Weekly: QT is Dead, Long Live QT
CITI IS BEARISH GOLD SUDDENLY
SECTIONS
Market Summary— Brakes and Gas
Week’s Analysis/Podcasts— Lots of Gold stuff
Research— Hartnett, TD, JPM, Stifel
Charts— Metals, Energy, FX, Bonds
Calendar— PCE
Technicals— GC, CL, BTC, S&P
Zen Moment— Spring
Full Analysis— CITI hates Gold.. what’s new?
1. Market Summary
Let's start in Europe. Credit Suisse’s UBS rescue-generated gains were DB’s loss it seems. Friday’s chaos started there. Deutsche Bank's credit risk exploded higher Friday.
Deutsche Bank's 1Y Sub CDS (classic derivative counterparty risk hedge) literally exploded
European bank markets roller-coastered dramatically, rallying off the opening lows after the CS bailout then reversing weaker to end the week.
EU bank stocks were only modestly lower while Senior EU bank credit was tighter
Does that Mean DB will default? No. It means the market thinks it will. And it will keep thinking it until something is done. And, unlike stock values, credit tightening at banks is the death of them. So in this case.. yea. You can bet how they fix this is being discussed right now. Or noone will trust them for business anymore.
Meanwhile in The New World after the 2nd and 3rd largest bank collapses in US history:
The major equity indices remained largely resilient this week.
The Fed's QT program 11 months to reduce its almost $9 trillion balance sheet by $625bn... and 2 weeks to retrace two-thirds of that
QT is Dead, Long Live QT
While this is not the end of QT (by Fed measures), that doesn’t matter to the risk. The BTFP program is a loan against bank collateral. Banks cannot use that money for stock pumps, loans etc. But it does increase Fed balance sheet risk even if it is only “temporary”.
This, in practical terms, is like flooring the gas while pressing the brake. You aren’t going anywhere.
The Fed can contnue draining liquidity from the whole market while the Treasury gives it back to those deemed worthy, but this is very bad. It cannot end well. The car is being destroyed a piece at a time.
We think those loans will be forgiven, extended, or rolled into JPM’s risk when the time comes. The Gov’t is pretty predictable that way.
Crisis aside, the economy will not recover for years from this mathematically. It will not recover in trust terms for possibly a decade. That is all you need to know if you are asking what it means for precious metals.
Sectors/Technicals
Big tech did very well again. The New Nifty Fifty in stocks maybe?
S&P 500 was very technical again this week. finding support early in the week at the 200DMA, rallying up to its 50DMA and reversing there. Falling back down to find support at the 200DMA again before bouncing back above the 100DMA today
Anything housing credit related did poorly. CRE/Office REITs continued to collapse
Banks were mixed. Regionals seemed to stabilize and mega banks gave some back
Under the surface things were ugly for FRC, RILY, TCBI, COLB, and PACW plunged from early week gains
Commodities:
Gold was very volatile and sideways
Dollar erased all of the post-Powell plunge but ended the week lower (3rd week lower of the last 4)
Silver was less volatile and marched in orderly fashion higher
Crude started very strong, had a bad 2 days after Yellen spoke, then some short covering for the weekend.
Wheat was wild.. collapsing all week, spiking 5% on Friday.
Bonds:
Yields continued to drop as the safety-trade continued
Curve continued to uninvert due to increasing expectations of Fed easing soon
Expect some funds to go belly up. Lots of short bond-players got carried out
Crypto:
Sideways week for the big ones. There was a BTC moment of panic when Jack Dorsey’s Block Financial had a negative report released on it by Hindenburg. But BTC recovered almost immediately.
RRP is moving of its own accord, possibly tied to FedNow (CBDC pilot program) being on schedule
2. Week’s Analysis/Podcasts:
Unease Over Banking Sector Turmoil Spurs Huge Demand for Precious Metals
Gold's Most Important Weekly Close Next Week.. Ever | Market Rundown
3. Research Excerpts:
Hartnett
Citi- Says short gold. Remember they are a major derivatives player in gold
JPMorgan And Citi are 90% of The U.S. Gold Derivative Market
Stifel- Nice Market piece
JPM- on Bank failures
TD: CTA and COT reports
CONTINUES AT BOTTOM…