What is gold telling us?

Gold soared overnight, hereā€™s what it means

Author

Tim Vollans
December 04, 2023 ā€¢ Estimated Reading Time: 4 minutes

āš” The Spark
What is gold telling us?

Gold soared overnight, hereā€™s what it means

Absolutely nothing.

See, everyoneā€™s always in such a rush to attribute meaning to numbers going up and down. Especially when it happens fast.

See, gold was soaring because ā€˜insert narrativeā€™ā€¦

(this was my favourite)

Life comes at you fastā€¦

A lot of people look very silly right about now. Gold is now down by a massive $125 from this mornings highs.

So all that meaning that was attributed to gold hitting new all time highsā€¦

Now means something very different.

Or maybe it never meant anything at all.

Markets are just positions. Occasionally, something like this happens. Illiquid Asian trade makes the price move much larger than it otherwise would have been.

Emotions and illiquidity donā€™t equal meaning.

šŸ§  The Big Brain
The Enemies of Clear Thinking

Why we do what we doā€¦

Why did you lose all that money?

I wasnā€™t thinking clearly.

The psychology of trading is MASSIVELY overhyped. Thereā€™s fortunes to be made in telling people that if they just get their head right, THEN they can make money from the markets.

Donā€™t get me wrong. Psychology IS important, but I think itā€™s more of a tactical optimiser than a one size fixes all solution.

Hereā€™s whyā€¦

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šŸ’” The Lightbulb
The America of oil

Saudis wonā€™t take this for long

Focus was on the OPEC+ oil producers last week and whether theyā€™d cut production further to push oil prices higher.

But is it really an OPEC problem?

And more importantly, will the Saudis be happy to continue bearing the load of production cuts that donā€™t have a positive impact on price?

The Prince is keeping up appearances after last weeksā€™ agreement to jointly cut production by 2.2 million bpdā€¦

ā€œI honestly believe that the delivery of the 2.2 million will happen,ā€

ā€œI honestly believe that 2.2 million will overcome even the usual inventory build that usually happens in the first quarter.ā€

(There are already signs that demand is improving, he said.)

Goldman see downside risks to their $80-$100 barrel forecast nowā€¦

We continue to expect that solid demand growth, a slowdown in US supply growth, and responsive OPEC+ supply will keep Brent in the $80-100 range in 2024.

That said, the OPEC put is weakening because extra cuts are becoming increasingly difficult to implement.

If inventories data surprise to the upside again as a result of higher supply or lower demand, extending existing OPEC+ cuts may be less challenging than implementing extra cuts.

In a worst case scenario, could we see a repeat of the 2014 price war?

Push prices down to cap US production growth and gain market share back for the cartel?

Itā€™s a risk that seemed unthinkable last year, but one worth considering.

Especially if the global economy slows sooner/faster than expectedā€¦