Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page >> News >> Story  Disclaimer 
Latest Headlines

Gold Seeker Weekly Wrap-Up: Gold and Silver Fall Roughly 1% and 4% on the Week
By: Chris Mullen,

COT Gold, Silver and US Dollar Index Report - April 28, 2017

Economic Demise Breeds Public Unrest
By: Rory Hall and Dave Kranzler

Bank of England releases new data on its gold vault holdings
By: Ronan Manly

Damn the Deficits, Huge Tax Cuts Ahead!
By: Peter Schiff, CEO of Euro Pacific Capital

Bubble Alert: Stocks Are Trading Based on Accounting Gimmicks and Fraud, Not Growth
By: Graham Summers

Gold Hostage to Stocks
By: Adam Hamilton, Zeal Intelligence

Looking for Epic Signs? Enter Silver.
By: Przemyslaw Radomski, CFA

What Happened to the Stock Market Crash experts were predicting
By: Sol Palha

Stock Market Sentiment, Re-Fueled Along the Way
By: Gary Tanashian


GoldSeek Web

Gold: “Taper This”

-- Posted Tuesday, 17 September 2013 | | Disqus

By Gary Tanashian

The media love to get a hold of buzz words and then give them a spin and a life all their own. Recent examples were the mainstream media’s presentation of ‘Operation Twist’ – which was simply an official yield curve manipulation designed to sanitize and dampen inflationary signals – as an inflationary operation, and the ‘Fiscal Cliff’ drama that sent herds of conventional investors to the sidelines* when they should have been contrarian (and bullish) back in Q4, 2012.

Now we have the media on job tending the ‘Taper’ herd. Among the many hyped up implications of ‘Taper’ according to the media are that it is bearish for gold. But I would put forth not only a rejection of that assertion but just maybe a call for the opposite; a bullish stance on gold in the face of a Fed being coerced by natural movements in the Treasury bond market to talk ‘taper’.

As part of its QE operation, the Fed buys long-term Treasury bonds with newly printed money. It does so to try to keep interest rates down so that the economic recovery they have promoted does not fold in on itself, wheeze, roll over and die. They also buy distressed MBS, but this is a story about Treasury bonds.

As NFTRH noted back in May, long-term interest rates began bottoming (we established targets of 4.2% and 3% on 30 and 10 year yields respectively and were on the rising rates theme long before the word “taper” was first uttered by any talking head) and then not coincidentally various Fed members began chattering in the media… as our latest buzz word was born. Ladies and gentlemen I give you ‘T.A.P.E.R!’, the latest obsession for casino patrons to analyze to death.


Our long-standing target has been 4.2%, below which the 30 year yield now hovers. The red moving average is equivalent to the monthly EMA 100 that NFTRH has used for years in gauging the yield’s limitations and hence its implications for the entirety of the macro markets. TYX is fast approaching its decades old limiter.


Switching to a monthly view (chart from NFTRH 256) of the 10 year yield, we see that it has registered its 3% target at a potentially limiting moving average. Yesterday’s rise in 30 year yields and decline in 10 year yields could simply be a catch up move.

Regardless, our theme here is yields and gold; or more specifically yield relationships and gold. Gold tends to rise with a rising yield curve and decline with a declining curve. That is at least in part due to the inflationary signals implied by curve at any given time. Is there any wonder why the curve dampening effects of Operation Twist and its inflation sanitizing signals attended gold’s correction last year?

The long term view of the 30-5 spread and gold shows a mostly positive correlation save for a divergence in the 2011-2012 period that not coincidentally featured scores of people knee jerking into gold as a haven from the Euro crisis (as gold blew off) and the famed Operation Twist, which helped put pressure on inflation signals and hence, the yield curve and gold.


Dialing in to the micro term view of the 30-5, we see a potential bottom as longer dated maturities have risen in yield vs. short dated ones over the last couple of weeks. It is early, but a trend change would have to start somewhere.

What do they do when they taper? They buy fewer LONG TERM bonds. What would this do in theory? Put additional pressure on long term interest rates. In reality, I have my doubts and actually hold Treasury bond funds as a ‘counter the hype’ trade (yields are just about at our targets after all). But in theory a tapering would help put pressure on long yields vs. short yields, whether or not nominal yields are rising. That would theoretically pressure the curve upward.

At the least, ‘taper’ is hype and neutral where gold is concerned. At most it is another pressure on an upwardly mobile yield curve, which is a driver of gold.

Summing it all up, I’d say that people should just tune out the hysterics and keep their eyes on the various balls that actually matter like the sentiment backdrops in gold, the stock market and especially Treasury bonds. They should watch macro fundamentals like gold vs. commodities and stock markets and they should watch nominal technicals across the board. We are doing all of those things and more in NFTRH.

Changes are coming to the macro markets and these changes may be symbolized by a group of eggheads meeting this week to render their policy decisions, but in reality their ‘decisions’ will have little impact on events going forward. It is B/S detector time folks and it is time to know what analysis is valid and what supposed analysis is just buzz words gone wild.

Any assumption made in the mainstream media between gold and tapering should be questioned and put to the analytical test just as a long line of ill-founded assumptions that came before it should have been. If gold’s bull market is over, it is not because hyper-inflationists are not getting the QE they so crave and it not because of decisions that the clerks at FOMC are making this week. Quite the contrary, what is going on in T bonds could argue for the bull’s resumption.

* At Thanksgiving last year an extended family member (a financial planner) asked me for my thoughts on the market. “Bullish” said I, literally in a one word answer. “REALLY?” asked he… “The best fund managers I talk to are in cash right now. They expect a crash in December due to the Fiscal Cliff”. “Bullish” said I again., Notes From the Rabbit Hole, Twitter, Free eLetter

-- Posted Tuesday, 17 September 2013 | Digg This Article | Source:

comments powered by Disqus


Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to >> Story

E-mail Page  | Print  | Disclaimer 

© 1995 - 2017 Supports

©, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of, its affiliates or advertisers. makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of, is strictly prohibited. In no event shall or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.