@ Biiwii: “A Different Look at the US Yield Curve”

It’s actually a look we have noted in the past, which is that a steepening yield curve can either be driven by relatively declining short-term yields and an oncoming liquidity event or by relatively rising long-term yields and increasing inflation expectations.

Steve Saville takes A Different Look at the US Yield Curve

From the post:

The reason that the next yield-curve trend reversal from flattening to steepening will not necessarily signal the onset of an economic bust/recession is that there are two potential drivers of such a reversal. The reversal could be driven by falling short-term interest rates or rising long-term interest rates. If it’s the former it signals a boom-bust transition, but if it’s the latter it signals rising inflation expectations.

As an aside, regardless of whether a major yield-curve reversal from flattening to steepening is driven by the unravelling of an artificial boom or rising inflation expectations, it is bullish for gold. By the same token, a major reversal in the yield curve from steepening to flattening is always bearish for gold.

With the T-Bond likely to strengthen for at least the next two months there is little chance that rising long-term interest rates will drive a yield curve reversal during the third quarter of this year, but it’s something that could happen late this year or during the first half of next year.

Thing 1 would be a typical liquidation (which in the age of ever more intense booms/busts may not seem so typical) and Thing 2 would be along the lines of the von Mises Crack Up Boom style inflationary bonfire. In that event I don’t think you want to be short much of anything, and that includes stocks. So Thing 2 is the scenario where theoretically at least, gold and the stock market can go up together.

Subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas. You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.