As we hit the halfway point in the trading week, here is a look at inflation, gold, silver and real estate.

Inflationary
December 2 (King World News) – Peter Boockvar:  Well, that didn’t take long for bond yields to reassert its upward trend after I expressed surprise that it ignored the vaccine news. It seems that it took the growing expectations that Congress will spend another $1 Trillion. As for stimulus, the vaccine provides a multitude of it that is long lasting while the fiscal spending is just a short term bridge but I guess the Treasury market sees another $1 Trillion add to our debt and deficits and that is dollar negative and in turn inflationary. 

Gold & Silver
As I mentioned yesterday, the 10 year inflation breakeven rose 3.4 bps after Monday’s 3 bps increase. At 1.82% it is at the highest level since May 2019. The 30 yr breakeven is just below the magic 2% at 1.95%.

I continue to believe 2021 will be a story of rising inflation, rising long rates and central banks that will be stuck in having to confront it. In this environment I continue to like commodity stocks, banks, EM and the leisure/hospitality/travel space that had a rough 2020. Gold and silver in particular finally bounced yesterday, and people will see that they can rally WITH bitcoin and that it is NOT one or the other.

Real Estate
At a record low average mortgage rate purchase applications to buy a home jumped 9% week-over-week and 28% year-over-year. I’m not sure how the Thanksgiving holiday impacted the seasonal adjustment here. Either way, I believe annual home price gains of 5-7% if it continues will eventual slow the housing recovery while a moderation in price gains would actually sustain it with 1st buyers being the swing factor that is most sensitive to price. Refi’s fell 4.6% week-over-week after a similar rise in the week before. They are up 102% year-over-year. One year ago the average mortgage rate was 3.97% vs 2.92% now.

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Alasdair Macleod KWN Weekly Metals Wrap

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