June 04, 2019
Just last week, we asked "what is the bond market telling you?" Now, just one week later, with gold prices up $50 and rates even lower, has the message changed or is it being reinforced?
If you missed last week's post, you should read it now as it's still relevant:
The gist is this:
As rates around the world collapse, capital is rushing into the US bond market. As US rates fall, the yield curve inverts. As the yield curve inverts, the US economy begins to contract. As the US economy contracts, inflation disappears and rates fall even further. And, in the end, The Fed is forced to reverse policy, cut rates and re-install QE and other "stimulus" programs. This scenario is precisely what we laid out for you back in January and you are now seeing it play out in real time. Please consider the forward-looking quality of this forecast and compare it to the typical "rearview-mirror analysis" prevalent elsewhere.
So, as we type on Tuesday, June 4, the yield "curve" now looks like this:
• FED FUNDS: 2.40%
• 3-MONTH T-BILL: 2.36%
• 2-YEAR T-NOTE: 1.89%
• 10-YEAR T-NOTE: 2.12%
Or, if you prefer a picture versus the printed word, see these:
You might also check this chart from ZeroHedge. Below is a history of the spread between the 90-day US T-bill and the 2-year US T-note.
OK, you may be asking yourself, what's the point? Why does this matter to precious metal investors? Because, in 2019, the central bankers are FINALLY being exposed for all to see. These charlatans have been masquerading as saviors for a decade and the mainstream media has treated them as such. Bernanke, Yellen and Powell have attempted to fool everyone with claims of "interest rate and balance sheet normalization" and the masses swallowed these lies whole...until now.
At TF Metals Report, we've written for years that The Fed COULD NOT raise rates. Though they tried to do so through the manipulation of their Fed Funds rate, there has never been any way that longer rates could ever go back to "normal". The incredible amount of public and private debt worldwide simply prevents it. And now the jig is up.
The next FOMC meeting is in two weeks. At that meeting, The Fed will be faced with two choices. From their point of view, both of them are bad.
1. Admit defeat and immediately cut the fed funds rate by up to fifty basis points.
2. Stall. And if they do this, bonds will rally even higher as the bond market will anticipate an even more dramatic global economic collapse.
As the tide recedes and the central bankers are exposed, the ultimate ineffectiveness of their lies and schemes will be revealed to all. Renewed rate cuts, unlimited quantitative easing and enforced capital controls with negative interest rates are coming in the months ahead. Your ONLY financial protection against this madness is diversification and the continued accumulation of physical gold and silver.
In our forecast from January, we predicted that the year 2019 would unfold in a manner similar to 2010. That post was updated three weeks ago and, if you missed it then, you should read it now:
The charts below are what you must consider again today as we conclude this update. In 2010, you could have been 100% correct about where precious metal prices were headed by year end...but you could have easily been shaken out by the malaise that lasted until July. It was only when the situation became obvious for all to see that precious metal prices began to explode higher and the back half of 2010 saw gold move from $1160 to $1420 while silver rallied from $18 to $30.
And now here we are in 2019. Just as in 2010, prices have moved sideways for the first five months of the year and only just now is the investment world coming to terms with where this is all headed. The US economy is demonstrably slowing, the US$ is rolling over, the yield curve is inverting, the Fed is reversing and the precious metals are beginning their move.