Gold stocks and the yield curve; Bessent & Warsh Op/Twist-lite paints temporary Goldilocks
On the charts below, perhaps you can see why, if they are successful in pressuring the yield curve into another flattening, Bessent and Warsh (B&W, AKA good cop/bad cop) could keep gold stocks under pressure for a while.
Of course, if it is different this time and these correlations do not project into the near future, the caution I hold at this time would be unfounded. Gold stocks are up strongly today with other relieved markets, but they have not yet broken the (sector’s) short-term downtrend.
The mechanics of what I believe could be in play were illustrated in late August:
Operation Twist 2.0? Bessent & Warsh Work the Yield Curve
And again yesterday, FOMC day:
Goldilocks Painted Into Existence
But if it is not different this time, long-term history (2012-2016 post-Op/Twist phase) and shorter-term history (the 2025 rally and 2026 correction in gold stocks) indicate trouble for the sector if (that’s an important word) B&W are trying to engineer a renewed curve flattener and if they prove successful (our time target is to/through the mid-terms).
In my many years managing the gold market, not to mention the wider macro markets, I have all too often seen gold bugs succumbing to group-think, marching in line behind the slogans of their leaders. If you’re holding (I am, with hedging) for a better phase to come, that’s one thing. But if short-term volatility could knock you out, it’s best to be open-minded to actual macro signals.
The above represents a potential macro ripple, though a short one I believe it would be, manufactured for election season. But don’t take my word for it. The pictures above do not lie. In the context of 2025 and 2026, when the curve has steepened, gold stocks rallied. When it has flattened, gold stocks corrected.
Slogans and rightly-bullish long-term views aside, anyone concerned about the shorter-term might at least consider the above and be prepared for less than ideal outcomes if B&W do get their way. But what do I know? I am not one of the foremost leaders or gurus in the gold “community”. I’m just a lowly top-down macro guy presenting a macro picture.
On the plus side, gold bugs who simply weather any rough stuff in the short-term should be rewarded well once the Bessent and Warsh routine fades to the dustbin of history (in my opinion, probably well within 2026). The above is an interim macro caution. The longer-term macro appears very bullish, not only for gold/silver stocks, but for the commodity complex in general.
Technically in the short-term, if HUI breaks its bull flag to the upside, say bye-bye to B&W curve flattener fears. I’ll have raised caution for nothing. Could happen, of course. But the flag is not broken yet. Interested bugs might want to keep an eye on it.
For “best of breed” top-down macro analysis and market strategy covering Precious Metals, Commodities, Stocks and much more, subscribe to NFTRH Premium, which includes a comprehensive weekly market report, detailed NFTRH+ updates and chart/trade setup ideas, and Daily Market Notes. Receive actionable (free) public content at NFTRH.com and subscribe to our free Substack.
