Platinum and silver have fundamental tailwinds from both rising inflation and improving economic conditions that will propel these metals to grow faster than gold in 2021, said Bill Baruch, president of Blue Line Futures.
Bill Baruch president of BlueLine futures is back to give us an update on his market overview and why markets are behaving the way they are right now. Bill, welcome back. Thank you for having me on again. Really glad to join you really glad to have you back. And it's a, it's always an interesting time.
Whenever you get back. I don't know. We don't purposely time it this way, but the markets are always just doing something funny whenever you're on the show right now, the funny business to me at least is this week, bunch of positive economic data has come out, retail sales PPI. So as you know, retail sales up 5.3% in January, yet, everything seems to be down.
Gold is down. Equities are down. I'm looking at the dollar, the DXY is down. The only thing that's up is yields. What's going on. And we've been calling for this. I've been talking about this story going back to at the end of September early October, when the tenure yield was at 60 basis points saying our trade is getting short treasuries and looking for one and a quarter.
And really one in a quarter is the resistance. And we're trying to chew through that. Our fear was the, the sort of get through that resistance in a quick move to one and a half percent. Now, when, when a treasury, when the treasury yields rise in, in the certain landscape that we're seeing right now, And they do it slow and steady.
It's not a big deal, but if we see big 10 basis points, 20 basis points, even 30 basis points in a week or two, that starts to hit a pain threshold. And we we've been looking at the fact that one 25 is resistance, uh, in, in the yields. And they're where they're, you're seeing about one 36 or so and support a 136 points support the ten-year futures.
Uh, once we kind of break down through there, And this, you can see a quick move, a quick move up to one and a half is exactly what the market is fearing right now. And that's why we're seeing, you know, some, some risk assets start to come in a bit. Why is one and a half the pain threshold? What does that term mean?
You know, w you have a lot of dead printed, you have a lot of, a lot of debt on balance sheets, and it's going to cost more to service that debt. So with, with one and a quarter it's, it's sort of, you know, a move that, uh, that was still staying contained within the range that we've seen going back to March of last year.
But when we start to see it move outside of that, um, the, the, the you're getting a more of a, uh, Fast food. You know, velocity is really the matter here and it's a fast move is what the market's spheric. So if we've got one and a quarter, and then we slowly grind up over the next couple of months to one and a half, it's not the same thing as seeing, well, you know, that 25 basis point move in and say a week or two.
Yeah, I remember you were on the show a couple of months ago, and you were calling for higher yields at the time you were, that was still a contrarian call because most people were expecting yields to remain flat. If not. Trend lower in terms of negative yields. But what we've seen is negative, real ELDs have stayed flat, hovering around negative 1% and nominal yields have gone up.
Why have nominal yields risen bill? That's my, that's my question. We're starting to see a little bit of, uh, economic rebound, uh, but just on the activity side. And, um, I mean, all the stimulus is, is working out there. And then not only that though, we're, we're seeing the market planning for that added supply from.
From a fiscal policy. Um, you know, you gotta, you gotta print more treasuries. It's adding to the supply in order to cover that debt. That's that's, you know, they're putting through and passing. So, uh, it, it forces, it forces, uh, the, the yields higher as the prices go lower. So, you know, I think there's a number of things here.
Um, as, as again, as we, we look through an economic rebound, some of the data has been good, but. You know, obviously good from low levels, but it's, it's definitely a light at the end of the tunnel. And then you get all this inflation from, from the stimulus itself that that's out there. And I look at energy prices and, um, you know, I mean the cost of lumber, I mean, their inflation is real, even though we didn't see it in CPI last week.
Yeah. So let's talk about Mark reaction then wouldn't you normally expect. The markets, at least the equities markets to respond positively to good economic news or retail sales are up. Uh, inflation PPI data has risen in January. The savings rate has gone down, so that could be good or bad depending on how you interpret it.
But economists are predicting higher. Consumer spending in 2021. Equities are still lagging. Why. Well, that's exactly what we're seeing here. I think it's relating to the yields. Um, but also the other side of the story is, um, you know, uh, little tailwind and one of the tailwinds we saw a few weeks back was, was when, uh, two fed governors.
