On a similar theme to the earlier update whereby the long bond is seeing extreme relative short interest by Commercial traders, let’s compare the 30 year vs. the 2 year.
The 30 year shows a big build up in net shorts by the Commercial Hedgers.
The 2 year is in the opposite direction, with Commercials net long.
Bearing in mind that the CoT (as it is with gold and silver or most any other market) is just one indicator and we should never chase only one or two indicators around as if they tell the truth, the whole truth and nothing but the truth… one implication could be a rising yield curve as there is an implication of declining short-term interest rates (if short-term bonds get bid) and rising long-term interest rates (if the long bond declines).
In the previous update we noted commercial shorting against risk ‘off’ long-term T bonds and risk ‘off’ gold could mean one thing (a flight away from risk ‘off’ and a positive for the stock market). In this update we present a case of the opposite, in that a rising yield curve could indicate risk ‘off’ and be damaging to the stock market. It could also be a signal of inflation, which can keep the stock market stable.
But since we are getting into ‘what ifs’ today, I wanted to present this other view. This would by the way, be a positive for gold’s fundamental backdrop as we have been noting that the main holdout in gold’s funda backdrop has been a rising yield curve.
It is pretty amazing how related data can tell very different stories about the macro.