A Market Timing Report based on the 3-14-2014 Close published Sunday March 16, 2014
NOTE: The SP500 Index Chart will be out by Sunday evening.
Gold is rallying again as interest rates fall within the most recent narrow band. Let’s review the GLD and 10 Year Treasury Yield charts and then a comparison chart between the two.
GLD chart:
Gold Rally Continues.
Ten Year Treasury Note Chart (TNX):
Rates fall within range.
And how have they been moving versus each other? (In the chart below, GLD is plotted against TNX which is in magenta.) When rates were rising above the most recent narrow range (far left on chart below), gold fell. Then when rates came back down, gold rallied. Then as rates rose slightly, gold rose. Then as rates fell gold went sideways. Then as rates fell, gold rose. In sum, gold has been going up or sideways DESPITE what rates have done, except when rates were headed toward 3%. Then gold fell in price.
Should rates suddenly move to a significantly higher level, things could change. Even a rapid climb toward 3% could cause trouble for the metals.
Rates on the 10 Year Treasury will eventually rise above 3% as the economies of the world improve, so we need to keep a sharp eye on the metals vs. the inflation rate. The only way rates can rise rapidly and much higher with gold rising too is if inflation starts to get out of hand. If rates were to rise too fast without inflation to go with it, gold would suffer. So instead of “hoping” the metals rally will keep going, we’ll follow the market’s direction, while we keep an eye on the balance between inflation and interest rates.
Gold vs. 10 Year Treasury Yield
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