JudgeDreg

Gold & real yields - 'things you think are so that ain't' Many OPs currently putting USD gold bear case due to - rising real yields - USD This misunderstands gold as an asset class vs bonds, stocks, GDP and history More... investopedia.com/articles/inves…

@michaeljmcnair Even then Precisely bc in a disintermediated world, gold will be the only proven monetary anchor It can be finessed but it wont be replaced

This is a great point, and I agree that for China, gold is too small to replace dollar reserve assets at current prices. So the legacy stock of reserves is largely stuck in Western financial assets. Gold is more an outlet for incremental flow than a substitute for the existing stock. But that’s also a big part of the bull case. Gold is a relatively small asset class, so even a modest marginal reallocation from USG bonds to gold has a very large effect on price. And there is a gold price that can absorb more of China’s and the RoW’s surpluses. It’s just much, much higher. But what I think this episode highlights more than anything else is the weakness of using commodities as reserve assets. Their prices will fall at exactly the point reserves are most needed. That’s certainly true for energy and industrial commodities. And while gold used to be more counter-cyclical, in the new reserve paradigm, it becomes pro-cyclical too. The reason gov bonds work so well as reserves is that their price is anchored by the expected path of future policy rates, and less by flows. And in a growth slowdown, when you might need to liquidate reserves, rate expectations typically fall and bond prices rise. Gold doesn’t have that anchor. Importantly, when gold played the reserve asset role under the Gold Standard and Bretton Woods, the gold price was fixed. The adjustment happened through the money supply and domestic economic conditions. Today gold floats, so the adjustment happens in the gold price itself. And that’s what makes it much more volatile and much more pro-cyclical now. But until a new reserve architecture exists, gold will increasingly be pushed into that role anyway bc there aren’t any better alternatives, aside from countries actually reversing the domestic policies that create their surpluses in the first place. They won’t do that willingly. Eventually the world will come together and create a new trading system with something like Keynes’ Bancor idea at the center. But that’s a long way off. There were 20 years and two world wars between the initial collapse of the gold standard and Bretton Woods. Until a new system is built, gold is going to play a major role as a reserve asset.

@KirkLubimov @SatireSquadHQ Thats trueish Not many ppl get that Canada has nearly no control over its cpi

@SatireSquadHQ Liberal boomers. Sold Canada our for home equity, cheap labour, and ideology. I mean, it's Trump's fault.

🚨Breaking: Canada TANKS in the new life satisfaction report. Canada drops from 6th place in the World Happiness Report from 10 years ago to 25th now. For under 25 year olds Canada is ranked 71st! Wow!

@RambusChart How is that a double top?

The bear trap has sprung , just like I’ve been warning 🚨🚨 PM COMPLEX DOUBLE TOP IS PLAYING OUT AS EXPECTED: Last Friday, the H&S top on the right side of the larger double top reversal pattern completed when the breakout below the neckline took place. The left side of the double top took place when the smaller double top reversed the previous rally that had been in place since January 2025. Putting these two small reversal patterns together created the larger double top reversal pattern. What is so bearish for the intermediate term for the PM complex is the one-year parabolic rise that never ends well. Yesterday, the price action gapped below the double top trend line, with some serious follow-through to the downside today. In my Wednesday Report last night, I showed many charts strongly suggesting the topping pattern was complete. I also talked about the game of psychological warfare, which is present in all markets. When everyone is extremely bullish, it’s hard to go against the herd, but that’s the nature of the game we choose to play. The bear trap has been sprung, which is going to trap a lot of PM stock investors, but Chartology gave us ample warning of what was to come. All the best…Rambus $HUI

@EdConwaySky So theyll have to sue the US?

👀 EXCLUSIVE- QATARENERGY CEO TELLS REUTERS: WE MAY HAVE TO DECLARE FORCE MAJEURE ON LONG-TERM CONTRACTS FOR UP TO FIVE YEARS FOR LNG SUPPLIES TO ITALY, BELGIUM, KOREA AND CHINA - From Reuters. This is bad.

@EdConwaySky Ikr DT will think they are referring to him

@YellowStripeASX Bpt

What a day #Fintwit 😅 PF is 6% down while #Oil is going nuts Anyone buying any stocks today or panic selling like the rest of the #ASX? I'm buying $DAL, hopefully this new #IvoryCoast #Gold project will deliver🤞 Also the #Greenland #REE #RareEarth project looks good to me💥

@AnnaEconomist Im looking fwd to when NFPs are discountinued cos the dog at the report

Powell downplayed the -92k drop in payrolls, attributing -80k to weather and strikes. The FRBSF weather models says, adjusted for weather, Feb’s nfp was actually -151k.

@DVSignals That 70s gold chart etc are in this

@Brad_Setser @Rory_Johnston You get what you pay for

@Rory_Johnston I got used to trade policy by tweet. But not really enjoying foreign policy (or defense policy) by tweet.

