The blue line shows the 10 year – 2 year yield curve. The curve is inverted with the 10 year at 4.24% and the 2 year at 4.43%. The curve has been inverted for two years since July 2022. An inverted yield curve has been a signal for a recession as short term rates, managed by the Fed, are higher than long term rates, priced by the economy.
When the curve climbs higher this is a signal that the Fed is ready to cut rates. A higher curve results from a decline in short term rates and an increase in long term rates due to accommodative Fed policy.
See how the the green line, showing Fed Funds, peaks when the curve is inverted. When the curve rises the Fed is busy cutting rates seen in 2000, 2007 and 2019. These have been strong periods for the gold price rising 73% in 2001, 182% in 2009-11, and 62% in 2020.
A similar type move now places gold well above $3,000/oz. Nothing moves up in a straight line. The gold price has recently traded off slightly as the equity market weakens. This sets the stage for the Fed to cut rates which will in time ignite the gold price.
Investors are experiencing persistent high inflation, and the Fed is focused on economic weakness only, powerless to stop the loss of the USD’s purchasing power. This is the perfect environment for gold.
Stay focused on the longer term. Gold will rise higher. Most miners trail golds return due to high costs and never ending dilution. Focus on the GP and the GP10X which are the proven best way to add gold exposure.
