Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Gold and the Bond Yield Continuum

Interest-Rates / US Bonds Aug 11, 2019 - 02:21 PM GMT

By: Gary_Tanashian

Interest-Rates

Have you heard the news? US Treasury bonds are sky rocketing as it turns out there is no inflation amid a global central bank NIRP-a-thon and race to the currency bottom. Going the other way, our 30yr Treasury yield Continuum is burrowing southward.

If you check out yesterday’s post you’ll see proof that the 2018 NFTRH view that people should tune out the bond experts instructing BOND BEAR MARKET!! was 100% on target.

But today the din is coming from the opposite pole. Everywhere you look on the financial websites it’s now about tanking yields, decelerating growth, trade war damage and deflation. Here is the 30 year bond yield (TYX), which is front and center in this hysteria (click the charts below for the clearest view). That is one impulsive looking drop.


But just as we warned that the precious metals move was a “launch” (not a blow off as some were calling it) in June because it was at the beginning rather than the end of an extended move, we note that TYX is impulsively dropping into a potential climax. Everybody is on the opposite side of the boat they were on in H2 2018. That would be the BOND BEAR MARKET!! side of the boat with experts Gross, Gundlach and company. Now amidst the current Armageddon (the SPX is after all down a whole 4% from its all-time high, he said sarcastically) backdrop it’s all BOND BULL MARKET!! all the time.

Wash…

Rinse…

Repeat… the herds never catch on because they are the herds. They follow. Always.

While it does not always work this way, since gold often plays well with inflation and bonds do not, during this slight global economic growth contraction gold has acted as have Treasury bonds in almost perfect sync. Here, check out the daily chart of the yield and gold.

The green dashed lines on this weekly chart show phases where gold and 30yr yields were mostly correlated, which meant that gold and Treasury bonds were not. That relationship is violently interrupted on this cycle of fear, loathing and Armageddon obsession.

But maybe this is the big one (Elizabeth!). The Continuum has declined to the lows reached during the NIRP hysteria back in 2016 and the stock market correction before that in 2015. Armageddon ’08? Yields are below that terror stricken event and the 2012 launchpad to the financial media’s “Great Rotation” (out of bonds and into stocks) promotion of 2013.

This critical area of support is as important in a completely different way than the aborted breakout (orange arrow) above the Continuum’s limiter was last year.

Gold’s vulnerability, in theory at least, is the fact that it has gone hand in hand with something that is stretched to an extreme. While there are compelling reasons that the gold price should be rising today (we are after all, in the minority of voices calling out that the case for gold goes far beyond inflation protection). Most of the key fundamentals are very well in line, but the yield curve has been hammered back to flattening in the post-FOMC action. That, taken at face value is not gold-positive. Here again, the cartoon representation of important factors for gold.

My job is not to tell anyone what is going to happen. My job is not to promote a viewpoint or ideology and least of all fear, although I’ve been on the case for the unsustainability of the system since I began writing about markets in 2004. But this system depends on ever-increasing credit. Thus far along the continuum, every time the yield limiter has been reached – or slightly exceeded, as in 2018 – the result has been a swing to the other side, the deflationary side (that’s a continuum of spiking and fading inflation expectations among other things).

As we noted at the time, a breakout in yields and inflation expectations would basically end the Fed as we know it; it’s gig would be up. And still people were wondering why Jerome Powell was so stern on the Fed Funds rate in the face of a tanking stock market. Today things may not be as simple as looking at some guy’s chart he calls the Continuum and expecting a continuation of the wash/rinse cycle. Among other complications, Powell should be going full dove right now and he is not. It cannot be that he’s trying to teach a bully on Twitter a lesson. Something could be lurking in the system that has not yet come to the surface.

Bottom Line

This debt-based system needs funding. It gets funded with herds of frightened market participants thundering into bonds. See? But as someone who believes the racket is not sustainable, I am ready for a breakdown below support in Treasury yields. That would see the most ardent gold bugs finally validated and the herds comfortably huddled in Treasury bonds (until the terms of the new system are enacted, that is).

But if we continue along the Continuum that has been in place for decades, as we did after 2018’s BOND BEAR MARKET!! hysteria, a bearish bond view could be well rewarded. And that may or may not paint risk into the price of gold.

Gold is different than T bonds. Gold is real, bonds are debt. So it’s all a matter of your expectations for a monetary asset that merely reflects confidence or lack thereof by the masses. But as gold rises (in more rapid fashion than originally anticipated) toward our initial targets, we should realize the power of the herds. If a few months down the road they are thundering in the opposite direction along the Continuum, they will not be in a mood to rationally discuss the merits of real value. They are died in the wool bond investors after all, not even a half a year after having been tended to a die hard BOND BEAR MARKET!! view.

Subscribe to NFTRH Premium (monthly at USD $33.50 or a 14% discounted yearly at USD $345.00) for an in-depth weekly market report, interim market updates and NFTRH+ chart and trade setup ideas, all archived/posted at the site and delivered to your inbox.

You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar and get even more by joining our free eLetter. Or follow via Twitter ;@BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2019 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules