WE’RE ALL YUAN TRADERS NOW

 

“You have no idea Dave … none … where’s your little Mao book!?”

Welcome to Columbus Day! … another worthless federal Holiday, where our 

overlords in D.C. get another paid Monday off for not doing shit … Banks & 

US bond markets closed today, cuz bankers work soooooo “Hoover Dam” hard 

ya know, trying their best to rob everyone blind … good grief, we need a 

Holiday! Stock market is open, but volumes will be light without bonds. Gold?

“Well, we’re all Yuan traders now”! … cuz nothing matters except what the 

ChiComs are doing … pick your market, it doesn’t matter, they control & 

influence the entire damn world … last night, coming off a week long “Golden 

Week” festivities, their stock market tanked, they cut interest rates to boost 

their economy, the Yuan blew lower [USDCNH higher], and gold immediately 

headed “bigly & yuge” south in reaction. Other than that, nothing happened 

[snark].

It’s tough to tell, cuz of the times involved, which markets are playing  

“catch up”, and what’s leading & lagging … it’s clear, though, that when U.S. 

traders hit their desks today, sell gold cuz of the Yuan depreciation, was 

foremost on their mind … straight down for an hour … literally … and now 

sideways action creeping in … unless U.S. stocks go dumpster diving, and the 

Yuan subsequently rallies, I don’t think there’s much on the upside in today’s 

trade … the risks are clearly skewed lower, unless we get back over 1192, 

which right now I don’t see happening today. After that initial blast lower out 

of nowhere, volatility has collapsed … what was there isn’t anymore … but, 

the bottom line is simply this, “it’s all about the Yuan and the tradeable offshore 

Yuan, the Reminbi [USDCNH] … whatever it does, gold will head the opposite 

direction … it doesn’t get any clearer than this for the foreseeable future … sure, 

at some point these 2 markets will decouple, but I don’t think we are anywhere 

near that point yet … for sure, it bears watching”.

And if you need further proof, in addition to yesterday’s timely Sunday update 

highlighting this correlation on the daily candlestick charts, let’s take a look at 

the weekly candlesticks for both markets. Directly below, first USDCNH, then 

underneath that chart, XAUUSD, over the last 3 years [Sep 2015 - Sep 2018]. 

Each white arrow matches exactly the appropriate orange arrow on the other 

chart, since they are inversely correlated.

 

click to enlarge

 

click to enlarge

Outside of the influence “Brexit” had on markets leading up to the June 2016 

vote, the correlations are extremely strong … and again, the question becomes 

not a rhetorical one, but an important one, “which market is leading which 

market”? At this point, I’d have to give the edge to Yuan leading gold, and it 

wouldn’t surprise me to see banks “gaslighting” Yuan to get gold trades off, 

and then taking the other side … they used to do that with impunity when Yen 

correlated highly with gold before Yuan took over the action.

Quite frankly, I completely forgot on Friday, and last night on the Sunday 

update blog post, to mention today is a “quasi” Holiday … given the fact the 

calendar lined up Columbus Day with “Golden Week” in China makes it worse 

… in some way, shape, or form, I figured there would be some wild action 

somewhere along the timeline from Asia to New York today, given China was 

off all of last week … sure enough, we got it in Asia, and at the very start of 

New York … outside of that, it’s been a bucket of hog slop, with zero volumes 

at times, very little liquidity, and non existent volatility.

If you look at the history of gold trading, anytime you already have very large 

ranges [$10+ per OZ.] when New York is starting it’s session, you inevitably 

end up with a very dull New York session … outside of today’s first hour  

“catch up” to the Yuan, that’s been the case … and while the day’s range is 

high by recent standards [over $20 per OZ. so far], the day's range in New York 

is lagging badly … here in the NY PM, it’s barely at $5 - $6 from the tips … not 

something historically I want to get involved with, especially in the NY 

afternoon with Squid & the boys. A very high probability the same happens on 

Veterans Day in about a month from now. So, no C2 signals or PAMM trades 

today.

So, no worries over this “Holiday”, and the drop we missed … nothing has 

really happened, cuz we’re still stuck inside an 8 week range dating back to the 

weekly candlestick of 8/15/2018 … and quite frankly, at these levels in price, 

I’m more concerned about rallies than drops. With the world now back full 

time, we pick it up tomorrow … until tomorrow mi amigos 

… Onward & Upward!!

PAMM Spreadsheet directly below.

 

click to enlarge

Have a great rest of your weekend everybody!!

-vegas

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