Loading ...Calling Jordan !
Jordan your work on Real Interest rates and Gold ( linked on our sidebar) is the best !
Please comment with respect to the pending Bond bear how this will impact gold.
Real rates appear to be rising ….is that Gold bearish in this case or will inflation outpace rates going forward ?
There was a time in the mid 00s when real rates were rising but Gold did very well. Maybe it was because of rising inflation expectations.
The key with respect to interest rates is long-term rates need to rise faster than short-term rates. That also indicates a steepening yield curve. Longer-term rates rising also reflects rising inflation expectations. One thing to keep an eye on is the 10-year yield. I’ve been thinking Gold would really perform if it breaks above 3%. If it breaks above 2.60%, that brings it to a 3-4 year high.
The real bullish scenario would be a rising 10-year but the fed funds rate (or 2-year yield which is a proxy for it) stops rising bc economy slows or Fed intervenes. Thats your stagflation scenario. 2019 would seem more likely for that than 2018.
Interestingly, in recent months Gold has held up better even as long-term Bond prices have sold off. That is a huge change from 3, 6 and 12 months ago. The initial breakdown in LT bonds may fundamentally not be Gold bullish (bc of spike in real rates) but perhaps Gold is sniffing out what that breakdown would lead to….rising inflation expectations and the eventual need for some kind of intervention.