| It feels almost nostalgic, like a Norman Rockwell painting, to see gold once again at odds with the dollar and Treasury yields.
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| It’s somewhat comforting when old enemies remain enemies.
In recent weeks we’ve often seen the opposite relationship in action, as gold advanced higher along with yields, and the Dollar Index seemed to ignore them both. As I’ve explained in this publication, that was because of the unease in which Treasury investors viewed the flood tide of new issuance coming down the pike.
In short, the legendary “bond vigilantes” had decided to return.
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| Or, at least temporarily. Because over the past couple of days, the old ways have returned, as investors-turned-speculators have once again begun to place bets on a Fed pivot.
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| The precipitating factor was this week’s CPI report, which came in at one-tenth below consensus expectations in both the headline and core numbers. Year-over-year, the inflation rate was 3.2% headline and 4.0% ex food and energy.
In reaction to this cooler-than-expected inflation reading, the Dow jumped about 500 points, and gold leaped $18, while Treasury yields and the Dollar Index both plunged.
Ahh...just like old times.
Gold continued to gain overnight, gaining another $10 or so, before being smacked down by the release of the October New York Manufacturing Index, which surprised with a +9.1 reading against the expectation of -4.6.
So, good news was once again bad for gold.
But never fear, fellow gold bugs. The good news for gold is that more bad news is on the way.
One of the major themes amongst the presenters at our recently concluded New Orleans Investment Conference (plug: You can order the recordings here.) was that the current, historically harsh tightening cycle, coming fast on the heels of the easiest monetary policies in human history, are undoubtedly going to break something.
What that something will be, and when it will happen, remains in question. But we can’t doubt that a new crisis is coming. It’s just what happens when a room full of PhDs believe they can manipulate a vibrant, ever-changing economy.
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| They first lower rates in reaction to a crisis...which then blows up a new bubble. When they then try to raise/normalize rates, they pop that bubble and spark the next crisis.
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| This chart, just released by our friends at Incrementum in the latest In Gold We Trust Chartbook, shows how reliable this cycle is:
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| All that chart needs is a “You Are Here” arrow pointing to the very end of the trendline.
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| In short, the next crisis and Fed easing cycle is coming. And when it does, gold is going to soar.
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| You can discover a litany of additional, highly compelling reasons why the next crisis is looming in the aforementioned In Gold We Trust Chartbook. It’s an invaluable resource, with more than 50 fascinating charts, and the best part is that our friends at Incrementum provide it absolutely free of charge!
Just click on the link below to get it now.
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| Brien Lundin
Publisher, Gold Newsletter
CEO, the New Orleans Investment Conference
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| CLICK HERE
To Get The Latest
In Gold We Trust Chartbook
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