👀"NO MORE ATTACKS WILL BE MADE BY ISRAEL pertaining to this extremely important and valuable South Pars Field unless Iran unwisely decides to attack ... Qatar - In which instance the US, with or without the help or consent of Israel, will massively blow up the entirety of the South Pars Gas Field"

@DVSignals I dont have chart at hand but think peak was early 75 If this was that peak, youd be suggesting US is already part thru the recession I dont see that But then it doesnt all have to be exact same Would be amazing tho if gold had been telling us what US data was not allowed

I do agree with you there. That is exactly why the 1974 analogy matters: $GOLD roughly halved from about 200 to 100, and if you apply that same broad 0.5 framework to today’s move, you end up in that roughly 3,500 area, which fits the less aggressive end of the wider retrace zone I outlined in the larger macro post...

$GOLD I partly agree with the 1979/1980 analogy but people are oversimplifying it... 👇🏼 Yes, the geopolitical shock setup is comparable on the surface. No, the macro backdrop is not.... Back then, rates were far higher, policymakers had much more room to tighten, and the monetary regime was fundamentally different. Today, rates are still relatively low in historical terms, debt loads are far heavier, and the system is much less able to absorb that kind of Volcker-style shock. So I do not think a straight copy-paste 1980-style collapse is the base case... That said, dismissing the analogy entirely is also a mistake. If you actually map the 1979–1982 unwind properly, it does not argue for some harmless little dip. It argues that a much deeper retrace than most gold bulls are emotionally prepared for would still be perfectly normal in structural terms. And that is exactly the point people keep missing.... The chart floating around points to roughly $3,900–$4,000 as the first meaningful retrace zone. Fine. That is reasonable as an initial roadmap. But if you apply the historical Fib logic more consistently - using the 1980-style wick-to-wick retracement framework - you can absolutely justify something much closer to $3,000, which lines up very closely with the $2,800–$2,850 deeper retrace zone I posted earlier and which some people were laughing at.... They may not be laughing for long. So my view is simple: 1979 is useful as a roadmap, but dangerous as a lazy one-liner. I do not expect gold to replay the exact same path, with the same sideways churn and the same policy-driven collapse dynamics. The macro regime is too different for that. But I do think the historical analogy is a very useful reminder of one thing.. Parabolic moves can unwind a lot further than the crowd thinks, while still remaining completely normal within a secular bull market. So yes, $3,900–$4,000 makes sense as a first major retrace area. But no, that does not mean the downside automatically stops there. A flush toward $3,000 - even $2,800–$2,850 - would look insane to most participants right now, which is precisely why it remains plausible. History does not say it must happen. But it absolutely says people are far too complacent in assuming it cannot. Structure first. Narrative second.

@AnnaEconomist Just wait till US tries to spin an anti recession view based on massive reduction in workforce and tepid growth held together by AI 'productivity' Itll resemble Trump's best econ ever nonsense with 63% participation rate when Clinton had 70%

The FOMC upgrading gdp growth forecast across all forecast horizon will probably ranked as one of the strangest reaction to the Iran War and oil spike.

@lighthousejerry @michaeljmcnair @LukeGromen Its obviously not true at a trend level but it can be true at a short term tactical level This is probably one of those short term times cos the dxy recovering the channel

@michaeljmcnair @LukeGromen I’ll make it easier: Gold and silver act badly because the dollar is going up This ends my TED talk

Gold and silver are not acting well in a period of rapidly rising geopolitical risks. We have an Iran War, Strait of Hormuz blockade, rising volatility. In the old framework, that setup should be close to ideal for gold. But once you understand what is now driving gold, this move makes perfect sense. Something fundamental changed after the US and Europe froze Russian reserves in 2022. For decades, surplus countries parked their excess savings in US dollar assets, mostly Treasuries. The freezing of Russian reserves combined with the current administration's explicit push to discourage foreign countries from parking excess savings in US financial assets, forced surplus countries to rethink where they store reserves. And those countries haven't changed their domestic policies that generate the excess savings, so those savings have to be placed somewhere. The result is that gold and silver have increasingly become the obvious “neutral” reserve assets. That’s why gold decoupled from the three factors that used to explain it…real interest rates, volatility, and liquidity. Now reserve accumulation flows have become the primary driver. That shift has a consequence I don’t think most investors have thought through. If gold is now primarily driven by reserve flows from surplus countries, then gold has become pro-cyclical. Reserve growth is driven by export revenues, trade surpluses, economic growth in surplus economies. When the global economy is strong and surplus countries are generating large export revenues, their excess savings grow, their reserve accumulation accelerates, and gold catches a bid. When that surplus generation is disrupted, the bid weakens or reverses. This is exactly what is happening with the blockade of the Strait of Hormuz. The GCC countries are major reserve/gold buyers and now their export revenues are collapsing. They likely need to liquidate some reserves to cover fiscal obligations, and gold is one of their most liquid assets. Even if the reserve sales aren’t excessive yet, the market can see their reserve accumulation has stalled and probably reversed. That flow, which was a meaningful source of gold demand, has gone to zero at best. There are also secondary effects on other surplus economies. China is the world's largest oil importer. An energy shock of this magnitude slows Chinese growth, and compresses Chinese surpluses, which slows Chinese reserve accumulation. That same growth shock ripples through Korea, Taiwan, Japan, and the rest of Asia. The whole chain that has been driving gold higher, surplus countries generating excess savings that need a home outside the dollar system, is being disrupted by an event that in the old model would have been unambiguously bullish for gold. This doesn't mean the structural case for gold is broken. The dollar standard is still ending. Surplus countries still need an alternative to Treasuries and gold is still the most obvious destination. But it does mean gold is going to be more volatile along that structural trend than most people expect, and the volatility will correlate with global growth and surplus generation rather than with the old drivers. Gold rallies when surpluses expand. Gold sells off when surpluses contract. Even if the reason for the contraction is rising geopolitical risk that, under the old model, should have sent gold to the moon.

