Trying to invest in the opposite direction of big-money influencers is a game that no one should attempt because you won’t win in the long run. To be blunt, inexperienced retail traders don’t have the means to move the markets like the whales do, nor do they have the deep research tools to make the best investing decisions.
It’s disheartening to see money in the markets being transferred from retail traders to institutional investors. This happens time and again as most novice traders buy on euphoria and sell on panic, which is the exact opposite of what you’re supposed to do.
For instance, commodities experts like Keith Neumeyer and David Morgan were pounding the table on behalf of silver when it was an all-but-forgotten asset last year. Regrettably, many traders missed out on the astonishing bull run this year as silver quickly doubled after bottoming out in March.
Or worse yet, they sold their bullion and their mining-company shares at the worst possible time, only to watch the price turn around and shoot upwards. I always say that timing is everything, and the investing whales are consistently better market timers than your average small-scale trader.
Silver is an excellent example as experts remain bullish on it and expect silver’s momentum to continue through 2020. TD Securities, for one, names silver as “our precious metal favorite as a clean positioning slate, strong investment flows and robust industrial demand combine for strong performance.”
Courtesy: Wall Street Journal
For big-time precious-metals investors, the party’s just getting started. Recent data from the Commodity Futures Trading Commission (CFTC) indicates that money managers have been increasing their long positions in Comex gold futures while also scaling back their short positions.
I can’t say that I blame them for leaning long on gold. With help from the government, the U.S. dollar is sliding and Treasury bond yields are stuck near zero. Encouragingly, the ramp-up in gold-buying activity is orderly, not speculative, meaning that it’s a sustainable rally.
Hussein Sayed, chief market strategist at FXTM, elaborates on this further: “Looking at open interest in the futures markets, there does not seem to be excessive speculative positioning. This suggests physical buying and exchange traded funds are currently the key factors driving the price.”
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Again, it’s the whales moving the price here, not small-time buyers. The Comex markets are the playground of large-scale traders and that’s where real commodity price discovery takes place. The mega-funds, through their buying activity and the unwinding of short positions, have made it crystal clear that bullion is poised for more gains.
Yet another voice that represents the smart money’s sentiment towards gold is Jan van Eck, whose father John launched America’s first gold fund back in 1956. Citing unprecedented worldwide central-bank stimulus, his firm is calling is for the gold price to reach $3,400 per ounce.
It’s no exaggeration to say that gold and silver are outperforming practically every other major asset class this year. And bear in mind that this took place during a year when Covid made it more difficult for mining activity to take place. All of this just goes to show the enduring resilience of the precious-metals markets.
Besides gold and silver, what else are the whales loading up on? Take a look at the price action of Bitcoin over the past few months and you’ll have your answer. After bottoming out at around $5,000 in May, Bitcoin is threatening to break the $12,000 level as I’m writing this.
A price move like that can’t be engineered by small-time traders. It requires a concerted effort among the handful of elites who have the ability to move markets. Sometimes they conduct their large-block trades quietly, while other times they reveal their positions – and that’s when we need to pay attention.
One example would be the legendary Paul Tudor Jones, CEO of the Tudor Investment Corporation. Citing “central banks’ record monetary expansion in 2020 as a potential catalyst for BTC,” Jones effectively gave away the keys to the kingdom when he revealed, “the best profit-maximizing strategy is to own the fastest horse… my bet is it will be Bitcoin.”
Institutional investment in Bitcoin has been on the rise, with Coinbase noting a sizable recent uptick in digital-asset buying activity among “leading university endowments, traditional multi-strategy hedge funds, VCs, and large family offices.”
Thus, we can observe the whales warming up to anti-inflationary assets including gold, silver, and Bitcoin. And thankfully, you can invest like they do and enjoy the same outstanding long-term returns.
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