Students are going back to school, vacations are ending, graduates are starting work, the weather is getting colder -- all signs are pointing to the fun of the summer being over, which I think would only be complete with another equity downdraft. Speaking of no fun, my question is about gold. It's hit a three week low as the 10 year got back above 3%, which makes sense because real yields are bouncing back higher as inflation expectations come down while the 10 year keeps climbing. The miners have all gotten smoked too.
But why is the 10 yr going higher? Isn't it because inflation is sticking around longer than a glance at lower commodity prices, and now, too, lower housing prices (per Zillow) would suggest? Or is it going higher because the market got too dovish and these expectations are retracing a little as the JPow hammer gets priced back in thanks in part to strong economic data and inflation in the EU?
So if yields are reacting to inflation after a couple months of pricing hikes out of the picture, why did gold barely react to the interim expectations of dovishness? Because I interpret flat gold meaning flat real yields as inflation would be flat around the 2-3% yield on the 10 year.
So heading into Jackson Hole, if we simplify what the Fed says to be of a binary result - dovish or hawkish - wouldn't hawkish suggest inflation remains too high - thus real yields are lower than current conditions suggest as inflation remains sticky - and wouldn't dovish suggest inflation is "under control" and it gives the green light for more of the same MMT looseness of the past several years which surely means prolonged low real yields and risk-on? Or would hawkish just mean gold will keep trending down as yields keep going up and would dovish mean risk assets are back and gold once again experiences outflows as bitcoin becomes more attractive again?
I'm trying to understand how gold spiked in 2020, in advance of all of the inflation news -- as if it knew it was all coming -- but now in the face of positive real yields, why hasn't it retraced those gains? It's just been so boring to watch, and now we even have dumb money on the gold wagon like Colin Cowherd peddling gold coins on TV. Still smarter money than Brady, Damon and the bitcoin salesmen.
But plenty of smart money remains on the gold train, including David Einhorn of Greenlight who spoke at a conference in June. He talked about much of the gospel that you have been preaching way before anyone else and he gave a compelling argument for gold (check it out at the below link). Even if it's boring, could it be a helpful barometer for understanding the tone at Jackson Hole?
The balance of risks, post 50% retrace to near 200dma and in line with the "parenting" from the Fed points to downside, obviously reninfornced by seasonals. Although nothing is certain, it seems as if bears might press the issue over the next couple of weeks, which is reinforced by poor seasonals. One area, which is the source of a key question, is what is the Fed going to do about the MBS side of QT? They hold a lot of low coupon stuff, with low pre-pays. Thus, the MBS is not going to run off in line with their targets. This problem is made murkier by the way the MBS is accounted for but that is a more complicated subject, but in general, it seems as if one decision the Fed could take at the next Sept meeting and possibly signaled in either speeches or in media interviews is some indication that they are prepared for outright sales of MBS. If this occurs, MOVE ought to spike and that also may be one of the reasons for the re-steepening of 2-10y or increased convexity in the curve.
To what extent are current “supply chain issues” impacting the markets and how do you track this issues progress?
good article. Some rate tantrum pullback followed by markets finding their footing. I see 4400 eoy (barring ofc Putin nuking/china invading etc)
Students are going back to school, vacations are ending, graduates are starting work, the weather is getting colder -- all signs are pointing to the fun of the summer being over, which I think would only be complete with another equity downdraft. Speaking of no fun, my question is about gold. It's hit a three week low as the 10 year got back above 3%, which makes sense because real yields are bouncing back higher as inflation expectations come down while the 10 year keeps climbing. The miners have all gotten smoked too.
But why is the 10 yr going higher? Isn't it because inflation is sticking around longer than a glance at lower commodity prices, and now, too, lower housing prices (per Zillow) would suggest? Or is it going higher because the market got too dovish and these expectations are retracing a little as the JPow hammer gets priced back in thanks in part to strong economic data and inflation in the EU?
So if yields are reacting to inflation after a couple months of pricing hikes out of the picture, why did gold barely react to the interim expectations of dovishness? Because I interpret flat gold meaning flat real yields as inflation would be flat around the 2-3% yield on the 10 year.
So heading into Jackson Hole, if we simplify what the Fed says to be of a binary result - dovish or hawkish - wouldn't hawkish suggest inflation remains too high - thus real yields are lower than current conditions suggest as inflation remains sticky - and wouldn't dovish suggest inflation is "under control" and it gives the green light for more of the same MMT looseness of the past several years which surely means prolonged low real yields and risk-on? Or would hawkish just mean gold will keep trending down as yields keep going up and would dovish mean risk assets are back and gold once again experiences outflows as bitcoin becomes more attractive again?
I'm trying to understand how gold spiked in 2020, in advance of all of the inflation news -- as if it knew it was all coming -- but now in the face of positive real yields, why hasn't it retraced those gains? It's just been so boring to watch, and now we even have dumb money on the gold wagon like Colin Cowherd peddling gold coins on TV. Still smarter money than Brady, Damon and the bitcoin salesmen.
But plenty of smart money remains on the gold train, including David Einhorn of Greenlight who spoke at a conference in June. He talked about much of the gospel that you have been preaching way before anyone else and he gave a compelling argument for gold (check it out at the below link). Even if it's boring, could it be a helpful barometer for understanding the tone at Jackson Hole?
https://www.greenlightcapital.com/login
The balance of risks, post 50% retrace to near 200dma and in line with the "parenting" from the Fed points to downside, obviously reninfornced by seasonals. Although nothing is certain, it seems as if bears might press the issue over the next couple of weeks, which is reinforced by poor seasonals. One area, which is the source of a key question, is what is the Fed going to do about the MBS side of QT? They hold a lot of low coupon stuff, with low pre-pays. Thus, the MBS is not going to run off in line with their targets. This problem is made murkier by the way the MBS is accounted for but that is a more complicated subject, but in general, it seems as if one decision the Fed could take at the next Sept meeting and possibly signaled in either speeches or in media interviews is some indication that they are prepared for outright sales of MBS. If this occurs, MOVE ought to spike and that also may be one of the reasons for the re-steepening of 2-10y or increased convexity in the curve.