The 10-year yield rose to 14-month highs on Thursday at 1.75%, erasing the gains in gold price yesterday following the Federal Reserve's statements. Lobo Tiggre of The Independent Speculator, said that without yield curve control, the 10-year Treasury note could rise to as high as 2%, which would cause the markets to "break". Short-term, gold has more downside, he said.
Markets are reversing the gains they saw last night, following drill and power statements at the federal reserve meeting local T great of the independent speculator joins us to break down what is going on today and why it's happening the way it is. Lobo. Welcome back. You and I spoke two weeks ago about why inflation.
Is no longer their driving force for gold. We're going to follow up on that conversation very timely and talk about the fed. So you presented two charts to me today. The first one shows market action from yesterday. Help us break it down a little bit. What happened? All right. So first and foremost, you know, I'm a mining and metals guy and I'm actually not an economist.
So the broader picture for the markets, I have to talk about it because that's the context we're in. Um, but you know, my focus is very much on the metals and the mining. So. That chart shows gold and the ten-year yesterday. Now the tenure is sort of a substitute right now for real rates. Since nominal rates are nailed in a floor right there, and inflation, you know, is moving.
We know it, but as measured, it's not barely budging. So that sort of makes the tenure like a standard for real rates at this short-term moment. And so what happened yesterday was. Uh, power got on and this action didn't happen at the moment of the press release. The moment of the press release, you know, nothing changed.
The statement was basically current policy is good and we can get into some of the numbers that, that do matter, but nothing changed. It wasn't until Powell started talking as usual that the fireworks started and he was really very, not just. He was simultaneously very dovish on the policy and, you know, bend over backwards to reassure everybody that rates wouldn't be raised for a long time while also very optimistic on the markets.
So it's not too surprising that there was a knee-jerk reaction. We get a lot of those very emotional markets these days, and, you know, stocks shut up the S and P and the Dow hit hit records. Um, but the interesting thing was that the bond market responded that that tenure rate shot up as well. And you, you might say, well, gee, you know, why, why would that happen?
If, if the fed is saying that there's not going to be higher inflation. And my reason for that, my explanation, and you know, the market is not a person. It's not Mr. Market though. We like to use that metaphor. It's. Thousands millions of people interacting. So there's no one answer because global level you are talking to me about irrational, exuberance offline.
What does that mean? What are you talking about? All right. So what I'm saying is that, you know, yesterday's market action. You look at new highs in the S and P and Dow, uh, you know, what can you call that? But irrational exuberance at a time where there's still all this trouble, you know, the, the, the fed has been trying to tell us that everything's great.
Everything's getting better. But everything's not great yet. Everything's not getting better fast enough. So don't worry. We're going to remain easy. And what had been happening in particularly impactful for gold and silver is that the bond market had been calling BS on the fed. And the fed keeps saying, we're not raising rates.
We're not raising rates. You know, it's like power jumping up and down saying we're not raising rates, but the market was sending rates higher. Anyway. And yesterday he somehow managed to persuade investors that, you know, rates really aren't going higher. And I think that the, the key point was that the fed actually said, well, okay, there is going to be higher inflation.
After all the, you know, they raised their expectations this year from 1.8 to 2.4, which is a substantial increase. But at the same time they say, but don't worry, don't worry. It's not real. It's just transitory right again and again, he hammered that. Oh, it's just transitory. It's not real. And I think that, that, that BS function of the bond vigilantes, they're like, Oh, okay, well this is more realistic.
You know, maybe we don't need to worry. You know, it's just transitory. And th you know, they're going to keep rates low and rates and inflation is going to come back down. So maybe things are okay, and you have this response of the tenure going down and just like clockwork. What you and I have been speaking about.
Gold shot up at the same time. You look at that chart and they're like mirror images. They're like a Rorschach chart. Um, that was yesterday. So it's interesting as you and I speak this morning, Thursday. Yeah. That same pattern has reversed itself. Right. It's kind of like, uh, you know, the hangover of the day after of that irrational exuberance at the party and investors would say, well, wait a minute, maybe they're transitory, but it's still inflation.
And you look at the jobs report. You look at the trouble, you look at the reassurances of easy money. And that still says, you know, it screams that higher inflation is coming. So I see that the, um, you know, the irrational exuberance of yesterday is wearing off. We have a reality check today and you look at that second chart I sent you or pair of charts, a screenshot, take a look, and do you have the same relationship?