Um, Bostik and, and, uh, and, um, Uh, bargain, uh, they, they had spoken about potentially having to unwind some of these measures, uh, policy measures towards the end of the year, turn of the year. And that was really, they called it an educational discussion, not, not a real clan. And then that's where the yields backed off pretty big.
But, um, that's, that's what we're seeing here. You get this economic activity out there, you get inflation out there. Then there obviously is some fear that the fed is going to have to reign in some of these extravagant and unprecedented, uh, policy measures. But, you know, they, they have been, uh, been reiterating that they're going to stay accommodative until the jobs picture gets better.
And, uh, chair Powell said, you know, the real unemployment rate is closer to 10%. So just, just here Thursday, the, the initial, uh, claims were much higher than expected. Uh, not from payroll two weeks ago, uh, you know, much worse than expected and, and, uh, it's been, it's been a pretty bad jobs, late escape, and that's, what's going to keep the fed accommodative, but, but they can't ignore the fact that economic activity is picking up a little bit.
And so, uh, you get a bunch of a bunch of crosswords. I don't understand why yields are up at the dollar. Hasn't risen, proportionately. It's still kind of flat actually down from the month, I'm looking at it, the DXY index shouldn't you wouldn't you expect the dollar to rise in this circumstance. Well, the dollar, you know, the dollar has been, it's been very heavy through the last part of the part of last year, most of last year.
And I think that has a lot to do with it. Um, you know, there's obviously still a lot being printed and there's a lot coming down the pipeline. So I think that's, that's hurt the dollar. Uh, To a very large degree. And we've also seen some talks of, uh, you know, just mirroring, uh, out of the, out of the ECB mirroring, uh, what, what you've heard here in the U S w you know, when are they going to have to unwind some of the, some of the different measures?
Not that they're planning on doing it. So. I mean, you get again, you're what is the dollar being relative to, and, and if you're comparing it to the Euro for comparing it to the Chinese Yuan, uh, that's that's I guess really matters the most. I do expect, um, you know, the dollar to be more sideways to down.
And I think this recovery and the dollar. He's going to give a pretty good opportunity to fade, but again, it matters. It matters what currents you're looking at it against. So let's put this together for certain assets. Now it's starting with gold. So we've got the dollar trading sideways to down. You've got yields going up.
You got negative, sorry. Uh, real rates staying around negative one. Not really going down, uh, where, where, where it could be positive for gold. So what does this mean for the yellow metal? Does it, is it just a trade sideways from here? Does it go back up? No. I mean, that was one of the things, one of the trades we've had was, was being short, the treasury prices and coupling with that with any long gold exposure.
So we're basically hedging out. And then we were looking at platinum and palladium, platinum and silver as, as, um, Uh, beating goal to the, you know, this year. And, and so I think that was sort of the trade that we've had and, and we, we haven't fully hit the 10 year down then downside and prices that we've expected, but we've already started taper out those taper out that position sort of thread the needle.
If you will, as gold is also headed to a big level of support. It's a battle here. And we, we put our research each day and, and this 1770 areas is what we call rare major four-star support. So big battle going on here. And, and I think the fact that we did see a good spike in the treasury yields this week and from last week, um, that, that has encouraged a bit of, uh, you know, uh, a bit of caution in the equity markets.
And then on the technical side of those equity markets too, um, you got the big move higher to record highs to the holiday, and then they, it came off. So you get a big reversal and then if you get a weekly. Reverse a WIC like that. That is it doesn't look good. It, it, I'm not calling for massive correction, but I think a nice hell, another healthy pullback we chop around the same way we had the late January pullback.
We chop around, similar to we did through September and November of last year. So when that happens, then that's going to be. Buoy the charge, your prices and pair back those yields. So that could Dak is what could bring some strength to gold. We start to see the dollar sort of least just sideways dollar, not gain much, but, but the treasury prices, uh, bounce and gold bounces along with them as, and gold gets those safe Haven Haven attributes, which is what we're looking for right now.
Next question yield. So where do you anticipate yields to go from here? The yield curve has steep and a lot since actually 2020, it's continued to steep and. Can you see this? Uh, can you see this trend? Continuing work can start flattening. What do you think is going to happen? Well, I don't, I mean, I've called this intermission.
