Gold continues to look like it wants to test support at around 1270. A rise above 1300 could put that prospect in the rear view mirror, however.
A simple update noting that the 30 to 5 year Treasury yield spread has dropped again to a fresh low after 2 up days.
With reference to an earlier public post showing the EEM breakout today, you may recall that I use EMF for Emerging Market investment and TDF for China/Asia. Both are managed by Marc Mobius of Templeton.
I am cooling my heels at the allergist's office. I almost bid goodbye to this world a couple times due to Yellow Jacket stings and now am a bee venom…
There is a lot of talk now about a flattening of the yield curve. This talk has been among the most intense right here at the website you are reading at this moment. A flattening curve is commonly viewed as bad for gold, and according to Mark Hulbert, is an indicator of a coming recession.
Why you should care about the yield curve
But is the curve really flattening or is this all hype based on Janet Yellen’s press conference comments? Here is a chart the likes of which we have been using in NFTRH for many months now, the 30 year vs. the 5 year yield.
MarketWatch shows a similar chart in its article…
Excerpted from the 31 page NFTRH 283 (dated 3.23.14), which also thoroughly analyzed the precious metals and several other markets from a technical standpoint.
Gold’s Macro Fundamentals
This spike in short-term yields (2-year shown) is what harpooned gold last week and finally got it under control.
More importantly, this spike in the 2-year vs. the 30-year really hurt gold.
These spikes predictably came as the FOMC successfully managed to get the market thinking about an end to the damaging Zero Interest Rate Policy, ZIRP.
Data came in weaker this morning with a home sales drop of 3.3% in February. The ‘all one market’ market is cheering to banish the evil spirits released by Janet Yellen last week. Those would be the rising short term interest rate spirits and they are key to our fundamentals.
In reviewing the second of the two HUI weekly charts of the previous update, I want to blow the view up and illustrate the symmetry between the current ‘down from neckline’ vs. the previous ‘up to neckline’.
[edit] Adding an alternative view of HUI
The good news is HUI remains on the plan for a potential Inverted Head & Shoulders bottom.
Today as I watch a former holding (TAS) plummet after being promoted last week on the heels of watching the gold ‘community’ get Ukrained and FOMCed in a double barreled assault, I am reminded just how dangerous herding behavior has become in the social networking phase of the information age, where every genius has got a pitch and a play, every news outlet has got ready made reasoning and the whole cacophonous mess needs an ever more finely tuned Bullshit Detector.
Hence last week’s opening NFTRH segment. And by the way, I do not view Dan Norcini as any sort of a hype monger. Quite the contrary. From what I have seen he is a well grounded and honest person.
Tune Out the Noise, Follow Technicals & Macro Fundamentals
Mail from a subscriber highlighting Dan Norcini’s view of the precious metals rally being little more than Ukraine-inspired hedge fund short-covering is but one of many inputs I have either received or seen on the internet that for my purposes at least, will be tuned down. I don’t doubt that Mr. Norcini has good experience as a professional trader, but I do question the importance he seems to assign to what the “hedge fund community” is doing at any given time.
Other inputs received or observed range from the utterly ridiculous ‘China copper demand is declining, so a decline in China gold demand will push gold prices down’ to a wide range of bull and bear rationalizations that vary from unlikely to plausible. They have one thing in common; they serve to amp up emotions.
Consider this post-2009 litany: Flash Crash → QE2 → Euro Crisis → Greek Austerity Vote → Cyprus → Operation Twist → Fiscal Cliff → QE3 → Taper → Ukraine → [today we can add in the Yellen ‘you know, like 6 months after taper ends, sort of…’ rate hike hysteria]
Everyone expects Janet Yellen to be a rolling over, inflationist stooge just like they did Ben Bernanke. Bernanke came on board after Alan Greenspan had taken the Fed Funds rate up to around 5% if I remember correctly. Inflationists and gold bugs thought they had it in the bag when ‘Helicopter Ben’ assumed control.
Indeed, Bernanke did what he was supposed to do (per the ‘Helicopter ‘Ben’ script) as systemic stresses began to gather in 2007, addressing that pesky Funds rate, culminating in December, 2008’s official ZIRP (zero interest rate policy). Here again is the chart showing the S&P 500’s ‘Hump #3’ attended by this most beneficial monetary policy.
As noted again and again, the much trumpeted ‘taper’ of QE is not only not a negative for the economy, we have made a strong case that its mechanics are actually a positive, in the near term at least. But putting ZIRP on the table would be a whole different ball of wax.
Yellen Speaks
I had to go out for the rest of the day right after the FOMC release. I came back to a fairly unsurprising mess in the precious metals, and a negative stock market. It turns out I missed the market’s little fit as Janet Yellen hinted that the Fed might raise the Funds rate a little sooner and a little more steeply than the market had anticipated. A little.
GLD turned last week’s resistance to support, which is now being tested as Ukraine hype unwinds and FOMC looms. This is a still bullish chart working off an over bought condition.
Excerpted from this week's premium report, NFTRH 282: Last June when tidbits about a would-be future ‘taper’ of T bond purchases (QE) were popping up in the media NFTRH 241…