And at the same time you see these things going in, reverse the tenure pops back up again, hitting a new. Uh, multi-month high. I'm not sure what 1.75 is, but it's like a year and a half high and gold falling off a cliff at the same time. It's not quite as high as pre pandemic levels, I think, but it's very close.
Yeah. Well, yeah. So what month that it's so. I think there are different numbers that people look at. But last time I looked at it at 1.69, it was a 14 month high. So it depends on what you mean by pre pandemic, I suppose. But, but the main point is the reassurance to our metals loving audience is just look at the mirror image on this chart, the factor that we've discussed, you know, the, the, the real rates.
Over the last 50 years being, not the only variable, but the most explanatory variable for monetary metals, gold and silver. You know, this chart says that relationship is not broken. So then the question is, you know, what happens to rates going forward? And I think the things that you and I have spoken about before are still there, you know, Powell.
Palette trying to talk the bond vigilantes off the, the high window ledge. Right. Just try to talk them down yesterday. And for awhile, for some hours, it seemed like it worked. Now, rates are going back up again. I think the market is saying, you know, BS again, look at all these indicators. And I do think that some sort of fed actions, some sort of intervention will be necessary to control rates.
And if they don't, you know, there, there will be, um, All kinds of heck will break loose. And ultimately that would be good for gold and silver anyway, uh, sorry. But the bad news is near term while this pattern holds and if rates keep rising, the fed doesn't do anything. There could be more downside in the near term for gold and silver.
You know, people don't want to hear about buying opportunities, but that is the way I see it. And I do have cash prepared to deploy. If that happens. Yeah. Okay. I'm going to go back to this chart again. I was speaking to a guest yesterday. We were both so hopeful that this is the reversal for gold. This is, this is the end of the bear trend that we've seen.
And yet today, this is what happens yields at 1.7, five gold down again, 16 bucks right now, as we speak Lobo Thursday morning. Yeah. You're ready to deploy on this market. Uh, yes, because ultimately I'm not a chartist, right. And charts. You know, the, the technicals, they, they tell you, well, you know, if this happens, then this might happen and you know, the odds are good, but they're not, they're no guarantee.
So my view is, is fundamentally that what is happening now is, is truly, uh, you know, it's money printing on a historic level. It's easy fiscal and financial policy on a truly historic level that dwarfs even what happened in 2008, which sent golden, silver up for three years. Uh, so. On that if, if, if that's true, if I'm right about that, anything that presents a buying opportunity or a dip in between is something to take advantage of.
And, you know, we haven't even gotten into the broader irrational exuberance of the shortcuts. I mean, you've got, you know, the SMP, uh, I saw, um, Jeff Gunlock talking last night online. And, and he posted a chart showing the S and P P E ratios. Now at all-time highs, even beating the 1999, two thousand.com.
Sure. I mean just amazing charts. So there's, there is plenty of. Plenty of grounds here for things to, to break down for there to be buying opportunities. And as a fundamentalist, I see those as, um, something that I want to take advantage of Lobo. I'm not a fixed income expert, but even I know that when I look at a chart of the tenure yield, 1.75 has historically still very low.
Why are people, why are people by people? I mean the gold committee. Why, why is the gold market freaking out at a total? We've talked about that before, too. The change of direction matters, David. Right. So if, if nominal rates are flat not changing and the long bond changes, inflation hasn't adjusted yet, the direction of real rates appears to be going up upwards in the appearance of real rates.
It matters to, well, at least it matters to let me rephrase it. It matters to the people in New York and London who trade and whose whose actions set the prices we quote. Um, they don't look at it the way I do. They don't care about money printing. They're not Austrian economist. Eventually. I think, you know, that proof will be in the pudding.
The Piper will be, have to be paid, but in the meantime, you know, these guys in New York and London, they look at CPI, like that's a real number and not also BS. You know, they do the math, they look at the rate, they look at CPI and I hear, I hear. I hear from analysts like yourself. That's, you know, a lot of people agree with you Lobo that the CPI is not an accurate measure of inflation in real time.
Well, actually we do know that CPI is lagging. So maybe next month it will catch up. But for now we know that it's not reflecting what's happening in, in the economy. So if everybody thinks that way, Lobo, why, why are people still using the CPI as a metric? If what you're saying is true, if your thesis is correct.
That, uh, that inflation should be much higher than gold actually should be trading much higher. Shouldn't it? Because the perceived real interest rate should be a lot lower. Well, so, but I get written off as a gold bug, you know, you and I, even though you're not quite the same boat, I am David, you know, we operate in a world and most of our audience operates in a.
