Friday’s PMs jump could be a sign…

On Friday we reported on the epic setup in the gold and silver futures markets and how poised it appeared.  Well Friday night was possibly a glimpse of what could be to come as gold jumped over 2% and silver nearly 3.5% in an environment that should have been negative for the metals.  A better than expected US NFP jobs report (on the surface) all but cemented a rate rise next week in the US.  That would ordinarily be negative news for gold and silver.  That said, we did also see ECB chief Mario Draghi backflip on his conservative address Thursday night (after adverse reactions from easy money addicted markets around the world Friday) to promise more QE and stimulus Friday night.

However what we likely saw Friday night was a reaction borne of the sheer scale of the speculative short set up we reported.  Not since 2008 have we seen the speculative managed money category with so few long (bought on hope of a rise) positions.  Combined with the short (sold on hope of a fall) position so high there simply may not be any more shorts left to enter the market.  Whilst it was a healthy jump, it was off a low/oversold price base and has a short/long setup so big that there would be plenty left for further rallies.  Let’s not forget what we pointed out Friday, the canny and powerful Commercial traders are poised on the long side.

When combining this with potentially all the rate rise ‘sentiment’ priced in (and seriously, we are talking just a 0.25% rise as somehow representing ‘normalisation’…), we may well be seeing an early short squeeze ahead of the pack who were waiting for ‘the bottom’ in gold and silver at the Fed announcement.  We’ve said many times… only monkeys pick bottoms.  We likely have an interesting week ahead in precious metals markets.