by Turd Ferguson, TF Metals:
The divergence from the USDJPY correlation illuminates The Bullion Bank effort to smash price below the 200-day MA and flush out as many Spec longs as possible before the next rise. We saw this is May and in July and we are seeing it again now.
I have no doubt that what you are about to read is correct.
Since last Monday, when the USDJPY was forcibly rallied from below 111, the total change in this all-important HFT driver is 130 “pips”…from 110.90 to 112.20. After discovering and then closely following the yen-gold correlation for over three years, we’ve learned that a one point move in the USDJPY generally correlates to a $10-12 move in the price of Comex Digital Gold.
The current 130 pip move should thus translate into roughly a $15 drop in Comex gold. Considering that price was $1298 last Monday, the current price should be around $1283. Instead, I have a last of $1267. Why the 2X difference?
It’s simple. Over the past several days there has been a concerted and coordinated effort to rig price below the 200-day moving average. And why have The Banks taken this action? In order to engender the same type of Spec long liquidation seen in May and July of this year and displayed on the chart below from October 24:
The CoT survey of last Tuesday gave two alarms that allowed The Banks to trigger this current action.
- The Large Spec NET long position in Comex gold had reached 224,417 contracts. This was the highest level in 90 days.
- The Large Spec GROSS short position fell to just 62,967 contracts. This was the lowest seen since 9/6/16 and thus the second-lowest level seen since 2012.
Judging that the CoT was ripe to be flushed, The Banks took action, striking yesterday at 9:07 am EST. Note the 12,000 contract dump that finally shoved price well-below the 200-day. The selling action that took price another $10 lower in the three hours that followed was brought upon by Spec long liquidation upon seeing price fall below this critical technical indicator.