I don't want to call it the echo chamber. And so on. Most of us I think are smart enough to look outside our own preferences and gather information from all sources. But we see information on a daily basis that the broader investor investment world out there doesn't see. So I think, like I say, eventually the Piper has to be paid.
Eventually money printing does matter, no matter what the MMT people say, or even. Powell and his previous cusp press conference saying, you know, that M two doesn't matter anymore. Right. That's just wrong. And it will be, uh, something that will be shown I think, historically to happen. Um, but, but sorry, just let me just stress this because I actually get pushback all the time.
Why, why are you talking about real rates and CPI? Don't you know, that CPI is bunk, but of course I know that. But do 95% of the investors out there don't know that it's a better indicator of inflation then I'm sorry, what, what, what's a better basket for inflation then if we can't use the seat. Well, that that's a good point.
So you can look at shadow stats. For example, John Williams, shadow stats, and that's purported to be the way the United States government used to calculate inflation pre the 1980s hedonic and other adjustments. So. So it's a more conservative number in a way. It has technical criticisms. I'm not enough of a mathematician to weigh in on that.
But even that doesn't say it's more real. It just says, this is the way the government used to do it. Right. So I, I think. Um, you know, someday that will be a great gauge of inflation that isn't subject to political jury rigging until then just go to the supermarket or, you know, did I ever show you my, let me show you why you think inflation is rising or not.
Did I ever show you my goal to bake Mac ratio? You did. And we talked about that last time and my, my turnaround on that is that it lags longer-term. Uh, but in many ways you have a gold is your best measure of inflation. So that's, uh, that sounds like a scary thing to say, because it can drop 50% in between peaks or something.
Right. Uh, but, but if you look, pull back, pull back for, you know, since the price of gold was disconnected from being the foundation of the dollar in 71, and you look at what's happened to the dollar you look at what's happened to gold. Uh, you know, th that's a real measure of inflation. I'm frankly surprised yields didn't revise yesterday.
Following the statement because Jerome Powell was quite positive on the economy. He says, well, he says his projected GDP growth at 6.5%. Uh, he wants the inflation rate to run harder than 2%. These are very like bullish outlooks for the economy. Usually when that happens, yields run hotter. Uh, it didn't yesterday.
Why is it turning around today? What happened this morning? That didn't see it well. So the first part of irrational exuberance is irrational. And like I say, I think the market or the bond guys must've felt that, wow, you know, he's finally coming clean. He's talking about higher inflation, but manageable.
And it goes back down and in, by the two year timeframe of the 10 year, uh, Paula saying inflation will be back down again. So maybe that's why yesterday there was this knee-jerk instant response. But if you think about it a little bit more, I mean, 2.4% for the year. It's one point. Whatever it is now that implies much higher than 2.4% between now and then.
Yeah. And you know, I, I could see where people would say, well, let me think about that. You know, and there's, there's this question out there about, you know, Ken. Ken Powell really take the heat of higher inflation saying, Oh, it's just transitory. It's just transitory, but it's not just Powell. It's the bond market.
It's the other markets. Can anybody take the heat of higher inflation? Just because the powers that be are telling us, Oh, it's just transitory, but it's a funny thing that you mentioned this about yesterday. I had written in the current edition of the independent speculator. The title is the fed is damned if it does and damned if it's doesn't.
And I thought, you know, I don't, I like to make bold predictions, predictions, but my guess was that the fed would do nothing, keep policy steady safest course. And that's what they did. But I thought that that would cause bonds to rise because they've been doing that already. They've been calling BS on that policy and the last time fed chair, Powell said he wasn't going to do anything bonds left.
So I really thought that that would be the damned if they don't scenario. And they didn't yesterday, but he wasn't dammed yesterday instead it's happening today. So, you know, W, why did it take time for reality to sink in here? We may never know David, but it looks to me like it is sinking in. And, uh, you know, we've looked at tell us what to do on this basis.
Let's sum it up for golden and we'll move on to another metal. And then we'll wrap up there. So golds your outlook, then your short term, give us a medium outlook. Well, first of all, talk about yields 1.75. Every time someone says it, can't go above 1.35. Can't go above 1.5. Can't go above 1.7. Here we are.
1.75. Where's it going next? And what's going to happen to gold, tight as tight as in four. Yes. So, you know, I don't like to put a target number on these things. They're always wrong, but I do think yields go higher and less. The fed does something. Yeah. The data that the investors are reacting to keeps pointing higher and those rates I think will go higher.
