1/ Gold Basing

Chairman Powell and the FOMC will meet next week. As they conclude their two-day meeting, they will announce whether or not President Trump will get his Fed Funds rate cut. While I’m not in the business of making forecasts, I think President Trump might be disappointed.

If we look at Gold – using IAU as a proxy – it has been building a base since April. While it has not moved higher, it cannot seem to go lower either. Using history as our guide, this suggests that the markets do not believe the battle with inflation is over. A case can also be made that yesterday’s action began a move higher out of this base.

2/ Ten Year Yield – Secular Trend Change

Chart 2 is showing the yield for the 10-year US Treasury dating back to 1965. The big red trendline is drawn just to illustrate that from 1980 to 2022 we were in a declining interest rate environment. I discuss this in my book, Evidence-Based Investing, when the 10-year yield crossed above that trendline, that was a secular trend change.

That has broad implications.

3/ 10-Year Consolidates? (Trend Pause)

While the 10-year yield has absolutely broken the secular bear-market trend for yields, I am not yet declaring that we are in a secular bull-market for yields. In other words, rates have risen but I’m not convinced that they will continue to rise. I need to see some more evidence.

Looking at our third chart for today, this is how I see it.

The bottom blue-gray rectangle illustrates what I thought could be an important support level. This is ~3.4%. But yields have not yet come down to that level. So, I no longer really think that’s a solid support area.

4/ 10-Year and Inflation

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