@SohmMusic @michaeljmcnair I liked this until you said if rates fall thats a gold trigger Think thats less likely bc gold has been the anti bond bid

I get what you’re saying and parts of this are definitely right. The shift after Russia’s reserves got frozen is real. Countries don’t trust dollar assets the same way anymore and gold has clearly become a neutral reserve. No argument there. But I think this is leaning too hard on that one idea and trying to explain everything through it. Gold hasn’t suddenly become just a function of reserve flows. It’s still being pulled by multiple things at once. Right now the biggest one is still rates. Inflation came in hot, yields are rising, and the market still thinks the Fed is in control. That alone can push gold and silver down even if the geopolitical backdrop looks bullish. You don’t need to assume GCC countries are dumping gold to explain this move. In reality they’re not trading gold like that. At most they slow down buying. Gold is strategic for them now. Also I don’t fully buy that gold is now pro cyclical. In strong growth environments, sure, reserve accumulation helps. But in real stress or loss of confidence in the system, gold still behaves like gold. That hasn’t gone away. What this looks like to me is just a conflict between forces. Oil is up, inflation pressure is building, but yields are rising faster and that’s what the market is reacting to. The real shift happens when that breaks. If inflation stays high but yields stop rising or start falling, that’s when gold actually moves and silver finally catches up. So I wouldn’t say the old framework is dead. It’s just not the only thing driving anymore. Right now the bond market is still running the show.

@TheDailyGold @Sorenthek @Brien_Lundin @RonStoeferle 70s bull started in 67 This one in 2018 cpi 'epicenter' in each case So either going to see a crazy ivan as US recession data bubbles through or its done and ~2 yrs to wait if its same AI 'productivity' narrative + US data fudging will make it hard to spot a recession tho

The idea that Gold “should” be moving higher is a knee-jerk take—one without context. Over the past 24 months, Gold has nearly mirrored its historic 1971–1973 surge (equivalent to a run toward $6,000 today). Back then, it didn’t correct more than 12% until it finally dropped 28% over 5 months… before surging much higher. Gold is now working off another extremely overbought condition, as it did in 1973.

@michaeljmcnair Great idea but it can simply be they are selling some gold to cover shortfalls But the reason is likely more prosaic. Gold has risen a lot in 3yrs Such rises always see at least short retraces looks like the halfway 'N' move from 02-07 Narratives on gold are mostly misplaced

@DonpaulStephens @aaron_renn Nothing in Trump's history of 'business' or his 1st and 2nd terms gives a basis for these comments Nor is AI certain to give higher agg total population high productivity. Its likely to change who gets pie, not clear it will make 2 pies AI could theoretically drop productivity

If the economy can hockey stick due to AI, a big iff… then Trump might end his 2nd term with lower national debt than he started with. This requires capitalizing on AI boom, unlocking energy and cutting the regulatory blocks on it. Possible If you can cut 75% of the fraud in government spending - it’s far more likely

If we started running a $1 trillion surplus next, it would still take 40 years to pay off the debt. To think that in the 1990s we were on track to start retiring the debt. This is the ultimate Boomer legacy.

@ShanghaiMacro You should asterisk American Orange One is the cause If US returns to sanity by 2029 then a modified unipolar approach could be achieved The pointlessness of antagonistic trade blocs would be much better avoided

In 2003, 45 nations joined the US-led “coalition of the willing” against Iraq. Today, even America’s closest allies refuse to deploy naval forces to escort vessels through the Strait of Hormuz. Few contrasts more starkly illustrate the erosion of American unipolarity and the acceleration toward a multipolar world—one in which even US allies, let alone non-aligned powers, are increasingly both willing and able to say NO.

@waronweakness Ofc Trump wound the clock back to 60s 70s mentality of hidimg under school desks from muchroom clouds Never before has someone so dim done so lirtle for so many

There is something going on with pre-smartphone nostalgia. This isn't just "meh I must be getting old because I miss the past" (I'm older millennial). I've never seen people crave the past as much as they do now.