I think, uh, you know, I'm not an economist, but from other people that I respect that I've listened to, it seems to me that if it does go above 2% things, start breaking in a big way. And that would really force the Fed's hand. You know, when that happens, I don't know. But if that happens, I would expect some more substantive and policy change from the fed.
And until that happens, uh, that's bearish for gold. I'm not going to give you a price target. Can it go back under 1700? Sure. So I think it's going to a thousand. No, uh, but we could see significant weakness until things turn around. Either the fed intervenes or CPI numbers start coming in much higher and overcoming the increase in rates.
I just like to stay for the record that you and I have spoken several times, your short to medium term forecast have generally been correct. I know you get a lot of hate mail for that, and you'll probably get some more hate now for what you just said. And, uh, I know you probably enjoy reading those, but, uh, anyway, I'd just like to, uh, I'd like to say anyway, well, we'll follow up on this.
And, uh, uh, yeah, that was a good point. Let's move on to your, Rainium talk about . So it's exciting times. So I have to stress that it's usually a mistake to make too much to do over, you know, a daily fluctuation or two, a couple of ticks, but the uranium spot market has been ticking consistently down for months.
And you know, maybe one blip up, but it's been tracking down for months and over the last month it's been down almost every day until this last week. And at the end of last week with the last three price changes have all been upwards. And the one, uh, not yesterday, but day before yesterday was up $2 all at once, which on a $27 basis is a very significant uptick.
So I have been saying for some time I'm a uranium bull. If I get the thesis that you can't mind, the stuff at current prices, you can't substitute, you know, the Arrium or anything else or windmills for uranium for a long time. So. The prices have to go up absent another major nuclear accident. It's a win, not the other question, but my problem was buying the stocks and I'm a speculator.
I'm not just, you know, I'm going to stuff uranium under my mattress. I'm looking to speculate on the stock. My problem is that stocks have been going up for me. Yeah, that was my next question. Yeah, you don't need uranium price to go up, so it would seem. Um, but ultimately I'm a fundamentalist. Reality does matter.
And so I've been saying, and people be get eight for this, you know, uranium bug friends. Don't like it, but I'm saying I'm not going to chase these stocks that are rising while the uranium price it's. Well, why, why can you tell me why I have never seen divergence like that before? No. Oh, I can't tell you why.
I think, uh, I think there's been an expectation that the long-term contracts we've been waiting for are starting to happen. And that that's going to push spot up suddenly. And this is such a tiny market that you don't need the entire world to decide. Oh yeah, uranium's going up. So we're going to buy in advance.
A few whales participate in this market could really change the dynamic in advance of the data showing itself. If you assume that that smart money pushing the stocks up ahead of the uranium price itself, going up and you jump on that and it works out. That's great, but that's, that's a big assumption.
And I just, haven't been willing to make that I I'm a fundamentalist. It just goes the wrong way. Rubbed my Wolfer the wrong way to pay more for something the fundamental value of which is dropping. I just can't go there. Um, so I've been saying though that what I want to see is the stocks correct? You know, give me a better buying point or uranium to start going up.
And so what I'm saying today is, you know, a couple of days don't make me say, Ooh, it's off to the races. Uranium is, is, is. It's going to spike now to a new record high. Um, but it is a notable change at some point, you know, the Mark, the market changes, and we may be at that point now. So this is sort of an early warning to the audience out there.
One of the two conditions that I have asked for to start applying more in the uranium space may be happening right now. David is you and I speak it could be starting. So heads up, watch this space. If uranium does start showing solid. Upward movement. I do expect to be deploying more cash in this area near term.
Yeah, I just have to, is it true? I spoke to a minor recently. Is it true that there's no currently no production of uranium in North America right now? Everything's just shut down. Yeah, the, the last few had, um, had been producing as recently as 2019. Some of them had long-term contracts at higher prices.
And some of them, you know, it takes time to shut down the mine. And if you think it's going to start up again, you'll produce even at a loss anyway, just rather than shut it down and start it up again. So there had been, you know, a tail, a very small tail of production, but really on a, on a practical level, there's been no.
Um, significant amount of uranium production in the United States for years, there's been a lot from other sources, so doesn't really matter. It's a fungible market globally, but yes, that's basically true. And so what happened last year was that those little tales of, you know, residue, production basically dried up.
Sure. All right. Well thank you for coming on. Great talk. We'll see you next time. We'll be back with you, David, and thank you for watching Kitco news. I'm David Linn. Stay tuned for more coverage and subscribe. . .