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Metals sold off yesterday because of bond yieldsIn a recent post, I showed the strong correlation between inverted real bond yields and gold and silver: The hot inflation data yesterday and today drove nominal bond yields sharply higher. Bond investors demand higher yields when inflation is hot, which is why nominal yields rose. The rise in nominal yields broke a trend line. Here is the trend line break on the nominal 10-year yield: The trend line break suggests it might be a good time to be short on treasury bond funds like VGLT, since bond prices fall as nominal yields rise-- however, keep reading, because as I'll note later in the post, you've got to beware of Fed yield curve control. The picture for real yields is a little more complicated. The real yields chart above only shows data up to August 10, because the chart lags a couple days. Real yield is calculated by subtracting 10-year breakeven inflation from 10-year nominal yield. FRED's 10-year breakeven inflation rate was priced at 1.63% as of last update yesterday: However, the new CPI number implies an annualized inflation rate in the neighborhood of 6.0 - 7.5% this year. Obviously no one expects that to persist for 10 years, but the 10-year breakeven inflation rate is bound to keep creeping upward after this hot CPI read. The question is whether it will move upward faster than nominal bond yields. If so, then real yields will continue to fall. If not, then real yields will start to rise. It's possible, as a recent Seeking Alpha article argued, that the Fed is already exercising yield curve control to keep nominal 10-year yields in the range of 0.6-0.7%. If so, then we should expect nominal yields to stabilize here rather than to keep moving upward. If nominal yields do stabilize, then the rising 10-year breakeven inflation rate should continue to drive real yields lower and gold and silver higher. seekingalpha.com However, the trend line break in nominal yields suggests that if the Fed doesn't exert yield curve control, then we might see rising nominal yields outpace 10-year breakeven inflation for a little while, driving gold and silver lower. The next three or four days of real yields data should provide an important signal for where real yields and metals go from here. My best guess is that metals will bounce for at least the next day or two, and then we'll see from there.
AMEX:GLD
by ChristopherCarrollSmith
2
GLD 1D: New Breakout & PositioningGLD's performance has caught my attention (as well as many others) over the last few weeks. It is hard to ignore that gold looks pretty attractive at the moment given the macroeconomic forces that are at play today. Before we dig into the technicals, let's remind ourselves of the following: Fundamentals: Central banks all over the globe lowering interest rates and printing fiat due to the pandemic. A lack of faith in the political leadership in many western countries (which is very justified). The dismal economic data. Bad economies make the previous two points more relevant. Now let's take a look at the chart. GLD has just broken the 2011 Labor Day Weekend ATH. Keep in mind that is in nominal dollars. If we added inflation to the mix, we are still under the ATH of 2011 and way under the ATH of the 1980s. Nonetheless, the chart seemed to like the nominal ATH and broke right through on strong volume, currently sitting around 4% higher than the LDW 2011 highs. It is pretty clear GLD is set to keep moving up for the time being. We have set a new high on strong volume, which is the first indicator that GLD is set for a new trend to the upside and out of the sideways trade we have been in for 9 years now. That being said, confirmation is still needed. The following points give me hints that we are due for a pullback (in order of importance): Extensive 8 week rally. There are only a few times this has happened in the past, and most of those times resulted in down weeks afterwards. The current price of GLD is around 9% away from the 20-day EMA, which is almost twice the difference in the 2011 highs. This is telling me that we may be overextended on the short term, but long term prospects look good (lots of momentum). RSI is extremely overbought (most in decades). Minor MACD divergence (3.5%). Long positions around the 186-7 level look great, as there could be lots of upside with minimal risk via stop loss management. If the price keeps falling, the 175 level looks even better.
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AMEX:GLDLong
by laiello
10
GOLD - Next Stop $180Gold has been on a mission to space and hasn't shown any signs of slowing down. Whenever we see consolidation and a possible resistance forming it breaks through with ease. Targets for now: 1. $180 Feel free to give us a follow and shoot us a like for more analysis updates. Cheers! Disclaimer: I do not provide personal investment advice and I am not a qualified licensed investment advisor. I am an amateur investor. All information found here, including any ideas, opinions, views, predictions, forecasts, commentaries, suggestions, or stock picks, expressed or implied herein, are for informational, entertainment or educational purposes only and should not be construed as personal investment advice. While the information provided is believed to be accurate, it may include errors or inaccuracies. I will not and cannot be held liable for any actions you take as a result of anything you read here. Conduct your own due diligence, or consult a licensed financial advisor or broker before making any and all investment decisions. Any investments, trades, speculations, or decisions made on the basis of any information found on here, expressed or implied herein, are committed at your own risk, financial or otherwise. Feel free to give us a follow and shoot us a like for more analysis updates.
AMEX:GLDLong
by MannyLo