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Forget Stocks, The Gold Short Squeeze Is Intensifying



  • Despite mass rioting, stocks keep climbing since there isn't much else for Fed money to land on, but this looks increasingly like the mirror universe version of the dotcom bubble.
  • Retail investors are buying anything collapsing. 3% of all NYSE trades are for $2,000 or less, and 13% of all options trades are for 1 contract according to Goldman Sachs.
  • They are doing this because they expect the Fed to support what they're buying. But when retail gets in on a trend, it usually means the trend is ending.
  • Gold, on the other hand, looks, once it breaks back to all-time highs looks like it could start a fear trade that will only intensify once equities break lower.
  • Large deliveries were being taken at the Comex, over 45,000 contracts in a week, 141 tons, meaning the gold short squeeze is on.
  • I do much more than just articles at The End Game Investor: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Is what's happening now in equities the mirror universe of the dotcom bubble of 20 years? It looks that way to Jim Bianco, head of Bianco Research, interviewed by Jim Grant of Grant's Interest Rate Observer last week. Here's what he said on Grant's podcast:

"The amount of small retail that has been plowing into this market has been unprecedented. Goldman Sachs pointed out that 3% of all trades on the NYSE are now for an aggregate value of $2,000 or less...13% of all options trades in the United States are for one contract...We always thought that retail investors are chasers of momentum, but what we have seen is that in the month of March, when the stock market had one of its worst months in history, over 1,000,000 new accounts were opened by small investors...Not only are they buying into the decline, they are buying with reckless abandon into the decline, and further, they seem to be the most interested in anything that is collapsing."

Bianco is only very slightly wrong, in my opinion. Retail investors are indeed still chasing momentum. The only difference is that 20 years ago, retail investors were indeed chasing upside momentum in tech stocks. Now, they are chasing momentum to the downside. It appears even they are getting on in the "Follow the Fed" trend. It really is like the dark mirror universe of the dot-com bubble, it seems.

Some gold bugs think the bullish momentum here is just crazy, considering all the mayhem going on in both the real and financial economies all over the world. But it really does make sense if in a twisted way. After all, if you're a bank and you have all this new money from the Federal Reserve, where are you going to put it? In the real economy now rioting and destroying

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This article was written by

Austrolib profile picture
A gold-based approach to protecting wealth and profiting off Fed inflation

I invest in the light of Austrian Business Cycle Theory and cover monetary trends for the purpose of timing the credit cycle. My marketplace service The End Game Investor helps subscribers manage the risks of, and profit from the ongoing fiscal and monetary crisis precipitated by the COVID-19 pandemic. I use gold, silver, and associated stocks and investment vehicles in a low-risk high-return setup.

Analyst’s Disclosure: I am/we are long AAAU, GOLD, NEM, GDX, GDXJ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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