Inflation Spooks but Gold Can’t be Stopped

In today’s Fat Tail Daily, Bonds are selling off as the market realises inflation isn’t dead. Gold is usually weak as rates rise but the opposite is occurring. In today’s Closing Bell, Murray shows you key levels to keep an eye on in gold and analyses the long-term path of US interest rates.

A couple of weeks ago I discussed two underperforming gold stocks that I thought were on the cusp of playing catch-up.

Both stocks are up over 11% since then, so I hope you managed to jump on.

I personally don’t like it when analysts just trumpet their good calls and ignore everything else, so I will add that I still like Talga Group [ASX:TLG] which I spoke about recently.

While it has come off the boil, the chart still looks positive to me.

But graphite stocks aren’t firing yet, so I don’t expect Talga to rocket in the immediate future.

Gold stocks on the other hand are catching a strong bid as the US Dollar gold price continues to defy gravity.

Not only are we seeing a massive break-out from a three year range, but geopolitical risks are rising as Iran and Israel face-off against each other.

I have been saying that there is one final resistance level at US$2,320 that could cause some problems, but gold sliced through it like butter.

As I show you in the Closing Bell video above, if gold hits US$2,470 it is confirmation for me that the range of the past three years is completely dead and buried.

Where gold heads once that level is reached is anyone’s guess.

All of this is happening as US bonds get hammered after another miss on inflation numbers during the week. Rising interest rates usually have a dampening effect on the gold price.

The fact that gold continues to go vertical despite the weakness in bonds is a bullish signal in my book. When a market continues to rally despite bad news, it hints that the price could go much higher still.

I pointed out recently that US 10-year bond yields above 4.40% would give targets to 4.70–4.90% which could cause selling pressure in stocks.

The bad inflation numbers during the week spooked the market, with core inflation accelerating higher again. That was enough to kick 10-year yields above 4.40% and they currently sit at 4.56%.

If bonds remain weak this month (yields rising) it will confirm a monthly sell signal in bonds within a long-term downtrend. If that occurs you should think long and hard about remaining long interest rate sensitive sectors.

Stocks, commodities and bonds are moving again after a long time in the wilderness. It’s time to prick your ears up and listen to what the market is saying so you can prepare yourself.

Click on the picture above to watch the latest instalment of Closing Bell and don’t forget to like the video on YouTube and comment if you jumped on those gold stocks!


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Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Murray Dawes is our resident expert trader and portfolio manager. He is a former Sydney Futures Exchange floor trader who went on to design custom trading systems and strategies for ultra-wealthy clients (including one of Australia’s richest families). Today, his mission is to help ordinary Aussie investors make profitable investments, while expertly managing risk.

He uses his proprietary system for his more conversative and longer-term-focused service Retirement Trader…and then applies the same system to the ultra-speculative end of the Australian market in Fat Tail Microcaps (this service is strictly limited and via invitation only).

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