Loading ...10 YEAR YIELD OVER THE TIPS
….Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index….
There is a strong negative correlation with this Ratio (Ten Year Yield / TIPS) and Gold
OK…so lets figure out exactly what this ratio shows
When it is dropping the “Inflation” rate ( TIPS) is stronger than the 10 Year Yield
(ie Real Rates are weakening)
Said another way Bond Holders are Losing to Inflation…..
This is Good for Gold….Gold pays no interest but its better than losing to inflation .
On the other hand when the ratio is rising Ten Year Rates are gaining on Inflation
( ie Real Rates are Rising)
So it pays to hold Bonds and collect the interest which is beating inflation…so Gold is sold for Bonds.
If all this is correct…The ratio looks like it has Double Bottomed and now broken out
This implies Real rates will rise….which is not Gold Friendly
Wowzers. Great chart and an even better explanation. A TIPs of the hat to you. (heh, heh)
As many are already aware, the Fed is reducing its 4.5 trillion dollar balance sheet while simultaneously raising interest rates. That means instead of priming the economy with cash, the Fed is draining $10 billion monthly from the economy, soon to increase to $50 billion monthly (yes, while raising interest rates). This double whammy will impact highly speculative bubbles first, then bite deeper.
https://www.bankrate.com/banking/federal-reserve/fed-balance-sheet-and-your-bottom-line/