I have called this intermission in, in the, in the move of yields to coming up. I mean, I I've been. Pounding the table for years, uh, yields are lower for longer. Is this, is this a bigger, more of a historic move? I mean, I don't think so. I don't think this is a bottom in the yields. I do think this is, and that's one of the reasons why, why were we looking at one and a half percent because you get that blow off between one quarter to one and a half, and that would actually give a good opportunity to then buy treasuries.
Where are you seeing the, the 30 year bond? Well, out of up 2% right now, I mean, you know, by 10 basis points or so, and, um, No, that's again, cognitive steep learning curve and that steep learning curve is, is, you know, why our equity markets record highs? Well, let's see, put in curbs is, is fairly bullish on equities and you see banks lead the way.
So there's a lot of parts within inflation coming out as well. So the energy market's been doing well, so there's a lot of. Components within the market that have been able to perform within this landscape. Uh, but, but, uh, you know, I, I do think that this, this bounce in yields lower and the prices is going to give a trading opportunity there.
And we're, we're looking to, you know, out here, maybe it may not be this year, but may, it may be more of the turn of the year to be able to buy, uh, treasury prices, uh, from a much lower line. Um, some of the analysts have spoken to in regards to gold have set that what gold really needs is real yields to come down.
So if yields are staying. Flat or perhaps even rising from here. What we really need then is higher inflation where at least inflation to outpace the growth of yields. Uh, could that happen? I mean, inflation is taking up, but it's not taking up as fast as it maybe should in terms of what gold needs.
Exactly and that's again, that's why we we've, uh, called for silver platinum to outperform gold this year. And, and I do think that it's the 10 year is a great trade to have a long with, with gold right now. Um, if you were to be hedging it. So I, I do think that, uh, I do think inflation is CPI was a little disappointing.
We didn't get that inflation yet, but I think it is starting to show up and you're going to see that be able to become a tailwind for gold because the 10 year. Prices are 10 year yield is as sort of front run that moving inflation. Okay. Let's talk about platinum then, because platinum has performed very well.
In fact, it's, it's the one metal I'm seeing on the screen. That's green today. So, uh, why do you think platinum has, first of all, why do you think platinum has had this nice run-up in the last month? Well, there's definitely the fundamental side of, of platinum itself. There's, there's been some closings of, of mines.
You got the, obviously the, the, the, a pandemic, that's still an issue and that's, that's curtailed some of the supply, so that that's one tailwind there, but then you also did inflation factor. Again, we're not seeing the CPI numbers resting in a lot of the data, but you also, you're seeing economic activity, pickup.
I mean, New York empire state manufacturing kind of got out of the gutter for the first time. And in months here, uh, on Monday or Tuesday, was it, and then a Philly fad has been fairly strong. We've got a lot of activity being seen in ism numbers, services in manufacturing, really almost, you know, considerably blowout reads on those.
So the academic activities there, we're not really seeing an inflation yet. So I think that's been a very big tailwind, uh, for, for platinum has been moving it's. Um, and really this just a technically you're you're, you're breaking out of it. 10 year downtrend. And, uh, that's one of the things that I've been calling for since the court fourth quarter of last year is looking when we're saying gold is going to be outpaced by silver and platinum and platinum broke that downtrend.
And our first upside target was, was 1200, which, which we put a trade out there looking for 1190. Uh, because there was good resistance from 1,212 and a quarter eight. It really got through that pretty good. And now you've got a floor that's 1200 to 12 and a quarter. And as long as it's out above there, I mean, we could see some big numbers here in platinum this year, because we're really breaking that downtrend.
Um, and we've already seen a 13. Okay. So you think platinum is going to outperform gold and silver this year. What else is going to outperform bill? What you, what else do you bullish on? I'm very bullish on crude oil. I just, you know, I don't like being bullish from these levels. I think that we've seen a very steep backwardation in crude oil.
So the meeting that April, uh, which is new front month contract is, has a, is about a five, four and a half to $5 premium to say December. And, um, I think that's going to come in a bit. And, and we may not see a full contain go through the curve show up immediately. But I do think that spread comes back in closer to two bucks or three bucks.
