DoubleLine Capital’s Jeffrey Gundlach has a warning for bond bears.

Noting the “massive increase” in short positions against 10-year and 30-year Treasury markets, he warned in a Twitter posting that Treasury bond shorts are the “highest in history, by far,” and “could cause quite a squeeze.”

Speculators boosted 10-year futures net shorts by a further $8.3m/DV01, leaving positioning at short close to 700k TY contracts; elsewhere, net short in belly of the curve was cut by $3m/DV01. Further out, net ultra-long futures short was extended by $5.5m/DV01 to record level.

In eurodollars, speculators cut shorts by $4.5m/DV01 while asset managers marginally added to net short

Speculators appears to be pricing in over 50bps of yield rise over current 10Y rates – as Gundlach notes, if the market gets a safe-haven jolt (cough EM crisis cough) or growth scare (cough China cough) then this massive short position might squeeze yields dramatically lower…

Additionally, Gundlach notes, The Dollar’s major net long positioning is a concern also…“Boom narrative post peak.”

And while speculators have never been more averse to bond safe-havens, as dollar longs have soared, they have also abandoned precious metals.

In an almost unprecedented move, net speculative positioning in gold and silver futures has collapsed in recent weeks.

As Peter Boockvar notes, “for those who care about gold such as myself, in the just released CFTC data for the week ended Tuesday, speculators went net short for the first time since December 2001 when gold was priced at $275 an ounce. It’s tough to find a more contrarian indicator.”

In fact, as of the latest week – both Gold and Silver futures are now net short…

Hedge funds have never been more net short gold…

Aggregate Gold speculators have not been net short since August 2002 and has not been this net short since Dec 2001. What happened then?

However, don’t write off gold yet.

As Bloomberg notes, bullion has lost out in a paradigm shift where the metal’s no longer viewed as the traditional refuge when investors are in a risk-off mood, but that won’t last, according to Rick Rule, chief executive officer of Sprott U.S. Holdings.

Investors are favoring U.S. Treasuries, and that’s seen the dollar get stronger, Rule said in an interview from Vancouver Wednesday. But the greenback’s strength is relative, not absolute, and the overwhelming faith that the global saver has placed in the U.S. currency is “probably partly misplaced,” he said.

“It used to be that investors looked much more broadly at a basket of currencies when valuing gold,” said Rule, 65, who’s been involved in the market for four decades.

“It seems now that the dollar really has obtained hegemony, and the consequence of that is that the fight really does seem to be between the dollar and gold, and gold seems to be losing. I don’t think that that continues, but I can’t tell you when that changes.”

Bullion has slumped to the lowest since January 2017 and is set for a fifth month of losses as investors flee to the dollar amid trade tensions, emerging market turmoil and a Turkish financial crisis. A hawkish Federal Reserve and buoyant U.S. equities have also boosted the greenback, now near a 14-month high.

“The world, to some degree, has been quite used to bad news,” Richard Hayes, the chief executive officer of Australia’s Perth Mint. “If you were to go back seven or eight years, any one of the trade wars, or what’s happening in the Middle East, or China, Brexit, the rise of the far left and far right, any one of those events would have been enough to make a fairly significant impact on volatility of prices of precious metals.”

Rule holds physical gold in his personal portfolio as a form of insurance. He still sees gold reaching $1,400 an ounce, a level he forecast earlier this year, but refrained from giving a time frame. With gold longs having been squeezed out of the precious metals futures, perhaps it is sooner rather than later.

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