A Beneficial Day for Gold Sector Fundamentals, Opposite Economy

As you know, we have been following this constructive view of the 30 year yield vs. the 5 year yield with respect to its would-be negative implications for the stock market if the spread bottoms.  Well, it is looking more like a bottom every day.

30 year yield, 5 year yield

Here is the daily view after this morning’s bad Payrolls report.


While I cannot get a live chart, here is what is happening in the 10 year vs. the 2 year today (graphic from Investing.com).  The 2 year is down a whopping 14% vs. the 10 year down 6%.  In other words, this yield spread is getting a bump up too.

bond yields

Here was the uninspiring state of the spread at yesterday’s close, 10 divided by 2 (our usual method of viewing the yield curve) and 10 minus 2 (Stockcharts.com’s method of viewing the yield curve).

10 year, 2 year yield spread

10 year minus 2 year yields

In line with our Microcosm theme, today’s events are just more hints of what would need to become trends in order to confirm a fundamental bull phase in the gold sector.  But these ‘microcosms’ are coming with some regularity now and some are pushing for trend changes.

For example, here is gold (GLD) vs. the SPX (SPY) and Euro STOXX 50 (HEDJ) today…

gld vs. spy

gld vs. hedj

These are each bouncing after having consolidated a bit.  We will again review the constructive bigger picture weeklies of Au-SPX, Au-STOXX 50 and Au-TSX in NFTRH 363.  But I wanted to get these views in front of you today.

The markets are in motion and that implies they are going somewhere.  As you know, sentiment is in the dumps and that is supportive of a bounce.  Who’s got the tinder box to ignite a sentiment-fueled rally, some policy Jawbone?  Or do they let the thing drop to SPX 1700 before panicking?  All questions to be answered.  Regardless, I don’t want to short the market with any real commitment unless it loses the October 2014 parameter.  Indeed, I only have a few positions, and they are long (SPXL short was covered on yesterday’s market downside, once again leaving short side money on the table).

But that is just me, a non-professional bear.  Some of you have more commitment and more experience taking a market down.  I do not have the makeup of a resolute bear, unless I get bear market confirmations (ref. October 2014 lows decision points).

Back on the gold sector, I am however, a chart guy reminding us that the larger trends are all down.  Yet today we have added more underpinning to the building fundamental case, and even a daily AROON up for GDX to boot.  I have added a few of my favorites, but am going to be patient here as well.  Very patient.  As we have noted, there are no technicals, but any real bull phase has got to start from a ‘no technicals’ basis.  In that regard, it helps to have positive fundamentals gathering.  The reason for patience is that there will likely be ups and down, as the sector has not to this point really responded to fundamental drivers – aside from these periodic ‘microcosm’ days when it seems to clearly understand its fundamental drivers.


Interestingly, I notice that in the time it took to make this post the Dow just took back 100 points of its early losses.  Interesting markets for sure.