I went to the track for some exercise, came back and yields had reversed back up and HUI back down, in-day. It is a microcosm of what I expect in a larger sense (than one day) if/when yields turn back up and put the inflation induced reflation trades back on.
Here is a picture of HUI and the inverse of the 30yr yield. It is apparent that HUI has gotten ahead of itself in hopes that TYX will turn down (it’s inverse will turn up) much further.
As a gold bug I don’t like this because I think that the yield is going to ultimately push the envelope, as markets often do, and test the 2.8% area at some point in 2021. TYX (monthly, below) has been putting in a little right side inverted shoulder to match the one on the left side. I have given gold stocks some leeway due to the immature right side shoulder (the current yield pullback), but in viewing the divergence above I am given pause. HUI’s technicals are fine, but this macro picture shows vulnerability.
I don’t tell others what to do, but I am certainly not going full frontal gold bug at this time and will take action as needed to manage the risk implied by the chart above and the ongoing inflation/reflation in general. Also vulnerable to a renewed rise in yields (when it comes) are Tech and Growth stocks. It’s as simple as reviewing what was and was not working during the rise in yields over the last many months.
