagine the opposite one with target around 2000 area. Second tricky moment - existence of 1949 support which makes a bit difficult decision making on short entry. Now risk/reward is around 1:1, if you hide stops above 2000 area. That's why bears supposedly should find some compromises for stop placement. Say, either to wait for action to 2000K resistance, or, use just butterfly pattern for trading:
gold_4h_24_05_23.png


For now it seems that downside action has a bit more chances to happen, especially if we get more or less hawkish Fed minutes
 
Greetings everybody,

Gold mostly remains in the same flat consolidation. By our view, now it is more bearish sign rather than bullish, because price just hangs above support level with bearish trend direction:
gold_d_25_05_23.png


Downside action that we've discussed yesterday is started. Take a look why we've called to hide initial stop above 2000 - cunning gold has completed upside AB-CD first and only then has turned down. Now we can't use any butterflies shape as all of them have been vanished. We could speak here only about XOP around 1922 and daily ~1950 Fib support level:
gold_4h_25_05_23.png


We see nothing interesting for bulls by far, and do not consider taking any long position. For bears, despite that we have bearish context, situation is not very comfortable as well. Those who haven't taken short position yesterday, today have no attractive setups, as price stands too close to 1950 support area. Some pullback is needed. Maybe it will happen. Today we're watching for PCE numbers and some news appear almost every 2-3 hours. Volatility should rise.
gold_1h_25_05_23.png
 
Greetings everybody,

So, as EUR as Gold stand in upside bounce from daily support levels. In fact, it is very similar picture on them both.
gold_d_26_05_23.png



Still, I feel a bit uncomfortable to consider long entry, having uncompleted 1922$ XOP on the back. That's the reason why it makes sense to watch for 1970 K-resistance area:
gold_4h_26_05_23.png


If Gold fails to break it up, it means that current downside tendency is not over yet and gold should try to reach XOP.

Conversely, if it breaks $1970 up, it could mean that we should get more extended upside bounce, maybe in a shape of reverse H&S pattern, similar to EUR:
gold_1h_26_05_23.png


So, let's see what will happen around 1970 and then we decide...
 
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