Going back to 1986, when the yield curve turned flatter drastically and eventually inverted, the S&P 500 tends to go into a downward spiral within the next 12 months, according to @LeutholdGroup.' https://www.cnbc.com/2019/06/14/this-chart-shows-why-everyone-on-wall-street-is-so-worried-about-the-yield-curve.html …
'Morgan Stanley’s Business Conditions Index, which captures turning points in the economy, saw the largest one-month decline on record in June as it fell to the lowest level since December 2008 during the financial crisis.' https://www.cnbc.com/2019/06/13/a-morgan-stanley-reading-on-the-economy-collapses-by-the-most-ever.html …
Incredibly bullish for gold. Real yields inverted have broken out of their six-year downtrend. Confirmed by yield curve inversions and new Fed easing bias.
India imported 105.8 tons of gold in May. That compares with just 77.6 tons a year earlier. Combined shipments of gold into the country during April and May came in at 226.6 tons. That was up about 74% from the same period in 2018.
2019 we will have a Budget deficit back to 1 trillion. Next recession will we see 2T? 3T? a year.
The chart below plots “The Buffett Yardstick” (inverted) against forward 10-year returns in the stock market. Right now, according to this measure, investors are paying such a high price they are likely to receive essentially nothing in return over the coming decade, including dividends.
At the same time that potential returns look so poor, the potential for risk may be greater than it has been in generations. Warren also famously wrote, “Be fearful when others are greedy and greedy when others are fearful.” Determining when they are greedy and when they are fearful is the trick. While The Buffet Yardstick carries a sentiment message of its own, as John Kenneth Galbraith wrote in The Great Crash 1929, “Even the most circumspect friend of the market would concede that the volume of brokers’ loans—of loans collateraled by the securities purchased on margin—is a good index of the volume of speculation.” When investors are keen to add leverage via margin debt to their portfolios they are clearly greedy and vice versa.
Comparing this “index of the volume of speculation” to the size of the economy (inverted in the chart below), just as we did with equity values, shows it hitting a new record high over the past couple of years. In other words, investors haven’t been this greedy in many decades – since 1929, in fact. All of this leveraged speculation must at some point be unwound, usually via forced selling during a bear market. The last two times it came even close to the current level the stock market suffered 50% declines.
A weak U.S. dollar, falling bond yields and struggling equity markets are creating the perfect storm that will eventually drive gold prices to $1,400 an ounce, according to one research firm.
In a report Wednesday, commodity analysts at Capital Economics reaffirmed their year-end target for gold as the market continues to benefit from shifting investor sentiment. Although off their more-than three-month high, gold prices are holding on to considerable gains, up nearly 4% in the last five sessions; August gold futures last traded at $1,333.80 an ounce, up 0.38% on the day.
Investors "are effectively willing to purchase 5-yr bonds to be issued in 2024 (5 yrs hence) at a rate below today’s risk-free O/N rate"
China's “determined diversification” away from dollar assets means persistent gold buying. https://www.bloomberg.com/news/articles/2019-06-10/china-snaps-up-more-gold-in-six-month-spree-as-tensions-escalate …
Futures traders are now pricing in almost three rate cuts by December: data compiled by Bloomberg.
U.K. manufacturing output fell the most in almost 17 years in April as the boost from Brexit stockpiling evaporated and car producers went ahead with planned shutdowns.
The 3.9% decline, the most since June 2002, saw the economy as a whole shrink for a second straight month, Office for National Statistics figures published Monday show. Vehicle production plunged by a quarter.
Construction and the dominant services industry failed to provide any support in April, and PMI data last week suggest the economy saw little if any improvement in May.
- Construction fell 0.4% from March and services were unchanged; total industrial production dropped 2.7%, the most since 2012, as maintenance work hit output of oil and gas
- GDP rose 1.3% from a year earlier in April, down from 1.9% in March. Annualized growth in the latest three months was 1.1%
- The trade deficit narrowed to 12.1 billion pounds ($15.4 billion), as imports and exports plunged following stockpiling by both British and European Union companies in the first quarter
- In volume terms, exports fell 10.9% in April, the most since 2006; imports declined 14.4%, the biggest drop since records began in 1998
- Output of transport equipment as a whole fell 13.4%, the biggest drop since 1974
If you have been paying any attention at all to the financial news headlines in the past few weeks then you know that the US Treasury Bond yield curve is inverted and that the Federal Reserve is positioning itself to lower interest rates before this year is over.
What does this mean for the price of gold?
Well check out this chart with the price of gold and the yield curve on the bottom of it.
This chart below is all the debt due every year in the #mining sector until 2050. We have just entered the Wall of Worry. Hundreds of billions will be required to Amend & Extend the debt. https://katusaresearch.com/marin-katusa-unfiltered-warren-buffett-just-dropkicked-the-resource-sector/ …
Only three other times in history precious metals surged while oil plunged! All of them happened during severe bear markets and recessions.
US recession in the making? The credit cycle is leading the economic cycle. So economic slowdown risk is rising, DB says.
OT – Reinforces my bullish outlook for Silver… Funds – Shortest since Nov 13 when Silver bottomed at 13.86 Banks – Longest since Oct 13. Commercials – Long for the first time since Sep 25. Producers – Smallest short position since Sep 25.