Yields at 4.10%: A Sticking Point for Gold
2023.09.06 06:48
What’s next for ? The (potentially massive) rally from the $1885 area low has hit its first sticking point at $1935-$1945.
The low of the left shoulder of a double-headed inverse H&S bottom is providing the resistance, and two other factors are also weighing on gold at the same time.
Gold Options & Futures Positions
The COT report shows heavy commercial selling through August 29, which is the end of the latest reporting period.
US 30-Yr Bond Yield 30-Min Chart
The important chart.
I urged gold bugs to prepare for Friday’s surge in the yield from the key 4.10% support zone, and the jobs report ensured it was a violent one.
The surge has done some damage to the large H&S top that has been forming. The bottom line:
For gold to continue its journey towards my $1980 target zone, yields almost certainly need to re-test and break below that 4.10% barrier.
US 10-Yr Yield 2-Hr Chart
The first yield chart shows the importance of the 4.10% high in early July. This one shows the additional importance of the March high.
Clearly, 4.10% commands respect. The good news is that when it finally broke decisively to the downside, gold could rally to $100/oz very quickly.
Also, Tuesday is often a soft day for gold. Given the strength in yields, the commercial selling in the COT report, and technical resistance at $1935-$1945, price softness is likely today and it could persist for the rest of the week.
The Economic Times Article
The big picture? The American empire is fading and China is rising, but India is likely to overtake China within just a few decades.
iShares China Large Cap ETF Chart
The citizens’ obsession with gold in both nations is likely to create what I call a “gold bull era”. In the medium term, China is struggling.
In America, mainstream media promises that all is well because a small number of stock market investors are happy.
Based on the CAPE (inflation-adjusted PE) ratio, the US stock market is ridiculously overvalued, yet the Fed’s rate hikes have hurt Main Street citizens more than they’ve hurt the debt and war-obsessed government.
Institutional stock market investors seem to enjoy watching the average citizen get ruined by both inflation and rate hikes.
The handouts the citizens got during the Corona crisis are gone. The US government’s horrifying scheme to achieve regime change by driving the citizens of Russia into poverty has backfired; the “stagflated” citizens of Europe are praying for a mild winter and US citizens are getting edgy as pump gas begins to move higher again.
When oil last surged as Russian troops stormed into Ukraine, interest rates were low.
Of great concern is the fact that the average Western citizen isn’t a saver. They are debtors. That means a surge in the price of oil now would be devastating.
A huge base pattern is in play with mind-boggling upside implications for the price. If a surge happens, the Fed would watch pump gas inflation spill into the rest of the economy, and then begin a new round of hikes.
At that point, the entire Western world could begin to resemble a super-sized version of America in the 1970s, when rates soared but inflation soared more and the citizens raced to buy both metal and mines!
Vaneck Gold Miners ETF 4-Hr Chart
The chart. There’s a nice inverse H&S bottom pattern in play, and it could become the head of a bigger pattern.
If the price goes under $28.40 the pattern would be ruined, but it would open the door to the formation of an emotionally painful but highly bullish double-bottom pattern. Right now, the ten-year yield support zone of 4.10% is the big fly in the mining stock ointment.
My suggested tactic to handle that fly is to lock in short-term government T-bills (and time deposits at the bank) now, and prepare for the next mining stocks surge, as Jay issues a “more dovish than expected” statement at the upcoming meet of the FOMC!
