Loading ...Bond Yields and Gold
JsKaui asked for an overlay of $TNX ( Interest Rates) on that Gold Chart
Here it is.
Somebody please explain why these 2 diverged in 2007 ! Just before the GFC
From 1970 Gold went UP with interest Rates and Down with Interest Rates
From 2007 they have completely diverged…Rates plunged to extreme ( forever) Lows
while Gold went Parabolic…. Now what ?
Don’t know why they diverged in 2007 but I think you have to look at $USD, $TNX & $XJY in relation to gold.
It’s when all three are aligned in terms of their correlations that you get significance moves in POG.
Post in a minute.
Interesting observation on the divergence, Fully. What came to my mind from the cosmic conscientiousness was that it was about the same time period that Bernanke and his school of influence over Fed policies began.
My guess on the divergence is sovereign debt levels and/or emerging economy govts stacking up like hell – china, russia
I can’t account for the ’07divregence vs. rates however the continued dashed line appears to assume the 2001-2011 run is similar to the late seventies run when if compare Gold to Asset Prices (GOW 100yr chart) the 2001-2011 run is more similar to the 1971-1974 500% run in gold (a blip on the far left of the chart). IMO we will not be waiting until the 2030’s for the massive build up in ‘currency’ starts to break through the dam and show as inflation and a rise in the velocity of money (with rates chasing to subdue – a la 1976-1979 (driver of PM’s to extremes). I’m going to give the rete divergence more thought as I believe the drivers of rate decreases might have been different after ’07 than before ’07. Thanks for the chart.
Looking at the drivers of fed rate policy (mgemt of inflation and employment mandates), in ’07 it was ‘apparent’ that full employment at just under 5% and seemingly flat inflation at 2.25% – they’d just completed a series of rate increases from 1% to 5% between 2002 and 2006 – remember CNBC’s Kudlow’s ‘goldilocks’ economy (it was all false). My theory is that PM’s sensed the risk to markets before the fed acted (Cramer’s ‘they know nothing’ rant). Before ’07 PM’s were on a rather gradual rise (inflation from around 1% 2002 to 4.5% 2006). Things changed in ’07 because it was from that moment forward Fed rate policy’s #1 goal was to SAVE THE STATE, inflation and employment be dammed – deflation was the new boogey man – QE 1-3 etc etc FFWD to mid-2015…..now we have inflation but this time there is a lot more water (currency) behind the dam that will need controlling – This to me is why I believe the second wave (a la 1976-1979) is still ahead of us with PM’s. That my $0.02 in trying to account for the ’07 divergence. PM’s smell rooted inflation before markets and the Fed will. To me the recent 3mo span between rate increases smells of fed anxiety – I’m looking for them to talk down the frequency of increases so as not to spook the dam of money that will be headed into prices. Heck, if I recall even a Fed head recently referred to the Punch Bowl as a thing. The jig will soon be up.
TA explains it with big base = big move I would say. BT late 2008.