Gold Update: Triangular Consolidation

Aibek Burabayev - INO.com Contributor - Metals


In the previous Gold & Silver update I warned you about the possible correction ahead. Indeed, both top metals showed weakness, but I didn’t think it would be that severe as we quickly reached seemingly distant supports both in gold and silver. Later I shared with you my concerns about golds outlook as the Fed starts cutting its massive balance sheet this month. This could be a real game changer as market wizards call for another perfect storm for the financial markets. In the charts below I try to model this change for you.

I would like to start with the U.S. 10-year Treasury notes (UST) chart as this instrument has a strong relationship with gold, which I already showed you in August.

Chart 1. U.S. 10-year Treasury Notes Daily: Bear Flag Works Out

U.S. 10-year Treasury Notes Daily
Chart courtesy of tradingview.com

Above is an updated and zoomed in chart from my last post. I chose a daily time frame to focus on the tactical move to see how the chart structure of the instrument develops over the time. Continue reading "Gold Update: Triangular Consolidation"

Fed Takes On Gold Unintentionally

Aibek Burabayev - INO.com Contributor - Metals


In my previous Gold & Silver post published earlier this month, I promised to update a long-term chart of Gold as I observed some interesting price behavior in a related instrument. But before I do that, let me speak about the Fed’s decision last Wednesday and that “related to gold” instrument first.

The positive dynamics of the US economy underpinned the Fed’s decision to finally start to trim its huge balance sheet next month, besides that there is a big chance of another rate hike this December. It wasn’t a shock to the market, and some big players already started their game weeks before the Fed moved from rhetoric to action.

The Fed’s decision could have a double impact on US interest rates as falling US Treasury notes increase the yields, and the impending rate hike could secure that situation. I was writing about the high possibility of this almost a month ago and last Wednesday we received a first-hand confirmation from the Fed. Continue reading "Fed Takes On Gold Unintentionally"

Gold And The Era Of Rising Interest Rates

Aibek Burabayev - INO.com Contributor - Metals


The U.S. dollar is the primary benchmark for the expense of the time value of the money around the world. It affects all asset classes, and I want to analyze it to see if the speculation about the coming cycle of the rise in interest rates is valid or not.

The wise trader once said; “if you want to know the market trend just squeeze the chart to see the perspective.” I used that advice to focus on the long-term perspective, and in this post, I would like to share the result of my research in the three graphs below.

Chart 1. The Yield Of 10-Year U.S. Treasury Notes Quarterly: Downtrend Could Be Over Soon

Quarterly Chart of 10 Year U.S. Treasury Notes
Chart courtesy of stooq.com

The chart above shows the history of the yield on the 10-Year U.S. Treasury notes (UST) from 1980 to present day. I chose that period to highlight the whole move down of the yield from the top in 1981 at the 15.84%. I chose this instrument as it is a benchmark showing investors’ sentiment about the future interest rates for the U.S. dollar. Continue reading "Gold And The Era Of Rising Interest Rates"

Trumponomics, Bonds And The Dollar

Lior Alkalay - INO.com Contributor - Forex


President-elect Donald Trump’s inauguration won’t take place for two more months and yet his proposed economic plan is already sending ripples through markets. Treasury notes and bonds are tanking, stocks are rallying and the Dollar Index has surged to highs not seen in more than 10 years. All of which is in utter contrast to what analysts had expected to occur post-Trump’s election, and which seemingly presents a paradox of sorts. Trump’s two economic focal points are aggressive tax cuts and massive infrastructure investment. Both are expected, according to The Office of Management and Budget, to push the US debt burden by roughly 25% of GDP by 2020. And yet, in conjunction with those expectations, the Dollar is gaining.

Naturally, the most obvious reason would be that higher deficits will lead to inflation and, consequently, would force the Federal Reserve to raise interest rates. But that is a consequence rather than a reason. The real reason is that both the US economy and the US banking system have been ripe for higher rates for a while, and Trump’s plans for the economy, or “Trumponomics” as we like to call it, is merely a catalyst for an already strong economy. Continue reading "Trumponomics, Bonds And The Dollar"

Impact Of Fed Rate Hike: June vs. September

Lior Alkalay - INO.com Contributor - Forex


The Fed dropped a bomb this past Wednesday when it released the latest FOMC minutes—a rate hike in June is possible. Weak US growth in the first quarter of the year and a slowdown now, coupled with nonfarm growth below 200K jobs might have suggested a more tamed statement. Markets responded to the surprise with a selloff in Treasuries and equities and a surge in the Dollar. And yet, despite the explicit mention of June, a rate hike in September seems more likely.

Just like the December 2015 rate hike, the Fed softens the blow by throwing out the possibility of a rate hike before the conditions are actually ripe for one. By the time the Fed actually lifts rates, the money market and the bond markets have adjusted and the shock is minimal. Continue reading "Impact Of Fed Rate Hike: June vs. September"