Loading ...Real Yields
I’ve been keeping an eye on real yields… I get updated data at close. If an uptick, then sometimes notice a so so day in PM’s the next day.
When they close solid red.. then usually a beautiful day in neighborhood in the PM’s sector!
Specially the 30 year treasuries real yields (bottom one)… see the close from yesterday.
Right now… just a possible rabbit hole I might jump into…
Interesting find Patrick
Excellent post, Patrick!
I’ve heard a lot of savvy Tech/Nasdaq investors say that they don’t understand the gold/PM market, that’s the biggest reason they stay away from it.
I use the same reasoning for staying away from bitcoin and its ilk, by the way, so not saying that the above argument for staying away from gold is not valid 🙂
But what you have illustrated is what really drives gold.
These savvy (tech/S&P) investors say that the argument for not holding gold is that it has no yield.
Now, US Govt long bonds, the safest of the safe havens, have negative yields.
Now it should make sense to these savvy investors why they should sell safe have govt bonds in exchange for physical gold.
Now, will they buy it? (Both the argument, as well as gold, LOL !!!)
GL
Yes… Neg real rates should deep to maybe negative 2% or 3%? My thinking is the Fed will control yield curve with infinite $$$ (killing the dxy) and keep it at zero or maybe even one day negative. Now.. if inflation is let to run at a flat 2% (as the Feds target)… then the real yields.. Nominal 0 minus inflation 2%… you get minus 2. So, still room for gold to drive upwards. AS the Powell pivot was the go signal for long gold… the next powell pivot will be time to exit gold. That will be when they let the nominal rates surpass the inflation rate… thus killing the arbritage in favor of gold.
Starting in 2008, the QEs done by the Fed (popularly known as QE1, QE2 and QE3, but who knows how many were there?) had been done just as pure Emergency measures, and not to give trillions to the TBTF banks, and the Fed had come back to raising rates gradually, regardless of the tantrums of the stock market … we would have gotten lot of inflation. Neither Bernanke, nor Yellen, nor Powell, really wanted to end QE.
I heard a lot of negative opinions about what Paul Volcker did in the early 1980s to end the gold bull of that era.
Coming back to your reply, Sir Patrick, the Powell pivot may be very very far away, if at all. A spine like Volcker, or, if you’d rather prefer a cigar smoking Fed head, https://www.ft.com/content/9f39065c-1a8c-11ea-9186-7348c2f183af may not come ever again. Can you imagine a Biden regime raising interest rates?
This country’s central bank embarked on the irreversible path to eventual hyperinflation in 2008. We may or may not see a huge deflationary bust before we see the eventual hyperinflation. Exits from gold and related PM positions may be planned when hyperinflation has strongly set in. Then it is up to the individual to sell at their own personal greed level, LOL !
GL… I can’t read that link.. asking me for some membership of some sorts ;(
Wasn’t trying to get you to read an FT article 🙂
Just wanted to share Volcker’s cigar smoking image for some humor (his spine was no funny stuff, rather too strong!)
Try this one:
https://www.amazon.com/VOLCKER-CHAIRMAN-FEDERAL-RESERVE-BECKETT/dp/B07R79H6CN
Got it. Yeah.. no nonsense dude right there. Love it.