Long Dollar, Short Gold, Short Bonds: Betting on Sticky Inflation This Week

The week's bet: long dollar, short gold, short bonds

My bias this week is clear: long dollar, short gold, short bonds. I could be dead wrong. But if you follow the signal of upside pressure on inflation, my system leans this direction.

Let me walk through all three. The core premise is simple: as long as oil sits at $90 for a second month, inflation won't cool off easily.

Dollar: a tug-of-war around 99.4

On the dollar index, I still lean bullish. It took a small hit from the geopolitics and capped out its gains near 99.4 on Friday, sliding back into a consolidation zone — but the overall score is a solid +5.

Here's the case: the four-hour and daily charts are both in an uptrend, May seasonals are strong, the jobs-market bias is positive, and the inflation bias is still sticky. The decisive trigger to rejuvenate the bullishness would be a headline that the Middle East won't calm down easily. A break back above 99.4 opens the door to 100.2.

That said, if the jobs data comes in weak or the inflation report shifts, I'll move my tone to neutral or even bearish without hesitation.

Gold: when the crowd gets too bullish

My stance on gold may sound counterintuitive. Despite the geopolitical headlines, I see an opportunity to short gold on a rally.

Three reasons. First, the inflation story is still troublesome, which dovetails with my bullish dollar view. Second, institutions did some recent COT selling — bearish activity in gold. Third, crowd sentiment went strongly bullish on Friday.

Let me unpack the sentiment tool. A falling put-call ratio on GLD means call buying is piling in, signaling a bullish crowd. But I use crowd sentiment as a contrarian indicator. When the crowd chases one side, I read it as the opposite signal — so this bullish tilt in gold is actually a bearish read.

My framework: follow the institutions on the Commitment of Traders as the "smart money," and fade the crowd. With no hardcore US-Iran deal signed, the risk-reward on a gold short still makes sense to me.

Bonds: targeting higher yields

I also carry a bearish bias on bonds. The 10-year Treasury (ZN) futures are retesting big resistance after a rally, and that moves inversely to the bond yield.

With yields pulled back, I see this as an opportunity to pick up a short-bonds play again, on the premise that yields can keep grinding higher. If inflation's upside pressure persists, the bearish bond setup fits the same picture as short gold and long dollar.

Putting it together: one macro scenario

Long dollar, short gold, and short bonds aren't three separate bets. They're three branches of a single macro view: inflation stays sticky and the Fed can't easily pivot back to easing.

I'm agnostic about where prices ultimately go. I'm just making educated guesses by combining the data, the technicals, sentiment, and macro fundamentals. If weak jobs data or a disinflation signal shows up, I'll revisit this entire scenario without hesitation.

FAQ

Q: Why short gold when the crowd is bullish? A: Because I treat crowd sentiment as a contrarian indicator. When GLD call buying gets crowded, I read it as a bearish signal. At the same time, institutions are net selling, so both signals point the same way.

Q: When does this thesis break? A: If jobs data comes in weak or inflation cools quickly, the premise behind long-dollar, short-gold, and short-bonds all wobble. In that case, I'd shift my tone to neutral or the opposite.