USD, Gold, Yields & Words

In an update earlier in the week we noted that the preferred scenario of a USD correction might morph into a bullish consolidation in the form of an imperfectly formed Symmetrical Triangle.

Well, today Uncle Buck is dropping below the lower line and making a signal that our initial target of 94 (+/-), with its combo of a trend line and support cluster, is a good one.


Gold bugs and silver bugs seem not to be able to catch a break as both metals are down in ‘pre’, while the Nasdaq gets ready to Google up some gains.  Of course, gold bugs depending on dollar weakness in order to trumpet inflation have been wrong for the majority of the bear market, so why start getting it straight now?

What actually matter are elements like yield spreads, gold ratios to positively correlated assets and good old fashioned confidence.  So to this point we have called the gold sector’s fundamentals “not fully baked” because they are not in line no matter the number of gold bugs clicking the heels of their ruby slippers.

As to yield spreads, the 10-2 spread is actually positive again this morning after closing yesterday on a little bounce.  Nominal yields declining with the curve rising is a risk ‘OFF’ recipe, but so far that cake has not baked yet either.  That is because the curve is only bouncing gently at this time.  It needs to be watched closely going forward as one of the real, not imagined market signals that matter to gold, stock markets and the rest of the kit and caboodle.  An impulsive move in these spreads would be a big negative.  So far… cue the crickets.


Here’s 10-2’s close from yesterday.


The point of the post?  Why not be patient and wait for signals that actually matter, respect current trends and wait for changes that are real, not imagined or hoped for?  Items like the chart directly above, gold’s ratio to palladium and others will give real time clues.

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