Andrew Maguire exposes the algorithms behind recent gold and silver market volatility.
‘Talking Gold’ – a fortnightly update from Kinesis Director and precious metals expert, Andrew Maguire, providing a detailed round-up of the recent action in the gold and silver markets – a regular feature from the Kinesis Youtube show ‘Live from the Vault’.
In this week’s exploration of the markets, Andrew Maguire exposes the algorithms behind the recent downward price movement in gold and silver. The precious metals expert breaks down why the bearish correlations of these algos are unwinding – and where this leaves gold and silver.
How are algorithms influencing the price of gold and silver?
With the COMEX a 99% algo-driven market, Andrew Maguire sees orchestrated algo as the driving force behind the recent market volatility in gold and silver.
The agnostic algos are programmed to search out and latch onto any possible correlation, completely disconnected from supply-demand fundamentals. For this reason, high-frequency trading bots are able to influence these largely neutral algorithms. According to Andrew Maguire, a tide of algorithms chase to source a tick either side of any generated price movements, which causes volatility in the gold or silver markets.
Over the last week or so, Andrew Maguire reports these algorithms have been programmed to automatically sell rallies into the downsloping 10-day moving average.
The footprints are clear, officials have stepped in to directionally chart paint correlations and incentivise neutral algos to stampede in the direction of whatever is currently working.Andrew Maguire
Is the current algorithm game up?
Stepping through the footprints, Andrew Maguire noted the first bullish signs that these directionally orchestrated algo correlations were becoming bullishly disconnected.
In Andrew Maguire’s opinion, the disconnect was due to 2 major factors:
- The impact of the 100-day moving average, a level deliberately front run by insiders.
- The political uncertainty leading up to the US election, intensified by US President Donald Trump testing positive for COVID-19.
Andrew Maguire reports a contraction of the window between the aforementioned downsloping 10-day moving average and the rising 100-day moving average. As the window tightens, it becomes increasingly difficult for officials to maintain a cap on the 10-day moving average.
Secondly, in Andrew Maguire’s opinion, uncertainty surrounding the upcoming US elections is driving safe-haven demand. A factor that was exacerbated last Friday morning, when Trump tested positive for COVID-19. The black swan event triggered an unfactored simultaneous tail risk drive into both gold and the US dollar, serving to further disconnect unnatural algo correlations.
Watch Andrew Maguire explain the paper market footprints that signalled an imminent raid on deliverable physical COMEX gold.
When algorithms cease to serve their purpose, new correlations are simply hunted out. If insiders are caught offside into a technical and fundamental oversold condition, in a physically delivered contract, they will always defend their positions.
Andrew Maguire predicts that the bearish for gold correlations will continue to unwind. Where the dollar index is concerned, the precious metals expert expects gold to rise alongside the US dollar, with algos eventually latching on to that trend.
Andrew Maguire’s parting thought:
These largely unfactored tail risks will be very assisted for all safe havens, we expect gold to do what it said on the tin – in such uncertainty, as it’s done for thousands of years.
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Next Episode: Andrew Maguire carries out another detailed round-up of the gold and silver markets.
The opinions expressed in this publication are those of Andrew Maguire and do not purport to reflect the official policy or position of Kinesis.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.