And in that case, um, you know, crude would theoretically, you know, the easiest way to get that spread to come in is see a little self and crude. And I think there's a lot of resistance, $762 that we've, we've tagged. Uh, you've got the energy crisis that's going on right now. And, and, you know, Ted through Texas, that's been another tailwind added.
But, but Saudi Arabia also this week talked about some extra production coming online. But so I, I think that could weigh on the market. You know, once we get through the energy crisis, you guys, then the market digests, extra production, Saudi Arabia got a lot, a little bit of a higher prices set that are good resistance.
So we get crude to come in and I mean, 53 bucks, 54 bucks in the front month, it'd be a terrific area. And then if you still got the premium relative to December, you're looking at December 50 bucks, I think is a great long. And, um, I'm not seeing this year, but yeah. But given some of the things that we're seeing, some of the, some of the economic policies overall from the new white house, uh, the inflation tailwinds to all this stimulus slashing around and then the vaccine rollout and increased demand and energy Alyssa crude oil could get to a hundred bucks in the next 18 months.
Um, I would not be surprised because there's a big, big downtrend in talking about similar to platinum breaking that decade long downtrend energy. I mean, since 2008 has been, it's just been a big downtrend. We, you know, we're right against breaking out of that downtrend right now. Yeah, I I'm just wondering, first of all, uh, the backwardation you're talking about, usually when you see that pattern, what does that tell you about demand?
Or, well, right now the supply has been, has been cut. So, so they've been, they've been able to, uh, you know, to, to tighten that, uh, supply demand landscape in the, in the recent months, but Saudi Arabia cut off an extra million dollar million barrels a day in production. So right now the supply has been cut.
And then you got a little bit of economic activity starting to pick up. So, so you're right now, the demand is in the front month has been, there's been. You know, much higher. So it's that, that, uh, prices really shoot up in the front month and outpacing those from the back month. I'm just wondering to be able to post oil does go up substantially.
What does that mean for consumer spending? There's been a lot of talk about people going out to travel once the restrictions, the travel restrictions, the lockdowns. And, but if oil goes up, if energy prices go up, what did that damper demand for? Travel, cruise ships, airlines, all that kind of thing. Yeah, but we don't have to worry about it right now.
I say that facetiously, but, uh, you know what I mean? You, you, you see a reaction to one problem, say the pandemic, um, you know, whether it be all the stimulus and then, uh, you know, the, the cutting up production of crude oil. So you see reaction, uh, to one problem being the pandemic, and then overall down the road, your it compounds to another issue.
And that is going to be an issue. I mean, that, that, that really, I don't think it's an issue. You know, over the next six, six to 12 months, but yeah, looking a year or two down the road, it definitely can become initiatives, higher prices, uh, and in energy you're hurting consumer spending and, and, and listen to it.
We go back to those days of know, 2010, 2009, 2008, where were you? Crudes up two or three bucks one day or one week. And that's weighing on the stock market, not ness, not the other way around, not where it becomes a tailwind. Okay. Now, final question. Potential stock market crash. Could that happen this year because of rising yields?
Listen, I don't go out there and try and predict stock market crashes. That's not my job. My job is to meet its risk. You know, I, I lay out on the, on the advisor side as an asset manager, a diversified portfolio, uh, and I do buy, put spreads to, to hedge times. And I have some put-spread right now in there to, to hedge out those, some exposure in that portfolio just a little bit.
And, um, you know, and then as well, it'd have to have a diversification and, and getting, getting things like, uh, um, um, Uh, dividend payments across the board and then other other sources that can perform other asset classes that can perform when the market it market. Is it, so, I mean, this is my am I fearful of a massive correction right now?
No, no, I'm not, but I think a nice healthy three to three to 5% is, is very doable. And then when you talk about a three to 5% correction, I mean, listen, there's that could hit some triggers, um, some positioning triggers and we could easily see another 5%. So, I mean, it's always, always possible, but, but I, I don't, I don't go through my day to day thinking here just here comes a massive correction right around the corner.
You're not going on Reddit and looking at the next meme stocks and putting your money in those. Is that, is that part of a consideration as well? No. No, it's not what I'm, that's not my job as someone I look to do. All right. All right. Fantastic bill. Thank you so much for giving us your update and we'll catch up with you again soon.
Thank you very much. And thank you for watching kiszko news. I'm David Lynn. .