Turkey is in (continued) currency crisis. CBRT (Cent Bank Repub Turkey) has allegedly run dry of its FX reserves to prop up the lira, which has has been hitting all time record lows vs USD & EUR. As USDTRY broke through the psychological 7 level (and doing so against a weakening dollar at that) in July, CBRT more or less threw in the towel in defending the peg, and began buying up gold. So much so that Turkey overtook Russia as the largest buyer of gold in the world - obviously contributing to gold’s run through prev all time highs, $2k and beyond.
As CBRT bought gold at a seemingly price indiscriminate pace, Turkish citizens holding lira and seeing their purchasing power get eroded away by the day and facing double digit inflation moved their assets in to anything other than the lira to preserve value - such at BTC. Unlike BTCUSD, BTCEUR, BTCJPY etc, BTCTRY is at all time record highs for this reason, and BTC’s July-Aug rally has also been supported by this reason.
The lira meltdown and horrendous monetary policy mismanagement has also obviously been killing the Istanbul stock market, as well as US listed Turkey ETF TUR.
Late last week, CBRT finally took steps to tighten credit conditions to local banks - and although nowhere near a sufficient solution, it put a temporary halt on the sell Lira → buy gold, silver, bitcoin, dollars, yen trend, and reversed its sentiment. And when the largest buyer of gold in the world stops buying after pushing prices to all time highs, gold falls, and when gold falls from all time highs, profit taking from record GLD inflows takes hold.
Though I bought puts on gold last week in light of developments in Turkey (which NOBODY is discussing, and therefore perfect - let consensus overlook and talk the usual nonsense explanations for market behavior), I’m not going to short gold on a temp pullback, any more so than I would short BTC for a near term downside view within a longer term bull view.
Instead, play the reversal by going long TUR. Buy (very cheap) calls for immediate term upside recovery, which for the time being should move inverse to gold.
Keep a very close eye on USDTRY breaking above 7.4 or below 7. And note the CBRT policy meeting later this month (Aug 20) for a potential inflection point for current trend to reverse again, and gold to continue upside.
As CBRT bought gold at a seemingly price indiscriminate pace, Turkish citizens holding lira and seeing their purchasing power get eroded away by the day and facing double digit inflation moved their assets in to anything other than the lira to preserve value - such at BTC. Unlike BTCUSD, BTCEUR, BTCJPY etc, BTCTRY is at all time record highs for this reason, and BTC’s July-Aug rally has also been supported by this reason.
The lira meltdown and horrendous monetary policy mismanagement has also obviously been killing the Istanbul stock market, as well as US listed Turkey ETF TUR.
Late last week, CBRT finally took steps to tighten credit conditions to local banks - and although nowhere near a sufficient solution, it put a temporary halt on the sell Lira → buy gold, silver, bitcoin, dollars, yen trend, and reversed its sentiment. And when the largest buyer of gold in the world stops buying after pushing prices to all time highs, gold falls, and when gold falls from all time highs, profit taking from record GLD inflows takes hold.
Though I bought puts on gold last week in light of developments in Turkey (which NOBODY is discussing, and therefore perfect - let consensus overlook and talk the usual nonsense explanations for market behavior), I’m not going to short gold on a temp pullback, any more so than I would short BTC for a near term downside view within a longer term bull view.
Instead, play the reversal by going long TUR. Buy (very cheap) calls for immediate term upside recovery, which for the time being should move inverse to gold.
Keep a very close eye on USDTRY breaking above 7.4 or below 7. And note the CBRT policy meeting later this month (Aug 20) for a potential inflection point for current trend to reverse again, and gold to continue upside.
Before rushing in, take cues on price action by WATCHING THE TURKISH LIRA
(intraday chart ↓)
And yes, TUR still trades inverse, correlation still holds. And so I don't have to keep repeating the same replies to the comments (which you should read each others) -
• I AM NOT BULLISH TURKEY
• I AM NOT BEARISH GOLD, SILVER OR BTC, AND EVEN IF I WERE, I WOUL D NEVER ACTIVELY SHORT GOLD, SILVER OR BTC - EXTREMELY HIGH RISK VS REWARD
• PURPOSE OF THIS CHART/POST = I'VE IDENTIFIED A MAJOR UPSIDE DRIVER IN RECENT GOLD, SILVER & BTC RALLY THAT'S BEING OVERLOOKED → TURKISH LIRA CRISIS, PRESENTING A TEMPORARY AND UNIQUE INVERSE RELATIONSHIP BETWEEN GOLD/SILVER VS TURKEY EQUITIES (US LISTED ETF: TUR)
• THEREFORE, IF YOU WANT TO PLAY THE SHORT TERM TEMPORARY REVERSAL IN GOLD/SILVER RALLY WITHOUT TAKING THE RISK OF SHORTING GOLD/SILVER, YOU CAN GO LONG TURKISH EQUITIES AS AN INDIRECT PROXY
I don't care about the near or long term fundamental outlook on Turkey, positive and negative, that isn't related to CBRT and their rate policy, their gold buying, their FX reserves. I also don't care about headlines such as this:
"Erdogan says Turkey will exact 'high price' for any attack on vessel"
...even if it moves the market direction, as long as the inverse correlation is intact (which it is - USDTRY, Gold, Silver move directionally in line, TUR moves inverse). The entire point is the correlation, not directional call. Correlation breaks down, then this idea is no longer relevant/useful. For now, its extremely useful as watching USDTRY would have told you not to chase gold and silver's sudden +10% jump (or, will tell you when such a move is real).