The war in the gold and silver markets continues to rage.
March 4 (King World News) – Peter Boockvar: In looking at the rise in the 10 yr yield from the closing low of .51% on August 4th, 2020 we can break down how much of the rise since is due to an increase in inflation expectations and how much is the estimate for growth. So, we’ve seen a rise of 95 bps in the nominal 10 yr yield to this morning’s 1.46% level since that low. Since August 4th, the 10 yr inflation breakeven in the TIPS market is higher by 65 bps to 2.22% today. Thus, about 2/3 of this move higher in nominal rates is on higher expectations for inflation relative to growth.
With respect to Jay Powell today, we’ll see what door he chooses, one of acceptance, one of fight or one of dismissal. Chicago Fed President Charles Evans late yesterday was all over the place in his thoughts. He’s not thinking about yield curve control but he would consider it. He is not concerned with the rise in long rates but he would consider buying longer term bonds but is not thinking about it now. What this reflects is someone who is constantly thinking about how to distort and manipulate the US Treasury market. There is no free market bone here, only how best to price fix the most important price in the world, the cost of money.
Gold
This gets me to gold where I saw Mark Cuban and Peter Schiff in a twitter debate on gold vs bitcoin yesterday. Cuban said “gold is dead.” At the midday low yesterday gold had the lowest 14 day Relative Strength Index since August 2018 when it traded at around $1200 and rose to $2000 over the following two years.
I remain very bullish, albeit frustrated with its recent price action. The rise in real rates and stabilization in the dollar is the reason for the pullback continuing after last summer’s spike.
But, here is a reminder of the conditions today vs September 2011 when it peaked at $1900 before the multi year decline that followed. Back then the size of the Fed’s balance sheet was $2.9 Trillion, 18% of GDP vs $7.6 Trillion today and 36% of GDP. Then, the 5 yr REAL yield was about -.60% vs -1.76% today. The 10 yr REAL yield was around -.16% vs -.74% today.
On the flip side, the euro heavy dollar index was 76 vs 91 today. Negative interest rates didn’t exist in 2011 vs the $13.3 Trillion of negative yielding securities that trade today. With respect to the ECB, their balance sheet in 2011 was 23% of the region’s GDP vs 63% today. The BoJ balance sheet was 28% of GDP vs 131% today. The BoE balance sheet was 8% of GDP then vs 38% now.
Back To Gold
Back to Cuban’s tweet, I responded, “So I guess gold made it 5000 yrs and now is dead. It doesn’t have to be bitcoin or gold, they both can achieve what they are intended for.” He didn’t respond.
Then someone else chimed in who is a big fan of bitcoin and said, “It was the best positioned resource to be money for most of that 5000. Technology changed that. What else are we using from 100 years ago (more or less 5000)? Technology has enable the creation of new & improved products & services in EVERYTHING. Now it’s improved store of value/money.”
I responded, “Technology is not a new thing. It has been a part of society’s progress since the history of time.” There is not one restaurant, there is not one cloud company, there is not one football team, etc… There is not one alternative asset with limited supply, it doesn’t have to be one or another. Each can have its place…
To learn about one of the most exciting silver plays in
the world click here or on the image below
Silver
And, with respect to silver, it is a key raw material that goes into the electronics that build out the tech equipment that is used to mine for bitcoin. Silver is the important production byproduct of gold.
To listen to a powerful and timely interview with E.B. Tucker about the fierce trading action in the gold and silver markets CLICK HERE OR ON THE IMAGE BELOW.
Alasdair Macleod discusses why the gold and silver markets are very close to a major bottom CLICK HERE OR ON THE IMAGE BELOW TO LISTEN.
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