Silver and the Yield Curve Inversion
Yield curve inversions have historically been great for silver prices. Currently we are experiencing such a phenomena, and again it is evidence of conditions that are conducive to some impressive silver rallies.
Below, is a long-term chart showing the spread between the 10-year Treasure Note Yield and the 3-month Treasury Bill Rate.
I have chosen these two to show data for a long-term analysis. There appears to be a mega rounding top. The spread has just recently gone negative (inverted). There is a great likelihood that the spread could go lower, given the rounding top and a similarity to the 70s pattern (ABC).
Silver has already started to move, but what kind of rally can we expect going forward? Previously, I have argued that we are likely to see a rally similar to the late 70s .
Below, is a comparison of the above chart and a long-term silver chart to:
Notice how there were two deep negative spread dives in the 70s. As soon as those spreads went negative the first time during those inversions, silver started a massive rally.
As soon as the current inversion started, silver also started to rally. Will we have a shallow negative spread dive like the two recent ones, or will we see a deep and protracted negative spread dive like that of the 70s?
A deep dive like the 70s would be consistent with conditions ideal for a monster silver rally.
Är det problem inom bank systemet efter smällen i Saudi? FED fick skicka in 75 miljarder nya friska dollar för att få tillbaka likviditet.
USAs börsvärde uppgår till ATH i förhållande till GDP vinsterna däremot fortsätter att sjunka som andel av den totala ekonomin
It’s featured faculty were Rick Rule, president & CEO of Sprott US Holdings and renowned resource investor; Chris Martenson PhD, economic analyst and co-founder of PeakProsperity.com; and Brien Lundin, editor of the world’s oldest precious metals newsletter and producer of the world’s longest-running investment conference.
As the bank explains, looking at this ominous indicator, for most developed and emerging markets that it follows (42 in total), levels are well below equilibrium (at 50), suggesting strong contraction in activity. Europe is the region most impacted, with France and Germany touching the lowest levels since 2001. But the US, Japan and China are also concerned, just 3.9%, 4.4% and 8.5% above their historical lows respectively. On paper, this justifies a cautious stance on so-called leading indicators, such as the ISM manufacturing index and the IFO business climate, which still look overly optimistic in comparison with the French bank's data. In fact, if anything the SocGen global eco newsflow indicator (ECNI) is at levels last observed during the bursting of the dot com bubble in 2001 and the housing and credit bubble of 2008.
And while US sentiment data have only just now cracked below the critical 50-support level that indicates expansion, the chart below shows that the US ECNI is not far from its all time low (the last time the red line was here, the stock market was about to crash).
Deutsche Bank: Gold Would Need To Rise To $2,764 To Make A New All-Time High In Real Terms
Most bond rates are already below the zero bottom and we will see that trend accelerate. At some not too distant point, the bond bubble will stop expanding with long rates going up and eventually also drag the short rates up. At that point, central banks will have lost control of interest rates and the world will see a debt collapse of massive proportions. Rates will go to the teens initially and later to infinity as bonds become worthless.
The very interesting chart below from SignalsMatter.com tells the above scenario in a beautiful way.
The chart shows the S&P Index divided by the 2/10 year Treasury spread.
The green area shows that the risk of a turn is extremely high. This indicator predicted the 2000 crash and also the 2007-9 crash. The Green area since 2017 shows much higher risk than the previous two crises. We are now at the Tipping Point which in simple terms means that we will first see stocks fall rapidly and a bit later interest rates rise. The size of the bubble and the extent of the risk will this time lead to a fall much greater than in 2000 and 2007.
A CRASH IS IMMINENT
The message from the chart above is very clear. The position of stocks at an extreme overbought situation combined with bond rates at an extreme low, indicates that we are now at the tipping point and thus not far from a major market crash.