Gold markets are telling us something: Over the last 3 weeks, bond...
The Kobeissi Letter@KobeissiLetter
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Oct 14, 2024
~3 min read
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1
Gold markets are telling us something:
Over the last 3 weeks, bond prices crashed and the US Dollar surged, both historically BEARISH signs for gold.
Meanwhile, gold prices are trading 1% away from a new all time high and up +29% this year.
What's happening here?
(a thread)
Over the last 3 weeks, bond prices crashed and the US Dollar surged, both historically BEARISH signs for gold.
Meanwhile, gold prices are trading 1% away from a new all time high and up +29% this year.
What's happening here?
(a thread)
2
Historically speaking, bond prices and gold trade together.
In times of uncertainty and volatility, investors flock to gold and bonds as safe havens.
As seen below, gold and bonds are moving OPPOSITE directions now.
Investors are ditching bonds even as the Fed cut by 50 bps.
In times of uncertainty and volatility, investors flock to gold and bonds as safe havens.
As seen below, gold and bonds are moving OPPOSITE directions now.
Investors are ditching bonds even as the Fed cut by 50 bps.
3
If Gold closed at its current price on December 31st, it would post its best year since 2010.
If the current pace of the rally continues, Gold could see its best year since 1979.
That's when inflation rebounded and gold jumped 126% in a single year.
If the current pace of the rally continues, Gold could see its best year since 1979.
That's when inflation rebounded and gold jumped 126% in a single year.
4
While the Fed is calling for a "soft landing," gold prices are rising like we are in a recession.
In fact, in the 1990s when the Fed did achieve a soft landing, gold prices traded LOWER.
Not only are gold prices now at record levels, but they are rising at a near record pace.
In fact, in the 1990s when the Fed did achieve a soft landing, gold prices traded LOWER.
Not only are gold prices now at record levels, but they are rising at a near record pace.
5
Cumulative gold ETF inflows including gold miners ETFs are now at $3.3 billion since August.
The most popular gold ETF, $GLD, has recorded $644 million cumulative inflows year-to-date.
Gold continues to trade like we are in a crisis.
The most popular gold ETF, $GLD, has recorded $644 million cumulative inflows year-to-date.
Gold continues to trade like we are in a crisis.
6
Furthermore, even as odds of TWO 50 basis point rate cuts have been priced-out this month, gold prices are rising.
In fact, markets are beginning to price-in an 11% chance of NO rate cuts in November.
However, gold prices are completely unfazed, even as $DXY rebounds.
In fact, markets are beginning to price-in an 11% chance of NO rate cuts in November.
However, gold prices are completely unfazed, even as $DXY rebounds.
7
We got ahead of this trend last week and posted this update for subscribers as gold dipped.
The dip was quickly bought and gold prices are nearing $2700 again.
Access our alerts and full analysis on gold at thekobeissiletter.com/subscribe
So what's next?
The dip was quickly bought and gold prices are nearing $2700 again.
Access our alerts and full analysis on gold at thekobeissiletter.com/subscribe
So what's next?
8
Central banks around the world are stocking up on gold while calling for a "soft landing."
Official world gold reserves have reached 1,170 million fine troy ounces, the most since the 1970s.
In 2022 and 2023, central banks bought 1081 and 1037 tonnes of gold, respectively.
Official world gold reserves have reached 1,170 million fine troy ounces, the most since the 1970s.
In 2022 and 2023, central banks bought 1081 and 1037 tonnes of gold, respectively.
9
When comparing gold's exponential rise this year to 1979, the charts look somewhat similar so far.
This also happens to be the year that inflation rebounded from the mid-1970s bottom into the 1980s inflation crisis.
Is gold pricing-in a rebound in inflation in 2025 and beyond?
This also happens to be the year that inflation rebounded from the mid-1970s bottom into the 1980s inflation crisis.
Is gold pricing-in a rebound in inflation in 2025 and beyond?
10
Gold is often viewed as the best hedge against inflation.
This is why gold prices typically lead a surge in CPI inflation, which usually lags reality.
On top of this, gold markets are weighing a potential hard landing and major geopolitical tensions around the globe.
This is why gold prices typically lead a surge in CPI inflation, which usually lags reality.
On top of this, gold markets are weighing a potential hard landing and major geopolitical tensions around the globe.
11
A path to a soft landing in 2025 is not nearly as certain as it may seem.
We expect larger tradable swings in equity, commodity, and bond markets.
We are trading these swings.
Subscribe at the link below to access our premium analysis and alerts:
thekobeissiletter.com/subscribe
We expect larger tradable swings in equity, commodity, and bond markets.
We are trading these swings.
Subscribe at the link below to access our premium analysis and alerts:
thekobeissiletter.com/subscribe